Exhibit 10.14
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT ("Agreement") is dated as of November 27,
2001 and is entered into by and among Cellegy Pharmaceuticals, Inc., a
California corporation ("Cellegy"), Vaxis Therapeutics Corporation, a
corporation organized under the OBCA ("Vaxis") and the stockholders of Vaxis
whose names are subscribed hereto on the signature page to this Agreement (the
"Stockholders").
BACKGROUND
A. Cellegy desires to acquire the business of Vaxis through the purchase
from the Stockholders of all of the issued and outstanding share capital of
Vaxis, on the terms and conditions set forth in this Agreement.
B. The boards of directors of Cellegy and Vaxis each have determined that
it would be in each of their best interests to carry out the transactions
contemplated by this Agreement, and the Stockholders desire to sell all of the
share capital of Vaxis that they own, subject to the terms and conditions of
this Agreement.
AGREEMENT
The parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions. As used in this Agreement, the following terms shall have
the following meanings:
"Agreement" means this Share Purchase Agreement, including all schedules,
and all amendments or restatements, as permitted, and references to "Article" or
"Section" mean the specified Article or Section of this Agreement.
"Arm's Length" has the meaning that it has for purposes of the Income Tax
Act (Canada).
"Benefit Plans" means plans, arrangements, agreements, programs, policies,
practices or undertakings, whether oral or written, formal or informal, funded
or unfunded, registered or unregistered to which Vaxis is a party or by which
Vaxis is bound or under which Vaxis has, or will have, any liability or
contingent liability, relating to:
(a) Pension Plans;
(b) plans in the nature of insurance plans, providing for employment
benefits relating to disability or wage or benefits continuation during periods
of absence from work (including, short term disability, long term disability,
workers compensation and maternity and parental leave), and any and all
employment benefits relating to hospitalization, healthcare, medical or dental
treatments or expenses, life insurance, accidental death and dismemberment
insurance, death or survivor's benefits and supplementary employment insurance,
in each case regardless of whether or not such benefits are insured or
self-insured; or
(c) plans in the nature of compensation plans, which means all
employment benefits relating to bonuses, incentive pay or compensation,
performance compensation, deferred compensation, profit sharing or deferred
profit sharing, share purchase, share option, stock appreciation, phantom stock,
vacation or vacation pay, sick pay, severance or termination pay, employee loans
or separation from service benefits, or any other type of arrangement providing
for compensation or benefits additional to base pay or salary;
with respect to any of its Employees or former employees (or any spouses,
dependants, survivors or beneficiaries of any such Employees or former
employees), directors or officers, individuals working on contract with Vaxis or
other individuals providing services to any of them of a kind normally provided
by employees or eligible dependants of such Person excluding Statutory Plans.
"Business Day" means any day, other than a Saturday or Sunday, on which the
Royal Bank of Canada in ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ is open for commercial banking
business during normal banking hours.
"Canadian GAAP" means Canadian generally accepted accounting principles
from time to time approved by the Canadian Institute of Chartered Accountants,
or any successor thereto, applicable as at the time on which such calculation is
made or required to be made in accordance with generally accounting principles.
"Cash Amount" means $240,000, or in Cellegy's discretion, the U.S. dollar
equivalent of $240,000, based on the noon spot rate of exchange from time to
time in effect as announced by the Bank of Canada, determined on the day before
such amounts are required to be delivered.
"Cellegy" has the meaning more particularly described in the Preamble.
"Cellegy Average Price" means the average of the closing prices of Cellegy
Common Stock on the NASDAQ National Market for the 15 consecutive trading days
ending on the day before the date as of which a particular determination under
this Agreement is made.
"Cellegy Common Stock" means the common stock, no par value, of Cellegy.
"Claims" includes claims, demands, actions, suits, causes of action,
assessment or reassessments, charges, judgments, debts, liabilities, expenses,
costs, damages or losses, including loss of value, professional fees and all
costs incurred in investigating or pursuing any of the foregoing or any
proceeding relating to any of the foregoing.
