{"id":43568,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/securities-exchange-agreement-incyte-pharmaceuticals-inc.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"securities-exchange-agreement-incyte-pharmaceuticals-inc","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/planning\/securities-exchange-agreement-incyte-pharmaceuticals-inc.html","title":{"rendered":"Securities Exchange Agreement – Incyte Pharmaceuticals Inc., Genome Systems Inc., David A. Smoller, Paul Gold, Mark Cunningham and Vysis Inc."},"content":{"rendered":" SECURITIES EXCHANGE AGREEMENT\n\n BY AND AMONG\n\n\n INCYTE PHARMACEUTICALS, INC.,\n\n GENOME SYSTEMS, INC.\n\n DAVID A. SMOLLER, PAUL GOLD,\n\n MARK CUNNINGHAM\n\n AND\n\n VYSIS, INC.\n\n\n\n\n\n July 22, 1996\n\n\n\n\n\n\n TABLE OF CONTENTS\n -----------------\n Page\n ----\nARTICLE 1 PURCHASE AND SALE................................................. 1\n 1.1 Closing Date........................................................1\n 1.2 The Exchange........................................................2\n 1.3 Delivery of Securities at Closing...................................2\n 1.4 Tax Treatment.......................................................2\n 1.5 Accounting Treatment................................................2\n\nARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY\n AND THE SECURITYHOLDERS........................................... 3\n 2.1 Representations and Warranties of the Company\n and Certain Securityholders....................................... 3\n 2.1.1 Organization............................................ 3\n 2.1.2 Capital Structure....................................... 3\n 2.1.3 Equity Investments...................................... 5\n 2.1.4 Authority............................................... 5\n 2.1.5 No Conflict with Other Instruments...................... 5\n 2.1.6 Governmental Consents................................... 5\n 2.1.7 Financial Statements.................................... 6\n 2.1.8 Payables; Receivables................................... 6\n 2.1.9 Absence of Changes...................................... 7\n 2.1.10 Properties.............................................. 9\n 2.1.11 Environmental Matters................................... 9\n 2.1.12 Taxes................................................... 10\n 2.1.13 Employees............................................... 11\n 2.1.14 Compliance with Law..................................... 11\n 2.1.15 Litigation.............................................. 11\n 2.1.16 Contracts............................................... 12\n 2.1.17 No Default.............................................. 13\n 2.1.18 Proprietary Rights...................................... 13\n 2.1.19 Insurance............................................... 15\n 2.1.20 Brokers or Finders...................................... 15\n 2.1.21 Related Parties......................................... 15\n 2.1.22 Certain Advances........................................ 15\n 2.1.23 Underlying Documents.................................... 16\n 2.1.24 No Misleading Statements................................ 16\n 2.2 Additional Representations and Warranties of\n the Securityholders............................................... 16\n 2.2.1 Authority............................................... 16\n 2.2.2 No Conflict with Other Instruments...................... 16\n 2.2.3 Ownership of Securities................................. 17\n 2.2.4 Disclosure.............................................. 17\n 2.2.5 Exchange Entirely for Own Account....................... 17\n 2.2.6 Reliance Upon the Securityholder's\n Representations......................................... 17\n 2.2.7 Receipt of Information.................................. 18\n 2.2.8 Restricted Securities................................... 18\n 2.2.9 Legends................................................. 18\n 2.2.10 Brokers or Finders...................................... 19\n 2.2.11 Vysis Status............................................ 19\n\n\n -i-\n\n\n\n\n\n Page\n ----\n\nARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE\n PURCHASER......................................................... 19\n 3.1 Organization...................................................... 19\n 3.2 Authority......................................................... 19\n 3.3 No Conflict with Other Instruments.................................20\n 3.4 Governmental Consents..............................................20\n 3.5 SEC Documents......................................................20\n 3.6 Shares of Purchaser Common.........................................21\n 3.7 Litigation.........................................................21\n 3.8 Brokers or Finders.................................................21\n 3.9 Acquisition for Investment.........................................21\n\nARTICLE 4 ADDITIONAL COVENANTS...............................................21\n 4.1 Expenses...........................................................21\n 4.2 Agreements by Securityholders......................................22\n 4.3 Nasdaq Listing.....................................................22\n\nARTICLE 5 CONDITIONS PRECEDENT...............................................22\n 5.1 Conditions to Each Party's Obligations to\n Effect the Exchange................................................22\n 5.2 Conditions to Obligations of the Purchaser.........................23\n 5.3 Conditions to Obligations of the\n Securityholders....................................................25\n\nARTICLE 6 INDEMNIFICATION....................................................25\n 6.1 Survival...........................................................25\n 6.2 Indemnification by the Securityholders.............................26\n 6.3 Indemnification by the Purchaser...................................26\n 6.4 Limitations as to Amount--the Securityholders......................27\n 6.5 Limitations as to Amount--the Purchaser............................27\n 6.6 Procedure for Indemnification--Third Party\n Claims.............................................................27\n 6.7 Escrow Fund....................................................... 29\n 6.8 Escrow Period..................................................... 29\n 6.9 Protection of Escrow Fund......................................... 29\n 6.10 Distributions; Voting............................................. 29\n 6.11 Claims Upon Escrow Fund........................................... 30\n 6.12 Objections to Claims.............................................. 30\n 6.13 Resolution of Conflicts........................................... 31\n 6.14 Distribution upon Termination of Escrow Period.................. . 31\n\nARTICLE 7 AMENDMENT AND WAIVER.............................................. 31\n 7.1 Amendment........................................................ 31\n 7.2 Extension; Waiver................................................. 31\n\nARTICLE 8 ADDITIONAL REPRESENTATIONS, WARRANTIES AND\n AGREEMENTS OF THE PRINCIPAL SECURITYHOLDERS....................... 32\n 8.1 Tax and Accounting Treatment...................................... 32\n 8.2 Reliance Upon Representations, Warranties and\n Covenants......................................................... 32\n\n\n -ii-\n\n\n\n\n\n Page\n ----\n\n 8.3 Additional Representations, Warranties and\n Covenants of the Principal Securityholders........................ 32\n 8.4 Resignations...................................................... 33\n\nARTICLE 9 ADDITIONAL AGREEMENTS OF THE SECURITYHOLDERS\n AND THE COMPANY................................................... 33\n 9.1 Shareholder Agreement............................................. 33\n 9.2 Company Registration Rights Agreement............................. 33\n\nARTICLE 10 GENERAL........................................................... 34\n 10.1 Notices........................................................... 34\n 10.2 Headings.......................................................... 34\n 10.3 Counterparts...................................................... 34\n 10.4 Binding Nature.................................................... 35\n 10.5 Applicable Law.................................................... 35\n\nAppendix A Form of Employment and Non-Competition\n Agreement\nAppendix B Purchaser Option\nAppendix C Registration Rights Agreement\nAppendix D Escrow Agreement\nExhibit 5.2(e) Form of Opinion of Stinson, Mag & Fizzell,\n P.C.\nExhibit 5.2(f) Form of Opinion of Counsel to Vysis, Inc.\nExhibit 5.3(d) Form of Opinion of Pillsbury Madison & Sutro\n LLP\nSchedule 1.2 Consideration for the Exchange\nSchedule 2.1.11(c) Schedule of Certain Environmental Matters\n\n\n* All Appendices and Exhibits and Schedule 2.1.11(c) are not\nfiled with this Agreement. The Registrant hereby agrees to\nfurnish supplementally to the Securities and Exchange Commission\na copy of any omitted Appendix, Exhibit or Schedule upon\nrequest.\n\n\n -iii-\n\n\n\n\n\n SECURITIES EXCHANGE AGREEMENT\n -----------------------------\n\n\n THIS SECURITIES EXCHANGE AGREEMENT dated as of the 22nd day \nof July, 1996, by and among INCYTE PHARMACEUTICALS, INC., a \n ----------------------------\nDelaware corporation (\"Incyte\" or the \"Purchaser\"), GENOME\n ------ \nSYSTEMS, INC., a Missouri corporation (the \"Company\"), and DAVID \n -----\nA. SMOLLER, PAUL GOLD, MARK CUNNINGHAM and VYSIS, INC., an \n- - ---------- --------- --------------- -----------\nIllinois corporation (each a \"Securityholder,\" and collectively \nthe \"Securityholders\").\n\n This Agreement is made with reference to the following \nfacts:\n\n A. The Purchaser desires, subject to the terms and \nconditions hereinafter set forth, to acquire all of the rights \nof equity ownership of the Company through the exchange (the \n\"Exchange\") by the Purchaser of (i) shares of its common stock, \n$.001 par value (the \"Purchaser Common\"), for all of the issued \nand outstanding shares of common stock, par value $1.00 per \nshare (the \"Company Common\"), and Series A Preferred Stock, \nwithout par value (the \"Company Preferred\"), of the Company and \n(ii) an option to purchase shares of Purchaser Common for the \noutstanding option, dated June 23, 1994, to acquire 1,000 shares \nof Company Preferred (the \"Company Option\" and, together with \nsuch shares of Company Common and Company Preferred, the \n\"Securities\"), and the Securityholders desire, subject to the \nterms and conditions hereinafter set forth, to effect the \nExchange.\n\n B. The parties desire to make certain representations, \nwarranties and agreements in connection with the Exchange and \ndesire to prescribe certain conditions precedent to such \npurchase and sale, including the condition of the Purchaser's \nobligations hereunder that certain of the Securityholders enter \ninto Employment and Non-Competition Agreements in substantially \nthe form attached hereto as Appendix A to, among other things, \nsecure to the Purchaser the benefits of this Agreement, \nincluding the goodwill of the business of the Company.\n\n NOW, THEREFORE, in consideration of the mutual covenants \nand conditions contained herein, the Purchaser and the \nSecurityholders agree as follows:\n\n\n ARTICLE 1\n\n PURCHASE AND SALE\n -----------------\n\n\n 1.1 Closing Date. The Closing under this Agreement (the \n ------------\n\"Closing\") shall be held simultaneously with the execution of \nthis Agreement. The Closing shall be deemed to be effective as \nof the close of business on the date of execution of this \nAgreement. Such date on which the Closing is to be held is\n\n\n -1-\n\n\n\n\n\nherein referred to as the \"Closing Date.\" The Closing shall be\nheld at the offices of Pillsbury Madison & Sutro LLP,\n235 Montgomery Street, San Francisco, California, at 10:00 A.M.\non such date, or at such other time and place as the Purchaser\nand the Securityholders may agree upon in writing.\n\n 1.2 The Exchange.\n ------------\n\n (a) At the Closing, the Purchaser shall issue to the\nSecurityholders owning Company Common and Company Preferred that\nnumber of shares of Purchaser Common determined as set forth in\nthe succeeding sentence. The aggregate number of shares of\nPurchaser Common to be delivered by the Purchaser at the Closing\nshall be determined by dividing 95% of $8,000,000 by the average\nclosing price of the Purchaser Common as quoted by The Nasdaq\nStock Market for the 30 consecutive trading days ending on and\nincluding July 19, 1996 (the \"Average Closing Price\"), and\nrounding down to the nearest whole share. Each such\nSecurityholder shall receive that number of shares of the\nPurchaser Common set forth in Schedule 1.2.\n\n (b) At the Closing, the Purchaser shall issue to the\nholder of the Company Option an option (the \"Purchaser Option\")\nin the form attached hereto as Appendix B. The number of shares\nof Purchaser Common subject to the Purchaser Option shall be\ndetermined by dividing 5% of $8,000,000 by the Average Closing\nPrice and rounding down to the nearest whole share and the\nexercise price per share shall be equal to $500 divided by such\nnumber of shares, all as set forth in Schedule 1.2. The Company\nand Mark Cunningham hereby agree that, as of and conditioned\nupon the Closing and the issuance of the Purchaser Option in the\nExchange, the Company Option shall be terminated and shall have\nno further force or effect.\n\n 1.3 Delivery of Securities at Closing. At the Closing,\n ---------------------------------\nthe Securityholders shall deliver to the Purchaser certificates\nevidencing the Securities which are duly endorsed for transfer\nthereon or by means of duly executed stock powers attached\nthereto against delivery by the Purchaser of (i) irrevocable\ninstructions to the Purchaser's Transfer Agent to issue that\nnumber of shares of the Purchaser Common in the names of the\nrespective Securityholders, in accordance with Section 1.2 and\n(ii) the Purchaser Option.\n\n 1.4 Tax Treatment. The parties intend that the Exchange\n -------------\nwill be a tax-free reorganization within the meaning of\nSection 368 of the Internal Revenue Code of 1986, as amended\n(the \"Code\").\n\n 1.5 Accounting Treatment. The parties intend that the\n --------------------\nExchange shall be treated as a pooling of interests for\naccounting purposes.\n\n\n -2-\n\n\n\n\n\n ARTICLE 2\n\n REPRESENTATIONS AND WARRANTIES OF THE COMPANY\n ---------------------------------------------\n AND THE SECURITYHOLDERS\n -----------------------\n\n 2.1 Representations and Warranties of the Company and\n -------------------------------------------------\nCertain Securityholders. Except as otherwise specifically set\n- - -----------------------\nforth on the disclosure schedule certified by David A. Smoller\nand Paul Gold as Securityholders and as officers of the Company\nand delivered by the Company to the Purchaser prior to the\nexecution of this Agreement (the \"Disclosure Schedule\"), David\nA. Smoller and Paul Gold (together, the \"Principal\nSecurityholders\") and the Company severally represent and\nwarrant to the Purchaser as follows:\n\n 2.1.1 Organization. The Company is a corporation duly\n ------------\norganized, validly existing and in good standing under the laws\nof the State of Missouri and has all corporate power and\nauthority to own, lease and operate its properties and to carry\non its business as now being conducted. The Company is\nqualified to do business as a foreign corporation and is in good\nstanding under the laws of each state or other jurisdiction in\nwhich the nature of its business requires such qualification,\nexcept where the failure to be so qualified would not have a\nmaterial adverse effect on the business of the Company. The\nstates or jurisdictions in which the Company is so qualified are\nlisted on the Disclosure Schedule. The Securityholders have\ndelivered or made available to the Purchaser true, complete and\ncorrect copies of its (a) Articles of Incorporation and Bylaws,\nas amended to the date hereof, (b) minutes of all of directors'\nand shareholders' meetings, complete and accurate as of the date\nhereof, (c) stock certificate books and all other records of the\nCompany, which collectively correctly set forth the record\nownership of all outstanding shares of capital stock and all\nrights to purchase capital stock of the Company, and (d) form of\nstock certificates, option agreements and rights to purchase\nshares of capital stock of the Company.\n\n 2.1.2 Capital Structure.\n -----------------\n\n (a) The authorized capital stock of the Company consists\nof 30,000 shares of Company Common and 3,000 shares of Company\nPreferred. As of the date of this Agreement (without giving\neffect to the exercise of the Company Option), there were issued\nand outstanding 17,600 shares of Company Common and 1,400 shares\nof Company Preferred convertible into shares of Company Common\nat the rate of one share of Company Common for each share of\nCompany Preferred, subject to adjustment as set forth in the\nCompany's Articles of Incorporation. As of the date of this\nAgreement, sufficent shares of authorized but unissued Company\nCommon have been reserved for issuance upon conversion of the\nCompany Preferred and upon the exercise of the Company Option.\nThe rights, preferences and privileges of the Company Common and\n\n\n -3-\n\n\n\n\n\nthe Company Preferred are as set forth in the Company's Articles\nof Incorporation.\n\n (b) Other than as described paragraph (a) above and other\nthan the Registration Rights Agreement dated June 23, 1994 among\nthe Company and the Securityholders (the \"Company Registration\nRights Agreement\"), there are no other outstanding shares of\ncapital stock or other equity securities of the Company and no\nother options, warrants, calls, conversion rights, commitments\nor agreements of any character to which the Company is a party\nor by which the Company may be bound that do or may obligate the\nCompany to issue, deliver or sell, or cause to be issued,\ndelivered or sold, additional shares of the Company's capital\nstock or securities convertible into or exchangeable for capital\nstock of the Company or that do or may obligate the Company to\ngrant, extend or enter into any such option, warrant, call,\nconversion right, commitment or agreement.\n\n (c) All outstanding shares of the Company's capital stock\nare, and any shares of the Company's capital stock issued upon\nexercise of the Company Option (subject to receipt of the\nexercise price as provided therein) will be, validly issued,\nfully paid and nonassessable and not subject to preemptive\nrights created by statute, the Company's Articles of\nIncorporation or Bylaws or any agreement to which the Company is\na party or by which the Company may be bound. All outstanding\nsecurities of the Company have been issued in compliance with\napplicable federal and state securities laws.\n\n (d) Schedule 2.1.2 in the Disclosure Schedule contains a\ncomplete and accurate list of, and the number of shares owned of\nrecord by, the holders of outstanding Company Common, Company\nPreferred, and the Company Option, including the addresses of\nsuch holders. The Disclosure Schedule identifies the vesting\nschedule, applicable legends, and repurchase rights or other\nrisks of forfeiture of any outstanding security of the Company.\n\n (e) Except for the Company Option, the Company does not\nhave in effect any stock option, stock appreciation rights or\nother equity-related stock incentive plan.\n\n (f) Except for any restrictions imposed by applicable\nstate and federal securities laws, there is no right of first\nrefusal, co-sale right, right of participation, right of first\noffer, option or other restriction on transfer applicable to any\nshares of Company Common or Company Preferred, other than those\nset forth in the Shareholder Agreement dated June 23, 1994 by\nand among the Company and the Securityholders (the \"Shareholder\nAgreement\"), which rights thereunder have been waived or made\notherwise inapplicable with respect to the transactions\ncontemplated by this Agreement.\n\n (g) Except for the Shareholder Agreement, the Company is\nnot a party or subject to any agreement or understanding that\n\n\n -4-\n\n\n\n\n\naffects or relates to the voting or giving of written consent\nwith respect to any outstanding security of the Company. Each\nPrincipal Securityholder represents and warrants that to the\nbest of such Securityholder's knowledge, there is no voting\ntrust, proxy, or other agreement or understanding between or\namong any persons that affects or relates to the voting or\ngiving of written consent with respect to any outstanding\nsecurity of the Company.\n\n 2.1.3 Equity Investments. The Company does not own any\n ------------------\nequity interest, directly or indirectly, in any corporation,\npartnership, joint venture, trust, firm or other entity.\n\n 2.1.4 Authority. The Company has all requisite corporate\n ---------\npower and authority to enter into this Agreement, to execute,\ndeliver and perform its obligations hereunder, and to consummate\nthe transactions contemplated hereby. The execution and\ndelivery of this Agreement, the performance by the Company of\nits obligations hereunder and the consummation of the\ntransactions contemplated hereby, have been duly and validly\nauthorized by all necessary corporate action on the part of the\nCompany, including approval by its Board of Directors. No vote\nof the Company's shareholders is required in connection with the\ntransactions set forth in this Agreement. This Agreement has\nbeen duly executed by the Company and constitutes the valid and\nbinding obligation of the Company.\n\n 2.1.5 No Conflict with Other Instruments. Except as set\n ----------------------------------\nforth in the Disclosure Schedule, the execution, delivery and\nperformance of this Agreement and the transactions contemplated\nhereby (a) will not result in any violation of, conflict with,\nconstitute a breach, violation or default (with or without\nnotice or lapse of time, or both) under, give rise to a right of\ntermination, cancellation, forfeiture or acceleration of any\nmaterial obligation or loss of any material benefit under, or\nresult in the creation or encumbrance on any of the properties\nor assets of the Company pursuant to (i) any provision of the\nArticles of Incorporation or Bylaws of the Company or (ii) any\ncontract listed on the Disclosure Schedule pursuant to Section\n2.1.16 or any other material agreement, contract, understanding,\nnote, mortgage, indenture, lease, franchise, license, permit or\nother instrument to which the Company is a party or by which it\nor any of its properties or assets is bound, or (b) to the best\nknowledge of the Company and the Principal Securityholders,\nconflict with or result in any breach or violation of any\nstatute, judgment, decree, order, rule or governmental\nregulation applicable to the Company or its properties or\nassets.\n\n 2.1.6 Governmental Consents. Except as set forth in the\n ---------------------\nDisclosure Schedule, no consent, approval, order or\nauthorization of, or registration, declaration of, or\nqualification or filing with, any court, administrative agency,\ncommission, regulatory authority or other governmental or\n\n\n -5-\n\n\n\n\n\nadministrative body or instrumentality, whether domestic or\nforeign, is required by or with respect to the Company in\nconnection with the execution, delivery and performance of this\nAgreement by the Company or the consummation by the Company of\nthe transactions contemplated hereby, except for such consents,\napprovals, orders, authorizations, registrations, declarations,\nqualifications or filings as may be required under state\nsecurities or Blue Sky laws in connection with the transactions\nset forth herein or which the failure to obtain would not have a\nmaterial adverse effect on the Company or the consummation by\nthe Company of the transactions contemplated hereby.\n\n 2.1.7 Financial Statements. The Company has furnished to\n --------------------\nthe Purchaser a complete and accurate copy of the Company's\nbalance sheet as of December 31, 1995, and its statements of\nincome and cash flow statements for the years ended December 31,\n1995 and 1994, and the Company's unaudited balance sheet and\nstatement of income as of and for the five months ended May 31,\n1996. The balance sheet at May 31, 1996 is hereinafter referred\nto as the \"Balance Sheet,\" and all such financial statements are\nhereinafter referred to collectively as the \"Financial State-\nments.\" The Financial Statements are complete and correct in\nall material respects and have been prepared in accordance with\ngenerally accepted accounting principles (\"GAAP\") applied on a\nconsistent basis throughout the periods indicated except that\nthey do not contain full footnote disclosures in accordance with\nGAAP, and are consistent with each other. The Financial\nStatements fairly present the financial condition and operating\nresults of the Company as of the dates, and for the periods,\nindicated therein, subject to normal year-end adjustments. At\nthe date of the Balance Sheet (the \"Balance Sheet Date\") and as\nof the Closing Date, the Company had and will have no liabili-\nties or obligations, secured or unsecured (whether accrued,\nabsolute, contingent or otherwise) not reflected on the Balance\nSheet or the accompanying notes thereto except for liabilities\nand obligations as may have arisen in the ordinary course of\nbusiness prior to the date of the Balance Sheet and which, under\nGAAP, would not have been required to be reflected on the\nBalance Sheet and except for liabilities incurred in the ordi-\nnary course of business since the date of the Balance Sheet\nwhich are allowed pursuant to Section 2.1.9. Attached as\nSchedule 2.1.7 to the Disclosure Schedule is the Company's 12-\nmonth budget for the 12 months ending June 30, 1997 that sets\nforth its budgeted revenues and expenses for its base business\n(excluding revenues and costs associated with the anticipated\ncDNA mapping collaboration between the Company and the\nPurchaser).\n\n 2.1.8 Payables; Receivables.\n ---------------------\n\n (a) The Company has delivered to the Purchaser accurate\nand complete schedules setting forth agings of accounts payable\nand accounts receivable of the Company in the aggregate and by\ncreditor or debtor, as the case may be (for the period zero (0)\n\n\n -6-\n\n\n\n\n\nto thirty (30) days, thirty (30) to ninety (90) days and greater\nthan ninety (90) days, if applicable), as of the Balance Sheet\nDate.\n\n (b) All of the Company's general ledgers, books and\nrecords are located at the Company's principal place of\nbusiness. The Company does not have any of its records,\nsystems, controls, data or information recorded, stored,\nmaintained, operated or otherwise wholly or partly dependent\nupon or held by any means (including any electronic, mechanical\nor photographic process, whether computerized or not) that\n(including all means of access thereto and therefrom) are not\nunder the exclusive ownership and direct control of the Company.