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"Closing" has the meaning more particularly described in Section 3.5
hereto.
"Closing Date" has the meaning more particularly described in Section 3.5
hereto.
"Collective Agreements" means collective agreements and related documents
including benefit agreements, letters of understanding, letters of intent and
other written communications with bargaining agents or trade unions for the
Employees or Dependent Contractors by which Vaxis is bound or which impose any
obligations upon Vaxis or set out the understanding of the parties with respect
to the meaning of any provisions of such collective agreements.
"Contract" means any contract, license, lease, agreement, commitment,
entitlement or engagement to which Vaxis is a party or by which it is bound or
under which Vaxis has, or will have, any liability or contingent liability, and
includes any quotation, order or tender for any contract which remains open for
acceptance and any warranty, guarantee or commitment (express or implied).
"Dependent Contractor" has the meaning given in the Labour Relations Act
(Ontario).
"Dollars or $": Unless otherwise specified in this Agreement, all
references to dollar amounts in this Agreement shall refer to Canadian dollars.
Where this Agreement requires or permits Cellegy to make cash payments, Cellegy
may, at its option, deliver the U.S. dollar equivalent of the specified Canadian
amount, based on the noon spot rate of exchange from time to time in effect as
announced by the Bank of Canada, determined on the day before such amounts are
required to be delivered.
"Earn-Out Consideration" has the meaning more particularly described in
Section 3.2 hereto.
"Employees" means those individuals employed or retained by Vaxis as
employees on a full-time, part-time or temporary basis, including those
employees on disability leave, parental leave or other absence.
"Employment Contract" means any Contract, whether oral or written, relating
to an Employee, including any communication or practice relating to an Employee
which imposes any obligation on Vaxis.
"Encumbrance" means any mortgage, lien, pledge, encumbrance, security
interest, option, encroachment, reservation, order, decree, judgment, condition,
restriction, charge, claim or equity of any kind, except for any of the
foregoing which (i) secures a liability which is accurately disclosed in the
financial statements of the party whose interest in property is affected
thereby; (ii) liens for taxes not yet due; and (iii) easements or other similar
rights which do not in the aggregate materially interfere with the present use
of the property affected thereby.
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"Environment" means the environment or natural environment as defined in
any Environmental Laws and includes air, surface water, ground water, land
surface, soil, subsurface strata, any sewer system and the environment in the
workplace.
"Environmental Approval" means any approval, permit, certificate, license,
authorization, consent, agreement, instruction, direction, registration, or
approval issued, granted, conferred or required by a Governmental Authority
pursuant to an Environmental Law with respect to the operations, business or
assets of Vaxis and includes any sewer surcharge agreement.
"Environmental Laws" means those Laws relating to the Environment, product
liability, or employee or public health and safety, and includes any Laws
relating to the storage, generation, use, handling, manufacture, processing,
labeling, advertising, sale, display, transportation, treatment, reuse,
recycling, Release and disposal of Hazardous Substances.
"Escrow Agent" means the Secretary of Cellegy.
"Escrow Funds" has the meaning given in Section 3.7.
"Escrow Release Dates" means the dates that are 12 months or 48 months
after the Closing, as applicable, as more particularly described in Section 3.7.
"Escrow Shares" has the meaning given in Section 3.7.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Founders" means ▇▇▇▇▇▇▇ ▇▇▇▇▇, Ph.D., ▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D. and ▇▇▇▇▇
▇▇▇▇▇▇▇, Ph.D.
"Governmental Authority" means any government, regulatory authority,
governmental department, agency, commission, board, tribunal, dispute settlement
panel or body, bureau, official, minister, Crown corporation, court or other
law, rule or regulation-making entity having or purporting to have jurisdiction
on behalf of any nation, or province or state or other geographic or political
subdivision thereof.