\n\n 2.1.9 Absence of Changes. Since the Balance Sheet Date,\n ------------------\nexcept as otherwise contemplated by this Agreement or set forth\nin the Disclosure Schedule, the Company has conducted its\nbusiness only in the ordinary and usual course and, without\nlimiting the generality of the foregoing:\n\n (a) There have been no changes in the condition\n(financial or otherwise), business, net worth, assets, proper-\nties, employees, operations, obligations or liabilities of the\nCompany which, in the aggregate, have had or may be reasonably\nexpected to have a material adverse effect on the condition,\nbusiness, net worth, assets, prospects, properties or operations\nof the Company;\n\n (b) The Company has not issued, or authorized for\nissuance, or entered into any commitment to issue, any equity\nsecurity, bond, note or other security of the Company;\n\n (c) The Company has not incurred additional debt for\nborrowed money or incurred any obligation or liability except in\nthe ordinary and usual course of business and in any event not\nin excess of $5,000 for any single occurrence;\n\n (d) The Company has not paid any obligation or\nliability, or discharged, settled or satisfied any claim, lien\nor encumbrance, except for current liabilities in the ordinary\nand usual course of business and in any event not in excess of\n$5,000 for any single occurrence;\n\n (e) The Company has not declared or made any dividend,\npayment or other distribution on or with respect to any share of\ncapital stock of the Company;\n\n (f) The Company has not purchased, redeemed or otherwise\nacquired or committed itself to acquire, directly or indirectly,\nany share or shares of capital stock of the Company;\n\n (g) The Company has not mortgaged, pledged, or otherwise\nencumbered any of its assets or properties, except for liens for\ncurrent taxes which are not yet delinquent and purchase-money\n\n\n -7-\n\n\n\n\n\nliens arising out of the purchase or sale of services or\nproducts made in the ordinary and usual course of business and\nin any event not in excess of $2,500 for any single item or\n$10,000 in the aggregate;\n\n (h) The Company has not disposed of, or agreed to\ndispose of, by sale, lease, license or otherwise, any other\nasset or property, tangible or intangible, except, in the case\nof such other assets and property, in the ordinary and usual\ncourse of business, and in each case for a consideration\nbelieved to be at least equal to the fair value of such asset or\nproperty and in any event not in excess of $5,000 for any single\nitem or $10,000 in the aggregate;\n\n (i) The Company has not purchased or agreed to purchase\nor otherwise acquire any securities of any corporation, partner-\nship, joint venture, firm or other entity; except as authorized\nin writing by the Purchaser, the Company has not made any\nexpenditure or commitment for the purchase, acquisition,\nconstruction or improvement of a capital asset, except in the\nordinary and usual course of business and in any event not in\nexcess of $5,000 for any single item or $10,000 in the\naggregate;\n\n (j) The Company has not entered into any transaction or\ncontract, or made any commitment to do the same, except in the\nordinary and usual course of business;\n\n (k) Except as disclosed in Schedule 2.1.9(k) to the\nDisclosure Schedule, the Company has not sold, assigned, trans-\nferred or conveyed, or committed itself to sell, assign, trans-\nfer or convey, any Proprietary Rights (as defined in Section \n2.1.18);\n\n (l) The Company has not adopted or amended any bonus,\nincentive, profit-sharing, stock option, stock purchase,\npension, retirement, deferred-compensation, severance, life\ninsurance, medical or other benefit plan, agreement, trust, fund\nor arrangement for the benefit of employees of any kind whatso-\never, nor entered into or amended any agreement relating to\nemployment, services as an independent contractor or consultant,\nor severance or termination pay, nor agreed to do any of the\nforegoing;\n\n (m) The Company has not effected or agreed to effect any\nchange in its directors, officers or key employees; and\n\n (n) The Company has not effected or committed itself to\neffect any amendment or modification in its Articles of\nIncorporation or Bylaws.\n\n\n -8-\n\n\n\n\n\n 2.1.10 Properties.\n ----------\n\n (a) The Company owns no real property. The Balance\nSheet reflects all of the real and personal property used by the\nCompany in its business or otherwise held by the Company, except\nfor (i) property acquired or disposed of in the ordinary and\nusual course of the business of the Company since the Balance\nSheet Date, and (ii) real and personal property not required\nunder GAAP to be reflected thereon. The Company has good and\nmarketable title to all assets and properties listed on the\nBalance Sheet and thereafter acquired, free and clear of any\nimperfections of title, lien, claim, encumbrance, restriction,\ncharge or equity of any nature whatsoever, except for the lien\nof current taxes not yet delinquent and purchase money liens\narising out of the purchase or sale of services or products made\nin the ordinary course of business. All of the material fixed\nassets and properties reflected on the Balance Sheet or\nthereafter acquired are in operating condition for the\nrequirements of the business as presently conducted by the\nCompany.\n\n (b) Except for its offices and laboratory space in St.\nLouis, Missouri (the \"Property\"), the Company does not lease any\nreal property, and has no real property under option to\npurchase. The Property is held under valid, existing and\nenforceable leases. To the knowledge of the Company and the\nPrincipal Securityholders, the Property and the operations of\nthe Company thereon do not violate any applicable material\nbuilding code, zoning requirement or classification, or\npollution control ordinance or statute relating to the Property\nor to such operations.\n\n 2.1.11 Environmental Matters. Except as set forth on\n ---------------------\nSchedule 2.1.11(c), which is deemed to be delivered as part of\nthe Disclosure Schedule, and except for such exceptions or\nbreaches of this Section 2.1.11 which will not result in\naggregate fines and other penalties in excess of $7,500:\n\n (a) To the knowledge of the Company and the Principal\nSecurityholders, the Company is in compliance with all\napplicable local, state and federal statutes, orders, rules,\nordinances, regulations and codes and all applicable judicial or\nadministrative interpretations thereof relating to pollution or\nprotection of the environment, including, without limitation,\nlaws relating to exposures, emissions, discharges, releases or\nthreatened releases of Hazardous Substances (as hereinafter\ndefined) into or on land, ambient air, surface water,\ngroundwater or structures (including the protection, cleanup,\nremoval, remediation or damage thereof), or otherwise related to\nthe manufacture, processing, distribution, use, treatment,\nstorage, disposal, transport, discharge or handling of Hazardous\nSubstances (collectively, \"Environmental Laws\"). The Company\nhas not received any notice of any investigation, claim or\nproceeding against the Company relating to Hazardous Substances\n\n\n -9-\n\n\n\n\n\nor any action pursuant to or violation or alleged violation\nunder any Environmental Law, and the Company is not aware of any\nfact or circumstance which will impose any environmental\nliability upon the Company. \"Hazardous Substances\" shall mean\nany pollutant, contaminant, material, substance, waste, chemical\nor compound regulated, restricted or prohibited by any law,\nregulation or ordinance or designated by any governmental agency\nto be hazardous, toxic, radioactive, biohazardous or otherwise a\ndanger to health or the environment.\n\n (b) To the best knowledge of the Company and the\nPrincipal Securityholders, there are no Hazardous Substances\ncurrently in, under or on the soil, sediment, surface water or\ngroundwater, or on or under any properties owned, leased or\noccupied by the Company. The Company has not disposed of any\nHazardous Substances on such properties in violation of any\nEnvironmental Law. There is no present release or threatened\nrelease by the Company of any Hazardous Substances in, on or\nunder such properties in violation of any Environmental Law. To\nthe knowledge of the Company and the Principal Stockholders, the\nCompany has not disposed of any materials at any site being\ninvestigated or remediated for contamination or possible con-\ntamination of the environment.\n\n (c) The Company has all permits, licenses and approvals\nrequired by Environmental Laws for the use and occupancy of, and\nfor all operations and activities conducted on, the Property,\nand (i) to the knowledge of the Company and the Principal\nSecurityholders, the Company is in compliance with all such\npermits, licenses and approvals and (ii) all such permits,\nlicenses and approvals have not, to the knowledge of the Company\nand the Principal Securityholders, been revoked, and to the\nextent permitted by law, will be transferred to the Purchaser at\nthe Closing.\n\n 2.1.12 Taxes. The Company has accurately and completely\n -----\nfiled with the appropriate United States, state, local and\nforeign governmental agencies all tax returns and reports\nrequired to be filed (subject to permitted extensions applicable\nto such filings), and has paid or accrued in full all taxes,\nduties, charges, withholding obligations and other governmental\nliabilities as well as any interest, penalties, assessments or\ndeficiencies, if any, due to, or claimed to be due by, any\ngovernmental authority (including taxes on properties, income,\nfranchises, licenses, sales and payrolls). (All such items are\ncollectively referred to herein as \"Taxes\"). The Balance Sheet\nfully accrues or reserves all current and deferred Taxes. The\nCompany is not a party to any pending action or proceeding, nor,\nto the knowledge of the Company and the Principal\nSecurityholders, is any such action or proceeding threatened by\nany governmental authority for the assessment or collection of\nTaxes. No liability for Taxes has been incurred other than in\nthe ordinary course of business. There are no liens for Taxes\nexcept for liens for property taxes not yet delinquent. The\n\n\n -10-\n\n\n\n\n\nCompany is not a party to any Tax sharing, Tax allocation, Tax\nindemnity or statute of limitations extension or waiver\nagreement and has never been included on any consolidated\ncombined or unitary return with any other entity.\n\n 2.1.13 Employees. The Company has provided the Purchaser\n ---------\nwith a true and correct list setting forth all employees and\nconsultants of the Company as of the date thereof, together with\ntheir titles or positions, dates of hire, regular work location\nand current compensation. The Company does not have any\nemployment contract with any officer or employee or any other\nconsultant or person which is not terminable by it at will\nwithout liability, except as the right of the Company to\nterminate its respective employees at will may be limited by\napplicable federal or Missouri law. Except for the Company\nOption, the Company has no deferred compensation, pension,\nhealth, profit sharing, bonus, stock purchase, stock option,\nhospitalization, insurance, severance or any other employee\npension benefit (as defined in the Employee Retirement Income\nSecurity Act of 1974 or otherwise) or welfare benefit plan or\nobligation covering any of its officers or employees. There are\nno controversies or labor disputes or union organization activi-\nties pending or, to the knowledge of the Company and the\nPrincipal Securityholders threatened, between the Company and\nany of its employees. The Company is not a party to or bound by\nany union or collective bargaining unit. To the best knowledge\nof the Company and the Principal Securityholders, the Company\nhas complied with all applicable state and federal equal\nemployment opportunity and other laws related to employment.\n\n 2.1.14 Compliance with Law. All material licenses, fran-\n -------------------\nchises, permits, clearances, consents, certificates and other\nevidences of authority of the Company which are necessary to the\nconduct of the Company's business (\"Permits\") are in full force\nand effect and the Company is not in violation of any Permit in\nany material respect. Except for exceptions which would not\nhave a material adverse effect on the condition (financial or\notherwise), business, net worth, assets, properties or\noperations of the Company, the business of the Company has been\nconducted in accordance with all applicable laws, regulations,\norders and other requirements of governmental authorities.\n\n 2.1.15 Litigation. There is no claim, dispute, action,\n ----------\nproceeding, notice, order, suit, appeal or, to the knowledge of\nthe Company and the Principal Securityholders, investigation, at\nlaw or in equity, pending against the Company, or involving any\nof its assets or properties, before any court, agency,\nauthority, arbitration panel or other tribunal, and to the\nknowledge of the Company none have been threatened. Neither the\nCompany nor any Principal Securityholder is aware of any facts\nwhich, if known to shareholders, customers, governmental\nauthorities or other persons, would result in any such valid\nclaim, dispute, action, proceeding, suit or appeal. The Company\nis not subject to any order, writ, injunction or decree of any\n\n\n -11-\n\n\n\n\n\ncourt, agency, authority, arbitration panel or other tribunal,\nnor is it in default with respect to any notice, order, writ,\ninjunction or decree.\n\n 2.1.16 Contracts. The Disclosure Schedule contains a\n ---------\ncomplete list of each executory contract and agreement in the\nfollowing categories to which the Company is a party, or by\nwhich it is bound in any respect: (a) agreements for the pur-\nchase, sale, lease or other disposition of equipment, goods,\nmaterials, research and development, supplies, studies or\ncapital assets, or for the performance of services, in any case\ninvolving more than $5,000; (b) contracts or agreements for the\njoint performance of work or services, and all other joint ven-\nture and collaboration agreements; (c) management or employment\ncontracts, consulting contracts, collective bargaining\ncontracts, termination and severance agreements; (d) notes,\nmortgages, deeds of trust, loan agreements, security agreement,\nguarantees, debentures, indentures, credit agreements and other\nevidences of indebtedness; (e) pension, retirement, profit-\nsharing, deferred compensation, bonus, incentive, life\ninsurance, hospitalization or other employee benefit plans or\narrangements (including, without limitation, any contracts or\nagreements with trustees, insurance companies or others relating\nto any such employee benefit plan or arrangement); (f) stock\noption, stock purchase, warrant, repurchase or other contracts\nor agreements relating to any share of capital stock of the\nCompany; (g) contracts or agreements with agents, brokers,\nconsignees, sale representatives or distributors; (h) contracts\nor agreements with any director, officer, employee, consultant\nor shareholder; (i) powers of attorney or similar authorizations\ngranted by the Company to third parties; (j) patents, licenses,\nsublicenses, royalty agreements and other contracts or\nagreements to which the Company is a party, or otherwise\nsubject, relating to technical assistance or to Proprietary\nRights as defined in Section 2.1.18 of this Agreement; and\n(k) other material contracts. The Disclosure Schedule sets\nforth true and complete financial terms of the agreements\nbetween the Company and Gold Biotechnology, Inc. (\"GBI\") with\nrespect to (i) the loan from GBI to the Company and (ii) the\nsublease of building space from the Company to GBI; the parties\nthereto shall endeavor in good faith to complete definitive\ndocumentation with respect to such agreements, including such\nother terms as shall be commercially customary for documents of\nsuch nature, as promptly as practicable following the Closing.\n\n Neither the Company nor, to the best of the Company's and\nthe Principal Securityholders' knowledge, any of its employees\nhas entered into any contract or agreement containing covenants\nlimiting the right of the Company to compete in any business or\nwith any person. As used in this Agreement, the terms\n\"contract\" and \"agreement\" include every contract, agreement,\ncommitment, understanding and promise, whether written or oral.\n\n\n -12-\n\n\n\n\n\n 2.1.17 No Default.\n ----------\n\n (a) Each of the contracts, agreements or other\ninstruments referred to in Section 2.1.16 of this Agreement is a\nlegal, binding and enforceable obligation by or against the\nCompany, subject to the effect of applicable bankruptcy, insol-\nvency, reorganization, moratorium or other similar federal or\nstate laws affecting the rights of creditors and the effect or\navailability of rules of law governing specific performance,\ninjunctive relief or other equitable remedies. To the best of\nthe Company's and the Principal Securityholders' knowledge, no\nparty with whom the Company has an agreement or contract is in\ndefault thereunder or has breached any terms or provisions\nthereof which is material to the conduct of the Company's\nbusiness.\n\n (b) The Company has performed, or is now performing, the\nobligations of, and the Company is not in material default (or\nwould by the lapse of time and\/or the giving of notice be in\nmaterial default) in respect of, any contract, agreement or\ncommitment binding upon it or its assets or properties and\nmaterial to the conduct of its business. No third party has\nnotified the Company or the Principal Securityholders of any\nmaterial claim, dispute or controversy with respect to any of\nthe executory contracts of the Company, nor has the Company\nreceived notice or warning of any material alleged\nnonperformance, material delay in delivery or other material\nnoncompliance by the Company with respect to its obligations\nunder any of those contracts, nor are there any facts which\nexist indicating that any of those contracts may be totally or\npartially terminated or suspended by the other parties thereto\nby reason of the Company's failure to perform in accordance with\nthe contracts' terms.\n\n 2.1.18 Proprietary Rights.\n ------------------\n\n (a) The Company has provided the Purchaser in writing a\ncomplete and correct list (the \"Intellectual Property Disclosure\nSchedule\") of (1) all patents and applications for patents,\ntrademarks, trade names, service marks, and copyrights, and\napplications therefor, owned or used by the Company or in which\nit has any rights or licenses and (2) all trade secrets owned or\nused by the Company or in which it has any rights or licenses\nwhich are material to the Company. Such list specifies, as\napplicable: (i) the title of the patent, trademark, trade name,\nservice mark, copyright or application therefor; (ii) the\njurisdiction by or in which such patent, trademark, trade name,\nservice mark or copyright has been issued or registered or in\nwhich an application has been filed, including the registration\nor application numbers; and (iii) material licenses, sublicenses\nand similar agreements to which the Company is a party or\npursuant to which any other party is authorized to use, exercise\nor receive any benefit from any Proprietary Rights (as defined\nbelow) of the Company. The Company has provided the Purchaser\n\n\n -13-\n\n\n\n\n\nwith copies of all written agreements of the Company with each\nofficer, employee or consultant of the Company providing the\nCompany with title and ownership to patents, patent\napplications, trade secrets, inventions and inventions developed\nor used by the Company in its business. All of such agreements\nare valid, enforceable and legally binding, subject to the\neffect or availability of rules of law governing specific\nperformance, injunctive relief or other equitable remedies\n(regardless of whether any such remedy is considered in a\nproceeding at law or in equity).\n\n (b) To the best knowledge of the Company and the\nPrincipal Securityholders, the Company owns or possesses or has\nthe right to use all patents, patent applications, trademarks,\ntrademark applications, trade secrets, service marks, trade\nnames, copyrights, inventions, drawings, designs, proprietary\nknow-how or information, or other rights with respect thereto\n(collectively referred to as \"Proprietary Rights\"), used in the\nbusiness of the Company, and the same are sufficient to conduct\nthe Company's business as it has been and is now being\nconducted. To the best knowledge of the Company and the\nPrincipal Securityholders, except as set forth on Schedule\n2.1.9(k) in the Disclosure Schedule, the Company has the rights\nto use, sell, license, sublicense, assign, transfer, convey or\ndispose of such Proprietary Rights and the products, processes\nand materials covered thereby.\n\n (c) To the best knowledge of the Company and the\nPrincipal Securityholders, except as set forth on Schedule\n2.1.18(c) or Schedule 2.1.9(k) in the Disclosure Schedule, the\noperations of the Company do not conflict with or infringe, and\nno one has asserted to the Company that such operations conflict\nwith or infringe, any Proprietary Rights, owned, possessed or\nused by any third party. There are no claims, disputes,\nactions, proceedings, suits or appeals pending against the\nCompany with respect to any Proprietary Rights and, to the best\nknowledge of the Company and the Principal Securityholders, none\nhas been threatened against the Company. To the best knowledge\nof the Company and the Principal Securityholders, except as set\nforth on Schedule 2.1.18(c) or Schedule 2.1.9(k) in the\nDisclosure Schedule, there are no facts which would reasonably\nserve as a basis for any claim that the Company does not have\nthe right to use and to transfer the right or use, free of any\nrights or claims of others, all Proprietary Rights in the\ndevelopment, manufacture, use, sale or other disposition of any\nor all products or services presently being used, furnished or\nsold in the conduct of the business of the Company as it has\nbeen and is now being conducted. To the best knowledge of the\nCompany and the Principal Securityholders, the Proprietary\nRights referred to in the preceding sentence are free of any\nunresolved ownership disputes with respect to any third party\nand to the Company's and the Principal Securityholders' best\nknowledge there is no unauthorized use, infringement or mis-\nappropriation of any of such Proprietary Rights by any third\n\n\n -14-\n\n\n\n\n\nparty, including any employee or former employee of the Company\nnor is there any breach of any license, sublicense or other\nother agreement authorizing another party to use such\nProprietary Rights. The Company has not entered into any\nagreement granting any third party the right to bring\ninfringement actions with respect to, or otherwise to enforce\nrights with respect to, any such Proprietary Right.\n\n (d) Except as set forth in the Intellectual Property\nDisclosure Schedule, there are no pending, or to the best\nknowledge of the Company and the Principal Securityholders,\nthreatened proceedings before any patent or trademark authority\nto which the Company is a party.\n\n (e) To the best knowledge of the Company and the\nPrincipal Securityholders, no employee or officer of or\nconsultant to the Company is in violation of any term of any\nemployment contract, proprietary information and inventions\nagreement, non-competition agreement, or any other contract or\nagreement relating to the relationship of any such employee or\nconsultant with the Company or any previous employer.\n\n 2.1.19 Insurance. The Company has provided the Purchaser\n ---------\nwith copies of all insurance policies to which the Company is a\nparty or is a beneficiary or named insured, and such policies\nare listed on the Disclosure Schedule. There have been no\nclaims in excess of $5,000 asserted under any of the insurance\npolicies of the Company in respect of all general liability,\nprofessional liability, errors and omissions, and worker's\ncompensation, and medical claims since the Company's\nincorporation.\n\n 2.1.20 Brokers or Finders. The Company has not dealt with\n ------------------\nany broker or finder in connection with the transactions contem-\nplated by this Agreement. The Company has not incurred, and\nshall not incur, directly or indirectly, any liability for any\nbrokerage or finders' fees or agents' commissions or any similar\ncharges in connection with this Agreement or any transaction\ncontemplated hereby.\n\n 2.1.21 Related Parties. Except for Paul Gold, who owns a\n ---------------\nmajority interest in GBI, no officer or director of the Company,\nor any affiliate of any such person, has, either directly or\nindirectly, (a) an interest in any corporation, partnership,\nfirm or other person or entity which furnishes or sells services\nor products which are similar to those furnished or sold by the\nCompany, or (b) a beneficial interest in any contract or\nagreement to which the Company is a party or by which the\nCompany may be bound.\n\n 2.1.22 Certain Advances. There are no receivables of the\n ----------------\nCompany owing from directors, officers, employees, consultants\nor shareholders of the Company, or owing by any affiliate of any\ndirector or officer of the Company, other than advances in the\n\n\n -15-\n\n\n\n\n\nordinary and usual course of business to officers and employees\nfor reimbursable business expenses which are not in excess of\n$5,000 for any one individual.\n\n 2.1.23 Underlying Documents. Copies of any underlying\n --------------------\ndocuments listed or described as having been disclosed to the\nPurchaser pursuant to this Agreement have been furnished to the\nPurchaser. All such documents furnished to the Purchaser are\ntrue and correct copies, and there are no amendments or modifi-\ncations thereto, that have not been disclosed in writing to the\nPurchaser.\n\n 2.1.24 No Misleading Statements. No representation or\n ------------------------\nwarranty made herein, in the Disclosure Schedule, or in the\nAppendices, Schedules and Exhibits attached hereto or any\nwritten statement or certificate furnished or to be furnished to\nthe Purchaser pursuant hereto or in connection with the\ntransactions contemplated hereby (when read together) contains\nany untrue statement of a material fact or omits to state a\nmaterial fact necessary to make any statement of fact contained\nherein not misleading.