"Governmental Authorization" means any authorization, approval, including
Environmental Approval, franchise, certificate, order, consent, directive,
notice, license, permit, variance, registration or similar right issued to or
required by Vaxis by or from any Governmental Authority.
"Hazardous Substance" means any pollutant, contaminant, waste of any
nature, hazardous substance, hazardous material, toxic substance, prohibited
substance, dangerous substance or dangerous good as defined, judicially
interpreted or identified in any Environmental Laws including any asbestos or
asbestos-containing materials.
"Initial Consideration" has the meaning more particularly described in
Section 3.1 hereto.
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"Intellectual Property Rights" means any and all intellectual property
rights in any jurisdiction, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service ▇▇▇▇ applications, copyrights, copyright applications,
publication rights, computer programs and other computer software (including
source codes and object codes), inventions, know-how, trade secrets, technology,
proprietary processes and formulae (including layouts, structures, sequences,
flow charts, instructions, records, notes and other information of a
technological or scientific nature regardless of form), used in whole or in part
or required for the carrying on of the business of Vaxis, as presently conducted
and as proposed to be conducted.
"Knowledge" means, with respect to any party hereto, with respect to any
fact, circumstance, event or other matter in question, that any of the officers
or legal or financial in-house personnel of such party (and, with respect to
Section 4.20 hereof, that any of the persons engaged in development activity for
Vaxis) has actual or deemed knowledge of such fact, circumstance, event or other
matter after reasonable inquiry of such fact, circumstance, event or other
matter. An individual will be deemed to have knowledge of a particular fact,
circumstance, event or other matter if (i) such fact, circumstance, event or
other matter is reflected in one or more documents, written or electronic, that
are or have been in such individual's possession or that would reasonably be
expected to be reviewed by an individual who has the duties and responsibilities
of such individual in the customary performance of such duties and
responsibilities, or (ii) such knowledge could be obtained from reasonable
inquiry of those persons employed by Cellegy or Vaxis (as the case may be), and
any subsidiary of Cellegy, if any, charged with administrative or operational
responsibility for such matter for such party.
"Laws" means applicable laws (including common law), statutes, by-laws,
rules, regulations, orders, ordinances, protocols, codes, guidelines, treaties,
policies, notices, directions and judicial, arbitral, administrative,
ministerial or departmental judgments, awards or other requirements of any
Governmental Authority.
"Leased Real Property" means premises which are used by Vaxis which are
leased, subleased, licensed or otherwise occupied by Vaxis and the interest of
Vaxis in all plants, buildings, structures, fixtures, erections, improvements,
easements, rights-of-way, spur tracks and other appurtenances situate on or
forming part of such premises.
"Material Adverse Effect" when used with reference to any entity or group
of related entities, means any event, change, violation, inaccuracy,
circumstance or effect (regardless of whether or not such events or changes are
inconsistent with the representations or warranties made by such party in this
Agreement) that is or is reasonably likely to be, individually or in the
aggregate, materially adverse to the condition (financial or otherwise),
capitalization, properties, employees, assets (including intangible assets),
business, prospects, operations or results of operations of such entity and its
Subsidiaries, taken as a whole with its Subsidiaries.
"Non-Competition Agreement" means the Non-Competition Agreement in the form
entered into by and among Cellegy and each of the Founders and Dr. ▇▇▇▇▇▇▇
▇▇▇▇▇▇.
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"OBCA" means the Business Corporations Act (Ontario), as amended from time
to time, and includes any regulations made pursuant to such Act.
"Occupational Health and Safety Laws" means all Laws relating in full or in
part to the protection of employee or worker health and safety.
"Owned Real Property" means real property, owned or purported to be owned
in fee simple, by Vaxis, or real property, other than Leased Real Property, in
which Vaxis has an interest, including all plants, buildings, structures,
fixtures, erections, improvements, easements, rights-of-way, spur tracks and
other appurtenances situate on or forming part of such real property.