\n\n 2.2 Additional Representations and Warranties of the\n ------------------------------------------------\nSecurityholders. Each Securityholder severally represents and\n- - ---------------\nwarrants to the Purchaser as follows:\n\n 2.2.1 Authority. Such Securityholder has all power to\n ---------\nexecute and deliver this Agreement and to carry out and perform\nsuch Securityholder's respective obligations under the terms of\nthis Agreement and the related agreements required to be entered\ninto as conditions of Closing under Article 5 hereof. Assuming\nthe termination of the Shareholder Agreement as contemplated in\nSection 9.1 hereof, such Securityholder has the sole power to\nexchange, assign, transfer and deliver his or its Securities\nhereunder, either as his or its sole and separate property or as\ncommunity property, as may be applicable to such Securityholder,\nfree and clear of all voting trust arrangements, liens,\nencumbrances, equities, security interests, restrictions and\nclaims whatsoever. This Agreement, when executed and delivered\nby such Securityholder, will constitute the valid and legally\nbinding obligation of such Securityholder, legally enforceable\nagainst such Securityholder in accordance with the terms of this\nAgreement, subject to the effect of bankruptcy, insolvency,\nreorganization, moratorium and other similar laws relating to or\naffecting the rights of creditors generally, limitations imposed\nby federal or state law or equitable principles upon the\nspecific enforceability of any of the remedies, covenants or\nother provisions of this Agreement, and upon the availability of\ninjunctive relief or other equitable remedies.\n\n 2.2.2 No Conflict with Other Instruments. The execution,\n ----------------------------------\ndelivery and performance of this Agreement and the transactions\ncontemplated hereby (a) will not result in any violation of,\nconflict with, constitute a breach, violation or default (with\n\n\n -16-\n\n\n\n\n\nor without notice or lapse of time, or both) under (i) any\nprovision of the Articles of Incorporation or Bylaws or other\ncharter or governing document of such Securityholder or (ii) any\nagreement, contract, understanding, note, mortgage, indenture,\nlease, franchise, license, permit or other instrument to which\nsuch Securityholder is a party or by which such Securityholder\nor any of his or its properties or assets is bound, or (b) to\nthe best knowledge of such Securityholder, conflict with or\nresult in any breach or violation of any statute, judgment,\ndecree, order, rule or governmental regulation applicable to\nsuch Securityholder or his or its properties or assets.\n\n 2.2.3 Ownership of Securities. Such Securityholder has\n -----------------------\ngood and marketable title to the Securities to be exchanged by\nsuch Securityholder pursuant to this Agreement and, upon\ndelivery of and exchange for such Securities hereunder, the\nPurchaser will acquire good and marketable title thereto, free\nand clear of all voting trust arrangements, liens, encumbrances,\nequities, security interests, restrictions and claims\nwhatsoever. Except for the Shareholder Agreement, such\nSecurityholder is not a party to any voting trust, proxy, or\nother agreement or understanding between or among any persons\nthat affects or relates to the voting or giving of written\nconsent with respect to any outstanding security of the Company.\n\n 2.2.4 Disclosure. Such Securityholder is not aware that\n ----------\nany of the representations and warranties set forth in Section\n2.1 above is untrue or inaccurate in any material respect. The\nexchange of the Securities held by such Securityholder pursuant\nto this Agreement is not prompted by any adverse information\nconcerning the Company that is not set forth in the\nrepresentations and warranties set forth in Section 2.1 hereof\nor in the Disclosure Schedule.\n\n 2.2.5 Exchange Entirely for Own Account. This Agreement\n ---------------------------------\nis made with such Securityholder in reliance upon such\nSecurityholder's representation to the Purchaser, which by the\nexecution of this Agreement such Securityholder hereby confirms,\nthat the Purchaser Common to be received by each Securityholder\nwill be acquired for investment for the Securityholder's own\naccount, not as a nominee or agent, and not with a view to the\nresale or distribution of any part thereof, and that such\nSecurityholder has no present intention of selling, granting any\nparticipation in, or otherwise distributing the same. By\nexecuting this Agreement, such Securityholder further represents\nthat he or it does not have any contract, undertaking, agreement\nor arrangement with any person to sell, transfer or grant\nparticipations to such person or to any third person, with\nrespect to any of the Purchaser Common.\n\n 2.2.6 Reliance Upon the Securityholder's Representations.\n --------------------------------------------------\nSuch Securityholder understands that the Purchaser Common is not\nregistered under the Securities Act on the ground that the sale\nprovided for in this Agreement and the issuance of securities\n\n\n -17-\n\n\n\n\n\nhereunder is exempt from registration under the Securities Act\nof 1933 (the \"Securities Act\") pursuant to Section 4(2) thereof,\nand that the Purchaser's reliance on such exemption is based on\nsuch Securityholder's representations set forth herein. Such\nSecurityholder realizes that the basis for the exemption may not\nbe present if, notwithstanding such representations, such\nSecurityholder has in mind merely acquiring the Purchaser Common\nfor a fixed or determinable period in the future, or for a\nmarket rise, or for sale if the market does not rise. Such\nSecurityholder has no such intention.\n\n 2.2.7 Receipt of Information. Such Securityholder\n ----------------------\nbelieves it has received all the information it considers\nnecessary or appropriate for deciding whether to acquire the the\nPurchaser Common. Such Securityholder further represents that\nit has had an opportunity to ask questions and receive answers\nfrom the Purchaser regarding the terms and conditions of the\noffering of the Purchaser Common and the business, properties,\nprospects and financial condition of the Purchaser and to obtain\nadditional information (to the extent the Purchaser possessed\nsuch information or could acquire it without unreasonable effort\nor expense) necessary to verify the accuracy of any information\nfurnished to it or to which it had access.\n\n 2.2.8 Restricted Securities. Such Securityholder\n ---------------------\nunderstands that the Purchaser Common may not be sold,\ntransferred or otherwise disposed of without registration under\nthe Securities Act or an exemption therefrom, and that in the\nabsence of an effective registration statement covering the\nPurchaser Common or an available exemption from registration\nunder the Securities Act, the Purchaser Common must be held\nindefinitely. In particular, such Securityholder is aware that\nthe the Purchaser Common may not be sold pursuant to Rule 144\npromulgated under the Securities Act unless all of the\nconditions of that Rule are met. Among the conditions for use\nof Rule 144 is the availability of current information to the\npublic about the Purchaser. Such information is now available,\nbut may not be in the future.\n\n 2.2.9 Legends. It is understood that the certificates\n -------\nevidencing the Purchaser Common may bear one or all of the\nfollowing legends:\n\n (a) \"These securities have not been registered under the\nSecurities Act of 1933. They may not be sold, offered for sale,\npledged or hypothecated in the absence of a registration\nstatement in effect with respect to the securities under such\nAct or an opinion of counsel satisfactory to the Purchaser that\nsuch registration is not required or unless sold pursuant to\nRule 144 of such Act or another applicable exemption.\"\n\n (b) Any legend required by the laws of the State of\nCalifornia or other jurisdiction.\n\n\n -18-\n\n\n\n\n\n 2.2.10 Brokers or Finders. Such Securityholder has not\n ------------------\ndealt with any broker or finder in connection with the\ntransactions contemplated by this Agreement. Such\nSecurityholder has not incurred, and shall not incur, directly\nor indirectly, any liability for any brokerage or finders' fees\nor agents' commissions or any similar charges in connection with\nthis Agreement or any transaction contemplated hereby.\n\n 2.2.11 Vysis Status. Vysis, Inc. represents and warrants\n ------------\nthat it was previously named Imagenetics Incorporated\n(\"Imagenetics\"), and accordingly possesses all rights, privilege\nand powers and is subject to all the restrictions, liabilities\nand obligations of Imagenetics with respect to the Company\nPreferred, the Shareholder Agreement and the Company\nRegistration Rights Agreement.\n\n\n ARTICLE 3\n\n REPRESENTATIONS AND WARRANTIES OF THE PURCHASER\n -----------------------------------------------\n\n The Purchaser represents and warrants to the\nSecurityholders as follows:\n\n 3.1 Organization. The Purchaser is a corporation duly\n ------------\nincorporated, validly existing and in good standing under the\nlaws of Delaware. The Purchaser is duly qualified to do\nbusiness and is in good standing in each other jurisdiction in\nwhich it owns or leases property or conducts business, except\nwhere the failure to be so qualified would not have a material\nadverse effect on the business of the Purchaser. The Purchaser\nhas all requisite corporate power and authority to own, lease\nand operate its properties and to carry on its business as now\nbeing conducted, and possesses all licenses, franchises, rights\nand privileges material to the conduct of its business.\n\n 3.2 Authority. The Purchaser has all requisite\n ---------\ncorporate power and authority to enter into this Agreement and\nthe related agreements contemplated herein, to execute, deliver\nand perform its obligations hereunder and thereunder and to\nconsummate the transactions contemplated hereby and thereby.\nThe execution and delivery of this Agreement and the related\nagreements contemplated herein, the performance by the Purchaser\nof its obligations hereunder and thereunder, and the\nconsummation of the transactions contemplated hereby and thereby\nhave been duly authorized by all necessary corporate action on\nthe part of the Purchaser, including approval by its Board of\nDirectors. No vote of the Purchaser's stockholders is required\nin connection with the transactions set forth in this Agreement.\nThis Agreement has been duly executed and delivered by the\nPurchaser and constitutes the valid and binding obligation of\nthe Purchaser.\n\n\n -19-\n\n\n\n\n\n 3.3 No Conflict with Other Instruments. The execution,\n ----------------------------------\ndelivery and performance by the Purchaser of this Agreement and\nthe consummation by the Purchaser of the transactions\ncontemplated hereby (a) will not result in any violation of,\nconflict with, constitute a breach, violation or default (with\nor without notice or lapse of time, or both) under, give rise to\na right of termination, cancellation, forfeiture or acceleration\nof any material obligation or loss of any material benefit\nunder, or result in the creation or encumbrance on any of the\nproperties or assets of the Purchaser pursuant to (i) any\nprovision of the Certificate of Incorporation or Bylaws of the\nPurchaser or (ii) any material agreement, contract,\nunderstanding, note, mortgage, indenture, lease, franchise,\nlicense, permit or other instrument to which the Purchaser is a\nparty or by which it or any of its properties or assets is\nbound, or (b) to the best knowledge of the Purchaser, conflict\nwith or result in any breach or violation of any statute,\njudgment, decree, order, rule or governmental regulation\napplicable to the Purchaser or its properties or assets.\n\n 3.4 Governmental Consents. No consent, approval, order\n ---------------------\nor authorization of, or registration, declaration of, or\nqualification or filing with, any court, administrative agency,\ncommission, regulatory authority or other governmental or\nadministrative body or instrumentality, whether domestic or\nforeign, is required by or with respect to the Purchaser in\nconnection with the execution, delivery and performance of this\nAgreement by the Purchaser or the consummation by the Purchaser\nof the transactions contemplated hereby, except for (a) such\nconsents, approvals, orders, authorizations, registrations,\ndeclarations, qualifications or filings as may be required under\nstate securities or Blue Sky laws in connection with the\ntransactions set forth herein or which the failure to obtain\nwould not have a material adverse effect on the Purchaser or the\nconsummation by the Purchaser of the transactions contemplated\nhereby, and (b) the listing of the the Purchaser Common on The\nNasdaq Stock Market.\n\n 3.5 SEC Documents. The Purchaser has furnished to the\n -------------\nCompany a true and complete copy of the Purchaser's Annual\nReport on Form 10-K for the year ended December 31, 1995, the\nPurchaser's Quarterly Report on Form 10-Q for the quarter ended\nMarch 31, 1996 and the Purchaser's Proxy Statement for its\nAnnual Meeting of Stockholders held on May 21, 1996, all filed\nwith the Securities and Exchange Commission (\"SEC\") under the\nSecurities Exchange Act of 1934, as amended, all Form 8-K's\nfiled by the Purchaser with respect to any event or condition\noccurring or existing after January 1, 1996, and all amendments\nto any of the foregoing (the \"Purchaser SEC Filings\"). As of\nthe respective filing dates, the Purchaser SEC filings complied\nin all material respects with the requirements of the Securities\nExchange Act of 1934, as amended, and the Purchaser SEC Filings\ndid not contain any untrue statement of a material fact or omit\nto state a material fact required to be stated therein or\n\n\n -20-\n\n\n\n\n\nnecessary in order to make the statements made therein, in the\nlight of the circumstances under which they were made, not\nmisleading.\n\n 3.6 Shares of Purchaser Common. The shares of the\n --------------------------\nPurchaser Common will, when issued and delivered to the\nSecurityholders in accordance with this Agreement, be duly\nauthorized, validly issued, fully paid and nonassessable.\n\n 3.7 Litigation. There is no claim, dispute, action,\n ----------\nproceeding, notice, order, suit, appeal or, to the knowledge of\nthe Purchaser, investigation, at law or in equity, pending\nagainst the Purchaser, or involving any of its assets or\nproperties, before any court, agency, authority, arbitration\npanel or other tribunal, and to the knowledge of the Purchaser\nnone have been threatened, that might prevent or materially\nadversely affect the consummation of the transactions\ncontemplated by this Agreement. The Purchaser is not aware of\nany facts which, if known to shareholders, customers, govern-\nmental authorities or other persons, would result in any such\nvalid claim, dispute, action, proceeding, suit or appeal. The\nPurchaser is not subject to any order, writ, injunction or\ndecree of any court, agency, authority, arbitration panel or\nother tribunal that would prevent or materially adversely affect\nthe consummation of the transactions contemplated by this\nAgreement, nor is it in default with respect to any notice,\norder, writ, injunction or decree that would prevent or\nmaterially adversely affect the consummation of the transactions\ncontemplated by this Agreement.\n\n 3.8 Brokers or Finders. The Purchaser has not dealt\n ------------------\nwith any broker or finder in connection with the transactions\ncontemplated by this Agreement. The Purchaser has not incurred,\nand shall not incur, directly or indirectly, any liability for\nany brokerage or finders' fees or agents commissions or any\nsimilar charges in connection with this Agreement or any\ntransaction contemplated hereby.\n\n 3.9 Acquisition for Investment. The Purchaser is\n --------------------------\nacquiring the Securities for its own account and not with the\npresent view to sell such Securities in connection with the\ndistribution thereof. The Purchaser has no present intention to\nliquidate the Company or merge or consolidate the Company with\nor into any other entity.\n\n\n ARTICLE 4\n\n ADDITIONAL COVENANTS\n --------------------\n\n 4.1 Expenses. The Purchaser, the Company and the\n --------\nSecurityholders shall each pay its or their own fees and\nexpenses incurred incident to the preparation and carrying out\n\n\n -21-\n\n\n\n\n\nof the transactions herein contemplated (including legal,\naccounting and travel).\n\n 4.2 Agreements by Securityholders. Each Securityholder\n -----------------------------\nagrees that he or it will not offer, sell, transfer, assign,\nmortgage, pledge or otherwise dispose of or encumber any of the\nPurchaser Common delivered to him or it by this Agreement (a) if\nsuch action would prevent the Purchaser from accounting for the\nacquisition of the Securities as a \"pooling of interests\" and\n(b) unless (i) in the opinion of counsel to the Purchaser or in\nthe opinion of the Division of Corporate Finance of the\nSecurities and Exchange Commission (the \"Commission\") expressed\nin a no-action letter (which letter and the request therefor\nshall be in form and substance satisfactory to counsel for\nPurchaser), registration of such shares under the Securities\nAct, and the rules and regulations of the Commission thereunder,\nas then in effect, is not required in connection with such\ntransaction; (ii) sale of the Purchaser Common is permissible\nunder Rule 144 of the Commission under the Securities Act; or\n(iii) a registration statement under the Securities Act is then\nin effect with respect to such shares and the purchaser or\ntransferee has been furnished with a prospectus meeting the\nrequirements of Section 10 of the Securities Act. Each\nSecurityholder further agrees that the Purchaser may endorse on\nany certificate for shares to be delivered to or on behalf of\nSecurityholder pursuant to this Agreement an appropriate legend\nor legends as described in Section 2.2.9 of this Agreement, and\nthat the Purchaser may instruct its transfer agent not to\ntransfer any such shares unless advised by the Purchaser that\nsuch provisions have been complied with.\n\n 4.3 Nasdaq Listing. Promptly following the Closing, the\n --------------\nPurchaser shall submit an application for listing on The Nasdaq\nStock Market of the shares of the Purchaser Common to be issued\nto the Securityholders.\n\n\n ARTICLE 5\n\n CONDITIONS PRECEDENT\n --------------------\n\n 5.1 Conditions to Each Party's Obligations to Effect the\n ----------------------------------------------------\nExchange. The respective obligations of each of the parties to\n- - --------\neffect the exchange of the Securities for Purchaser Common shall\nbe subject to the fulfillment at or prior to the Closing of the\nfollowing conditions:\n\n (a) All corporate action required by law or by this\nAgreement with respect to this Agreement shall have been taken\nby the appropriate parties.\n\n (b) None of the parties hereto shall be subject to any\ninjunction against the consummation of the transactions\ncontemplated by this Agreement, and there shall not be pending\n\n\n -22-\n\n\n\n\n\nany litigation or proceeding by any person, and there shall not\nhave been overtly threatened the institution of any litigation\nor proceeding by any person, to restrain or prohibit the\nconsummation of the transactions contemplated by this Agreement.\n\n (c) All legal requirements for the valid consummation by\nthe Securityholders, the Company, and the Purchaser of the\ntransactions contemplated by this Agreement shall have been\nfulfilled; all authorizations, consents and approvals of all\ngovernmental authorities required to be obtained in order to\npermit consummation of the transactions contemplated by this\nAgreement shall have been obtained.\n\n (d) The Purchaser and each of David A. Smoller, Paul\nGold and Mark Cunningham shall have entered into employment and\nnon-competition agreements in substantially the form attached\nhereto as Appendix A pursuant to which such persons will perform\ncertain services for the Purchaser after the Closing\n\n (e) The Purchaser and the Securityholders shall have\nentered into the Registration Rights Agreement in the form\nattached hereto as Appendix C.\n\n (f) The Purchaser and the Securityholders shall have\nentered into the Escrow Agreement with the Escrow Agent named\ntherein in the form attached hereto as Appendix D.\n\n (g) No preliminary or permanent injunction or other\norder, decree or ruling issued by a court of competent\njurisdiction or by a governmental, regulatory or administrative\nagency or commission nor any statute, rule, regulation or\nexecutive order promulgated or enacted by any governmental\nauthority shall be in effect, which would prevent the\nconsummation of the transactions contemplated hereby; provided,\nhowever, that the parties shall use their best efforts to seek\nto obtain the removal of any such order, decree or ruling.\nThere shall be no litigation pending or threatened by any\nregulatory body or private party in which (i) an injunction is\nor may be sought against the transactions contemplated hereby,\nor (ii) relief is or may be sought against any party hereto as a\nresult of this Agreement, and in which, in the good faith\njudgment of the Board of Directors of either the Purchaser or\nthe Company (relying on the advice of their respective legal\ncounsel), such regulatory body or private party has a reasonable\npossibility of prevailing and such relief would have a material\nadverse effect upon either party.\n\n 5.2 Conditions to Obligations of the Purchaser. The\n ------------------------------------------\nobligations of the Purchaser to consummate this Agreement are\nsubject to the satisfaction on or prior to the Closing Date of\nthe following conditions, unless waived by the Purchaser:\n\n (a) The Purchaser shall have received all written\ncertificates and other documents evidencing the Securities.\n\n\n -23-\n\n\n\n\n\n (b) The representations and warranties of the Company\nand the Securityholders set forth in this Agreement and the\nschedules and exhibits hereto delivered by the Company or the\nSecurityholders, and in any written statement or certificate\nthat shall be delivered to the Purchaser under this Agreement,\nshall be true and correct as of the date of this Agreement and\nas if made at and as of the Closing Date.\n\n (c) The Company and each of the Securityholders shall\nhave performed in all material respects all obligations required\nto be performed by each under this Agreement on or prior to the\nClosing Date.\n\n (d) The Purchaser shall have been satisfied that the\nExchange will qualify for pooling-of-interests accounting\ntreatment in accordance with GAAP and all applicable rules,\nregulations and policies of the SEC.\n\n (e) The Purchaser shall have received an opinion dated\nthe Closing Date of Stinson, Mag & Fizzell, P.C., counsel to the\nCompany and the Securityholders (other than Vysis, Inc.), in\nsubstantially the form attached hereto as Exhibit 5.2(e).\n\n (f) The Purchaser shall have received an opinion dated\nthe Closing Date of William E. Murray, Esq., counsel to Vysis,\nInc., in substantially the form attached hereto as Exhibit\n5.2(f).\n\n (g) All consents, filings, permits, approvals and\nwaivers from third parties and governmental authorities\nnecessary for the consummation of the transactions as\ncontemplated hereby and to the continued validity and\neffectiveness of the Company's Proprietary Rights shall have\nbeen obtained or timely filed, as applicable, in each case\nsubject to no term, condition or restriction unacceptable to the\nPurchaser in its sole judgment.\n\n (h) Unless otherwise provided in Section 8.4 hereof, the\nCompany and the Securityholders shall cause each of the\ndirectors and officers of the Company to deliver to the\nPurchaser prior to the Closing Date his or her resignation as a\ndirector or officer, respectively, of the Company, to be\neffective immediately upon the Closing Date.\n\n (i) No preliminary or permanent injunction or other\norder, decree or ruling issued by a court of competent\njurisdiction or by a governmental, regulatory or administrative\nagency or commission nor any statute, rule, regulation or\nexecutive order promulgated or enacted by any governmental\nauthority shall be in effect, which would prevent the\nconsummation of the transactions contemplated hereby; provided,\nhowever, that the parties shall use their best efforts to seek\nto obtain the removal of any such order, decree or ruling.\nThere shall be no litigation pending or threatened by any\n\n\n -24-\n\n\n\n\n\nregulatory body or private party in which relief is or may be\nsought that imposes material limitations on the ability of the\nPurchaser effectively to acquire or hold or to exercise full\nrights of ownership to the Securities or to operate the business\nof the Company.\n\n 5.3 Conditions to Obligations of the Securityholders.\n ------------------------------------------------\nThe obligations of the Securityholders to consummate the\ntransactions contemplated hereby are subject to the satisfaction\non or prior to the Closing Date of the following additional\nconditions unless waived by the Securityholders:\n\n (a) The representations and warranties of the Purchaser\nset forth in this Agreement shall be true and correct as of the\ndate of this Agreement and as if made at and as of the Closing\nDate.\n\n (b) The Purchaser shall have performed in all material\nrespects all obligations required to be performed by each under\nthis Agreement on or prior to the Closing Date.\n\n (c) The Securityholders shall have received documents\nevidencing the irrevocable instructions contemplated by Section\n1.3 to issue the Purchaser Common as set forth in Schedule 1.2\nand the Purchaser Option.\n\n (d) The Securityholders shall have received an opinion\ndated the Closing Date of Pillsbury Madison & Sutro LLP, counsel\nto the Purchaser, in substantially the form attached hereto as\nExhibit 5.3(d).\n\n\n ARTICLE 6\n\n INDEMNIFICATION\n ---------------\n\n 6.1 Survival. All representations, warranties and\n --------\nagreements contained in this Agreement or in any certificate or\ndocument delivered pursuant to this Agreement shall survive the\nClosing notwithstanding any investigation conducted with respect\nthereto or any knowledge acquired as to the accuracy or\ninaccuracy of any such representation or warranty. The waiver\nof any condition based on the accuracy of any representation or\nwarranty, or the performance or compliance of any covenant or\nobligation, will not affect the right to indemnification. The\nrepresentations and warranties of the Securityholders set forth\nin Article 2 (other than Sections 2.1.7, 2.1.8, 2.1.9, 2.1.11,\n2.1.12, 2.1.15, 2.1.16, 2.1.17 and 2.1.18) and the related\nobligations of indemnity contained in this Article 6 and the\nrepresentations and warranties of the Purchaser set forth in\nArticle 3 and the related obligations of indemnity contained in\nthis Article 6 shall terminate on March 31, 1997. The\nrepresentations and warranties of the Securityholders set forth\nin Sections 2.1.7, 2.1.8, 2.1.9, 2.1.12, 2.1.15, 2.1.16, 2.1.17\n\n\n -25-\n\n\n\n\n\nand 2.1.18 and the related obligations of indemnity contained in\nthis Article 6 shall terminate on the second anniversary of the\nClosing Date.\n\n 6.2 Indemnification by the Securityholders. Each\n --------------------------------------\nSecurityholder shall severally indemnify and hold harmless the\nPurchaser and its agents, representatives, employees, officers,\ndirectors, stockholders, controlling persons and affiliates\n(collectively, the \"Purchaser Indemnified Persons\"), and shall\nreimburse the Purchaser Indemnified Persons for, any loss,\nliability, claim, damage, expense (including, but not limited\nto, costs of investigation and defense and reasonable attorneys'\nfees) or diminution of value, whether or not involving a third-\nparty claim (collectively, \"Damages\") arising from or in\nconnection with (a) any inaccuracy in any of the representations\nand warranties of the Securityholders in this Agreement or in\nany certificate or document delivered by the Securityholders or\nthe Company pursuant to this Agreement, or any actions,\nomissions or state of facts inconsistent with any such\nrepresentation or warranty, (b) any failure by the\nSecurityholders to perform or comply with any covenant in this\nAgreement, (c) any claim by any person for brokerage or finder's\nfees or commissions or similar payments based upon any agreement\nor understanding alleged to have been made by any such person\nwith the Company (or any person acting on its behalf) in\nconnection with this Agreement, or (d) any matters set forth on\nSchedule 2.1.11(c) to the extent that such matters result in\nDamages in the aggregate exceeding $7,500; provided, however,\nthat Mark Cunningham and Vysis, Inc. shall not be liable\nhereunder for any Damages arising from or in connection with any\ninaccuracy of the representations and warranties set forth in\nSection 2.1 or Article 8 of this Agreement or any breach of any\ncovenant contained in Article 8 of this Agreement; and provided,\nfurther, that with respect to Damages arising from or in\nconnection with any inaccuracy of the representations and\nwarranties set forth in Section 2.2 of this Agreement, each\nSecurityholder shall be liable hereunder only for inaccuracies\nin the representations and warranties of such Securityholder in\nSection 2.2.\n\n 6.3 Indemnification by the Purchaser. The Purchaser\n --------------------------------\nshall indemnify and hold harmless each Securityholder, and its\nagents, representatives, employees, officers, directors,\nstockholders, controlling persons and affiliates (collectively,\nthe \"Securityholder Indemnified Persons\") and shall reimburse\nthe Securityholder Indemnified Persons for, any Damages arising\nfrom or in connection with (a) any inaccuracy in any of the\nrepresentations and warranties of the Purchaser in this\nAgreement or in any certificate delivered by the Purchaser pur-\nsuant to this Agreement, or any actions, omissions or state of\nfacts inconsistent with any such representation or warranty,\n(b) any failure by the Purchaser to perform or comply with any\ncovenant in this Agreement, or (c) any claim by any Person for\nbrokerage or finder's fees or commissions or similar payments\n\n\n -26-\n\n\n\n\n\nbased upon any agreement or understanding alleged to have been\nmade by such Person with the Purchaser (or any Person acting on\nits behalf) in connection with any of the transactions\ncontemplated by this Agreement.\n\n 6.4 Limitations as to Amount--the Securityholders. The\n ---------------------------------------------\nSecurityholders shall have no liability (for indemnification or\notherwise) with respect to the matters described in clause (a)\nof Section 6.2 or, to the extent relating to any failure to\nperform or comply prior to the Closing Date, clause (b) of\nSection 6.2 until the total of all Damages with respect thereto\nexceeds $50,000. However, this Section shall not apply to any\nmisrepresentation or breach of warranty of which either the\nSecurityholders had actual knowledge or any intentional failure\nto perform or comply with any agreement and the Securityholders\nshall be liable for all Damages with respect thereto. The\nliability of each Securityholder under this Article 6 shall be\nlimited to the percentage of $8,000,000 that the shares of\nPurchaser Common to be received by such Securityholder in the\nExchange bears to the total number of shares of Purchaser Common\nto be issued in the Exchange, as set forth in Schedule 1.2\n(treating as issued for purposes of this Article 6 the shares of\nPurchaser Common underlying the Purchaser Option).\n\n 6.5 Limitations as to Amount--the Purchaser. The\n ---------------------------------------\nPurchaser shall have no liability (for indemnification or\notherwise) with respect to the matters described in clause (a)\nor (b) of Section 6.3 until the total of all Damages with\nrespect thereto exceeds $50,000. However, this Section shall\nnot apply to any intentional misrepresentation or breach of\nwarranty or any intentional failure to perform or comply with\nany agreement and the Purchaser shall be liable for all Damages\nwith respect thereto.\n\n 6.6 Procedure for Indemnification--Third Party Claims.\n -------------------------------------------------\nPromptly after receipt by an indemnified party under Section 6.2\nor Section 6.3 of notice of the commencement of any action,\narbitration, audit, hearing, investigation, litigation or suit\ncommenced (\"Proceeding\") against it, such indemnified party\nshall, if a claim in respect thereof is to be made against an\nindemnifying party under such Section, give notice to the\nindemnifying party of the commencement thereof, but the failure\nso to notify the indemnifying party shall not relieve it of any\nliability that it may have to any indemnified party except to\nthe extent the indemnifying party demonstrates that the defense\nof such action is prejudiced thereby. In case any such\nProceeding shall be brought against an indemnified party and it\nshall give notice to the indemnifying party of the commencement\nthereof, the indemnifying party shall, unless the claim involves\nTaxes, be entitled to participate therein and, to the extent\nthat it shall wish (unless (a) the indemnifying party is also a\nparty to such Proceeding and the indemnified party determines in\ngood faith that joint representations would be inappropriate or\n(b) the indemnifying party fails to provide reasonable assurance\n\n\n -27-\n\n\n\n\n\nto the indemnified party of its financial capacity to defend\nsuch Proceeding and provide indemnification with respect\nthereto), to assume the defense thereof with counsel\nsatisfactory to such indemnified party and, after notice from\nthe indemnifying party to such indemnified party of its election\nso to assume the defense thereof, the indemnifying party shall\nnot be liable to such indemnified party under such Section for\nany fees of other counsel or any other expenses with respect to\nthe defense of such Proceeding, in each case subsequently\nincurred by such indemnified party in connection with the\ndefense thereof, other than reasonable costs of investigation.\nIf an indemnifying party assumes the defense of such a\nProceeding, (x) no compromise or settlement thereof may be\neffected by the indemnifying party without the indemnified\nparty's consent unless (i) there is no finding or admission of\nany violation by the indemnified party of any federal, state,\nlocal, municipal, foreign, international or other administrative\norder, law, ordinance, principle of common law, regulation,\nstatute or treaty or any violation of the rights of any person\nand no effect on any other claims that may be made against the\nindemnified party and (ii) the sole relief provided is monetary\ndamages that are paid in full by the indemnifying party and\n(y) the indemnifying party shall have no liability with respect\nto any compromise or settlement thereof effected without its\nconsent. If notice is given to an indemnifying party of the\ncommencement of any Proceeding and it does not, within ten (10)\ndays after the indemnified party's notice is given, give notice\nto the indemnified party of its election to assume the defense\nthereof, the indemnifying party shall be bound by any\ndetermination made in such action or any compromise or\nsettlement thereof effected by the indemnified party.\nNotwithstanding the foregoing, if an indemnified party\ndetermines in good faith that there is a reasonable probability\nthat a Proceeding may adversely affect it or its affiliates\nother than as a result of monetary damages, such indemnified\nparty may, by notice to the indemnifying party, assume the\nexclusive right to defend, compromise or settle such Proceeding,\nbut the indemnifying party shall not be bound by any determi-\nnation of a Proceeding so defended or any compromise or\nsettlement thereof effected without its consent (which shall not\nbe unreasonably withheld).\n\n For any environmental remediation or cleanup subject to\nindemnification under Section 6.2, the remediation or cleanup\nwill be considered complete when all actions required by any\ngovernmental authority have been completed and each relevant\ngovernmental authority approves, in writing, unconditional\nclosure of the site (with respect to all reporting,\ninvestigative, remedial or monitoring activities). No\nindemnifying party shall have the power or right to (a)consent\nto (i) remediation or cleanup standards for the Property, or\n(ii) any limitation or restriction upon the use or occupancy of\nthe Property, or (b) propose the cessation of any remediation or\n\n\n -28-\n\n\n\n\n\ncleanup without first obtaining the written consent of\nPurchaser.\n\n 6.7 Escrow Fund. As partial security for the indemnity\n -----------\nprovided for in Section 6.2 hereof, ten percent (10%) of the\nPurchaser Common to be received by each Securityholder pursuant\nto this Agreement (the resulting number being rounded up to the\nnearest whole share) (the \"Escrow Shares\") shall be registered\nin the name of such Securityholder but be deposited (with a\nmedallion signature guaranteed executed assignment in blank)\nwith First Trust of California, National Association (or other\ninstitution selected by the Purchaser with the reasonable\nconsent of the Securityholders) as escrow agent (the \"Escrow\nAgent\"), such deposit to constitute an escrow fund (the \"Escrow\nFund\") to be governed by the terms set forth herein and in the\nEscrow Agreement to be signed by all parties thereto. Upon\ncompliance with the terms hereof and the terms of the Escrow\nAgreement, the Purchaser shall be entitled to obtain indemnity\nfrom the Escrow Fund for all Damages covered by the indemnity\nprovided for in Section 6.2 hereof. The Escrow Shares shall not\nbe included in the registration statement to be filed by the\nPurchaser pursuant to Section 2.1 of the Registration Rights\nAgreement.\n\n 6.8 Escrow Period. The Escrow Fund shall remain in\n -------------\nexistence for a period (the \"Escrow Period\") ending on the\nearlier to occur of (i) the March 31, 1997 and (ii) the date the\nPurchaser releases publicly its audited financial statements for\nthe year ending December 31, 1996.\n\n 6.9 Protection of Escrow Fund. The Escrow Agent shall\n -------------------------\nhold and safeguard the Escrow Fund during the Escrow Period,\nshall treat the Escrow Fund as a trust fund in accordance with\nthe terms of this Agreement and not as the property of the\nPurchaser, and shall hold and dispose of the Escrow Fund only in\naccordance with the terms hereof and of the Escrow Agreement.\n\n 6.10 Distributions; Voting.\n ---------------------\n\n (a) Any cash dividends, dividends payable in securities\nor other distributions of any kind (excluding any shares\nreceived upon a stock split, stock dividend or recapitalization)\nmade in respect of any securities in the Escrow Fund shall be\npaid out to the Securityholders.\n\n (b) The Escrow Agent shall have voting rights with\nrespect to the shares of stock contributed to the Escrow Fund by\nthe Securityholders so long as such stock or other voting\nsecurities are held in the Escrow Fund. The Escrow Agent shall\nbe required to vote the shares held in escrow in accordance with\nthe instructions of the Securityholders in whose name the\nPurchaser Common is registered.\n\n\n -29-\n\n\n\n\n\n 6.11 Claims Upon Escrow Fund.\n -----------------------\n\n (a) Upon receipt by the Escrow Agent on or before the\nlast day of the Escrow Period of a certificate signed by the\nChief Executive Officer or Chief Financial Officer of the\nPurchaser (an \"Officer's Certificate\"):\n\n (i) stating that a Purchaser Indemnified\n Person has paid or properly accrued Damages in an\n aggregate stated amount to which such party is\n entitled to payment pursuant to this Agreement, and\n\n (ii) specifying in reasonable detail the indi-\n vidual items of Damages included in the amount so\n stated, the date each such item was paid or properly\n accrued, and the nature of the misrepresentation,\n breach of warranty or claim to which such item is\n related, the Escrow Agent shall, subject to the\n provisions of Section 6.12 hereof, deliver to the\n Purchaser Indemnified Person out of the Escrow Fund,\n as promptly as practicable, the number of shares of\n Purchaser Common or amount of other assets held in the\n Escrow Fund to compensate the Purchaser Indemnified\n Person for or against such Damages.\n\n (b) For the purposes of this Article 6, each share of\nPurchaser Common in the Escrow Fund shall be valued at an amount\nequal to the average closing price per share of Purchaser Common\non The Nasdaq Stock Market as reported in the Western edition of\nthe Wall Street Journal for the twenty (20) trading days\npreceding the date Damages are fixed.\n\n (c) In lieu of depositing a portion of the Purchaser\nOption in the Escrow Fund, the holder of the Purchaser Option\nagrees, upon written notification from the Purchaser, to take\nall action necessary to cancel the requisite number of shares\nunderlying such Purchaser Option to satisfy such person's\nliabilities under this Article 6.\n\n 6.12 Objections to Claims. At the time of delivery of an\n --------------------\nOfficer's Certificate to the Escrow Agent, the Escrow Agent\nshall deliver a duplicate copy of such certificate to each\nSecurityholder and for a period of thirty (30) days after such\ndelivery, the Escrow Agent shall make no delivery of Purchaser\nCommon or other property pursuant to Section 6.11 hereof. After\nthe expiration of such thirty (30) day period, the Escrow Agent\nshall make delivery of the Purchaser Common or other property in\nthe Escrow Fund in accordance with Section 6.11 hereof, provided\nthat no such payment or delivery may be made if any\nSecurityholder shall object in a written statement to the claim\nmade in the Officer's Certificate, and such statement shall have\nbeen delivered to the Escrow Agent prior to the expiration of\nsuch thirty (30) day period.\n\n\n -30-\n\n\n\n\n\n 6.13 Resolution of Conflicts. If a Securityholder shall\n -----------------------\nobject in writing to the payment to the Purchaser Indemnified\nPersons in respect of any claim or claims made in any Officer's\nCertificate, the objecting Securityholder and the Purchaser\nshall attempt in good faith to agree upon the rights of the\nrespective parties with respect to each of such claims within\nsixty (60) days after objection by either the objecting\nSecurityholder or the Purchaser. If the objecting\nSecurityholder and the Purchaser should so agree on a claim, a\nmemorandum setting forth such agreement shall be prepared and\nsigned by both parties and shall be furnished to the Escrow\nAgent. The Escrow Agent shall be entitled to rely on any such\nmemorandum and distribute the Purchaser Common or other property\nfrom the Escrow Fund in accordance with the terms thereof. If\nthe objecting Securityholder and the Purchaser are unable to\nagree with respect to a claim, the Escrow Agent shall make\npayment with respect thereto only in accordance with (i) a final\nand binding arbitration award or (ii) a final non-appealable\norder of a court of competent jurisdiction.\n\n 6.14 Distribution upon Termination of Escrow Period.\n ----------------------------------------------\nPromptly following termination of the Escrow Period, the Escrow\nAgent shall deliver to each Securityholder all of the Purchaser\nCommon or other property or rights to the Purchaser Common of\nsuch Securityholder in the Escrow Fund in excess of any amount\nof such Purchaser Common or other property sufficient, in the\nreasonable judgment of the Purchaser, to satisfy any unsatisfied\nclaims applicable to such Securityholder specified in any\nOfficer's Certificate theretofore properly delivered to the\nEscrow Agent. As soon as any such claim is resolved, the Escrow\nAgent shall deliver to each Securityholder such Purchaser Common\nor rights to Purchaser Common or other property of such\nSecurityholder in excess of any amount of such Purchaser Common\nor other property sufficient, in the reasonable judgment of\nPurchaser, to satisfy any remaining unsatisfied claims\napplicable to such Securityholder. As soon as all such claims\nhave been resolved, the Escrow Agent shall deliver to each\nSecurityholder all the Purchaser Common or rights to Purchaser\nCommon or other property of such Securityholder remaining in the\nEscrow Fund and not required to satisfy such claims.\n\n\n ARTICLE 7\n\n AMENDMENT AND WAIVER\n --------------------\n\n 7.1 Amendment. This Agreement may not be amended except\n ---------\nby an instrument in writing signed on behalf of each of the\nparties hereto.\n\n 7.2 Extension; Waiver. At any time prior to the\n -----------------\nClosing, the Purchaser, may (a) extend the time for the per-\nformance of any of the obligations or other acts of the other\nparties hereto, (b) waive any inaccuracies in the representa-\n\n\n -31-\n\n\n\n\n\ntions and warranties contained herein or in any document\ndelivered pursuant hereto and (c) waive compliance with any of\nthe agreements or conditions for the benefit thereof contained\nherein. Any agreement on the part of a party hereto to any such\nextension or waiver shall be valid if set forth in an instrument\nin writing signed on behalf of such party.\n\n\n ARTICLE 8\n\n ADDITIONAL REPRESENTATIONS, WARRANTIES AND AGREEMENTS\n -----------------------------------------------------\n OF THE PRINCIPAL SECURITYHOLDERS\n --------------------------------\n\n Each Principal Securityholder represents and warrants to\nand agrees with the Purchaser and the Company as follows:\n\n 8.1 Tax and Accounting Treatment. Such Securityholder\n ----------------------------\nunderstands and agrees that it is intended that the Exchange\nwill be treated as a \"reorganization\" for federal income tax\npurposes and as a \"pooling of interests\" in accordance with\ngenerally accepted accounting principles and the applicable\nGeneral Rules and Regulations published by the SEC. Such\nSecurityholder further understands and agrees that such\nSecurityholder may be deemed to be an \"affiliate\" of Seller for\napplication of the pooling of interests requirements, although\nnothing contained herein should be construed as an admission of\nsuch fact.\n\n 8.2 Reliance Upon Representations, Warranties and\n ---------------------------------------------\nCovenants. Such Securityholder understands that, since the\n- - ---------\nExchange is expected to be accounted for as a \"pooling of\ninterests\" and such Securityholder may be an \"affiliate\" of the\nCompany (as such term is used in Rule 145 promulgated under the\nSecurities Act, SEC Accounting Series Release No. 135 (\"ASR No.\n135\") and SEC Staff Accounting Bulletin No. 65), the shares of\nPurchaser Common that such Securityholder will acquire under the\nExchange or otherwise may only be disposed of in conformity with\nthe limitations described in this Article 8. Such\nSecurityholder has been informed that the treatment of the\nExchange as a pooling of interests for financial accounting\npurposes is dependent upon the accuracy of certain of the\nrepresentations and warranties and the compliance with certain\nof the obligations set forth in this Article 8. Such\nSecurityholder understands that the representations and\nwarranties and covenants of Securityholder set forth in this\nArticle 8 will be relied upon by Purchaser, the Company, their\nrespective counsel and accounting firms and other\nsecurityholders of the Company.\n\n 8.3 Additional Representations, Warranties and Covenants\n ----------------------------------------------------\nof the Principal Securityholders.\n- - --------------------------------\n\n 8.3.1 Such Securityholder has no present intention or plan\nto sell, exchange or otherwise dispose of the Purchaser Common\n\n\n -32-\n\n\n\n\n\nto be received by such Securityholder in the Exchange such that\nthe Securityholder would retain a continuing interest through\nstock ownership in the Purchaser that is equal in value, as of\nthe Closing, to less than 50% of the value of all formerly\noutstanding stock of the Company that was held by such\nSecurityholder.\n\n 8.3.2 Such Securityholder will not sell, transfer,\nexchange, pledge or otherwise dispose of or in any other way\nreduce his risk of ownership or investment in, or make any offer\nor agreement relating to any of the foregoing with respect to\nany of the Purchaser Common received by such Securityholder in\nthe Exchange from and after the Closing until the Purchaser\nshall have publicly released a report that shall include the\ncombined financial results of the Purchaser and the Company for\na period of at least 30 days of combined operations of the\nPurchaser and the Company within the meaning of ASR No. 135.\n\n 8.3.3 Such Securityholder also understands that stop\ntransfer instructions will be given to the Purchaser's transfer\nagent with respect to certificates evidencing the Purchaser\nCommon to be issued to such Securityholder hereunder. Such stop\ntransfer instructions will be promptly rescinded upon the\nissuance of the financial report referred to in Section 8.3.2.\n\n 8.4 Resignations. Each of the Principal Securityholders\n ------------\nrepresents and warrants that the Principal Securityholders\nconstitute the only directors and officers of the Company.\nEffective as of and conditioned upon the Closing, each Principal\nSecurityholder resigns as a director of the Company and agrees\nto resign as an officer if requested by the Purchaser.\n\n\n ARTICLE 9\n\n ADDITIONAL AGREEMENTS OF THE SECURITYHOLDERS AND THE COMPANY\n ------------------------------------------------------------\n\n 9.1 Shareholder Agreement. Each Securityholder hereby\n ---------------------\nwaives any rights under the Shareholder Agreement that may\naccrue to such Securityholder as a result of the execution and\ndelivery of this Agreement by the other Securityholders and the\nconsummation of the transactions contemplated hereby, and hereby\nagrees that the terms and provisions of the Shareholder\nAgreement are inapplicable with respect to the transactions\ncontemplated hereby. The Company and each Securityholder also\nagrees that, effective as of the Closing, the Shareholder\nAgreement is hereby terminated and shall be of no further force\nand effect.\n\n 9.2 Company Registration Rights Agreement. The Company\n -------------------------------------\nand each Securityholder also agrees that, effective as of the\nClosing, the Company Registration Rights Agreement is hereby\nterminated and shall be of no further force and effect.\n\n\n -33-\n\n\n\n\n\n ARTICLE 10\n\n GENERAL\n -------\n\n 10.1 Notices. Any notice, request, instruction or other\n -------\ndocument to be given hereunder by any party to the other shall\nbe in writing and delivered personally or sent by certified\nmail, postage prepaid, by telecopy (with receipt confirmed), or\nby courier service, as follows:\n\n (a) If to the Purchaser to:\n\n Incyte Pharmaceuticals, Inc.\n 3174 Porter Avenue\n Palo Alto, CA 94304\n Attn: Chief Executive Officer\n Fax: (415) 855-0572\n\n with a copy to:\n\n Pillsbury Madison & Sutro LLP\n 235 Montgomery Street\n San Francisco, CA 94104\n Attn: Stanton D. Wong\n Fax: (415) 983-1200\n\n (b) If to the Securityholders to:\n\n to their respective addresses shown on the signature pages\n hereto\n\n with a copy to:\n\n Stinson, Mag & Fizzell, P.C.\n 100 South Fourth Street\n St. Louis, MO 63102\n Attn: John W. Finger\n Fax: (314) 259-4599\n\nor to such other persons as may be designated in writing by the\nparties, by a notice given as aforesaid.\n\n 10.2 Headings. The headings of the several sections of\n --------\nthis Agreement are inserted for convenience of reference only\nand are not intended to affect the meaning or interpretation of\nthis Agreement.\n\n 10.3 Counterparts. This Agreement may be executed in\n ------------\ncounterparts, and when so executed each counterpart shall be\ndeemed to be an original, and said counterparts together shall\nconstitute one and the same instrument.\n\n\n -34-\n\n\n\n\n\n 10.4 Binding Nature. This Agreement shall be binding upon\n --------------\nand inure to the benefit of the parties hereto. No party may\nassign or transfer any rights under this Agreement.\n\n 10.5 Applicable Law. This Agreement shall be governed by,\n --------------\nconstrued and enforced in accordance with the laws of the State\nof California as applied to contracts entered into solely\nbetween residents of, and to be performed entirely in, such\nstate.\n\n\n -35-\n\n\n\n\n\n IN WITNESS WHEREOF, the parties have caused this Agreement\nto be executed, all as of the date first above written.\n\n INCYTE PHARMACEUTICALS, INC.\n\n\n\n By \/s\/ Randal W. Scott\n ---------------------------------\n Title Executive Vice President\n ------------------------------\n\n\n GENOME SYSTEMS, INC.\n\n\n\n By \/s\/ David A. Smoller\n ---------------------------------\n Title President\n ------------------------------\n\n\n SECURITYHOLDERS:\n\n\n\n \/s\/ David A. Smoller\n ------------------------------------\n David A. Smoller, Ph.D.\n\n Address: 9339 Pine Avenue\n St. Louis, MO 63144\n\n\n\n \/s\/ Paul Gold\n ------------------------------------\n Paul Gold, Ph.D.\n\n Address: 8 Mosley Acres\n Creve Coeur, MO 63141\n\n\n\n \/s\/ Mark Cunningham\n ------------------------------------\n Mark Cunningham\n\n Address: 2370 Martin Drive\n Florissant, MO 63033\n\n\n -36-\n\n\n\n\n\n VYSIS, INC.\n\n\n\n By \/s\/ John Bishop\n ---------------------------------\n Title President\n ------------------------------\n\n Address: 3100 Woodcreek Drive\n Downers Grove, IL 60515\n\n\n -37-\n\n\n\n\n\n SCHEDULE 1.2\n\n\n\n<\/pre>\n
\n\n Number of Shares of
\n Company Common Number of Shares of
\n Owned Immediately Purchaser Common to
\n Prior to the be issued in the
\nSecurityholder Exchange(1) Exchange(2)
\n– – ————– ——————– ——————–<\/p>\n
\n
\nDavid A. Smoller 8,800 94,518<\/p>\nPaul Gold 8,800 94,518<\/p>\n
Vysis, Inc. 1,400 15,037
\n —— ——-
\n Total 19,000 204,073<\/p>\n
Average Closing Price of Incyte Common Stock for 30 consecutive
\ntrading days ending on and including July 19, 1996: $37.2417<\/p>\n
Purchaser Option: Based upon the Average Closing Price, the
\nPurchaser Option shall entitle Mark Cunningham to purchase
\n10,741 shares of Incyte Common Stock at an exercise price of
\n$.0465506 per share.<\/p>\n
– – ——–
\n(1) Assumes the conversion of all outstanding shares of Company
\nPreferred into Company Common.<\/p>\n
(2) The total number of shares of Purchaser Common is
\ncalculated as set forth in Section 1.2(b) of the Securities
\nExchange Agreement to which this Schedule 1.2 is attached.<\/p>\n
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