"Pension Plans" means all benefits relating to retirement or retirement
savings including pension plans, pensions or supplemental pensions, "registered
retirement savings plans" (as defined in the Income Tax Act (Canada)),
"registered pension plans" (as defined in the Income Tax Act (Canada)) and
"retirement compensation arrangements" (as defined in the Income Tax Act
(Canada)).
"Person" means any individual, sole proprietorship, partnership, firm,
entity, unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, Governmental Authority, and where the
context requires any of the foregoing when they are acting as trustee, executor,
administrator or other legal representative.
"Pro-Rata Share of the Earn-Out Consideration" means the amount of Earn-Out
Consideration that may be payable to a Stockholder from time to time, calculated
by dividing the Earn-Out Consideration payable at the time by the aggregate
number of Purchased Shares issued and outstanding on the Closing Date and
multiplying the result by the number of Purchased Shares held by such
Stockholder on the Closing Date.
"Purchased Shares" means the Vaxis Common Shares that the Stockholders sell
to Cellegy pursuant to the terms of this Agreement, which shares shall
constitute all of the issued and outstanding share capital of Vaxis on the
Closing Date.
"Real Property" means the Owned Real Property and the Leased Real Property,
as more particularly described in Section 4.20.
"Release" has the meaning prescribed in any Environmental Laws and
includes, any sudden, intermittent or gradual release, spill, leak, pumping,
addition, pouring, emission, emptying, discharge, injection, escape, leaching,
disposal, dumping, deposit, spraying, burial, abandonment, incineration,
seepage, placement or introduction, whether accidental or intentional.
"Remedial Order" means any administrative complaint, direction, order or
sanction issued, filed, imposed or threatened by any Governmental Authority
pursuant to any Environmental Laws and includes, any order requiring
investigation or remediation of any site or any remediation or clean-up of any
Hazardous Substance, or requiring that any Release or any
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other activity be reduced, modified or eliminated or requiring any form of
payment or co-operation be provided to any Governmental Authority.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Act (Ontario)" means the Securities Act of the Province of
Ontario, as amended from time to time, and includes all regulations, rules,
policies and other instruments promulgated thereunder.
"Statutory Plans" means statutory Benefit Plans which Vaxis is required to
comply with, including the Canada Pension Plan and plans administered pursuant
to applicable health tax, workers' compensation and unemployment insurance
legislation.
"Stockholders" means all of the persons and entities who are holders of
Vaxis Common Shares at the Closing Date.
"Stock Ratio" means the number that is the result of (i) the number
obtained by dividing the U.S. dollar equivalent of Cdn$6,000,000, determined as
of the Closing Date (or such other date before the Closing as Cellegy and Vaxis
may agree), by the Cellegy Average Price determined as of the date of this
Agreement (or such other date before the Closing as Cellegy and Vaxis may
agree), divided by (ii) the aggregate number of Purchased Shares.
"Subsidiary" or "subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, of
which such party or any other subsidiary of such party is a general partner
(excluding partnerships the general partnership interests of which held by such
party or any subsidiary of such party do not have a majority of the voting
interests in such partnership) or of which at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporations or other organizations is directly or indirectly
owned or controlled by such party or by any one or more of the subsidiaries.
"Tax Returns" includes, all returns, reports, declarations, elections,
notices, filings, information returns and statements, forms, statements and
other documents (whether in tangible, electronic or other form) and including
schedules, attachments, supplements, appendixes or exhibits thereto prepared,
filed or required to be prepared or filed by applicable Laws in respect of
Taxes.
"Taxes" means taxes, duties, fees, premiums, assessments, imposts, levies
and other charges of any kind whatsoever imposed by any Governmental Authority,
including all interest, penalties, fines, additions to tax or other additional
amounts imposed by any Governmental Authority in respect thereof, including
those levied on, or measured by, or referred to as, income, gross receipts,
profits, capital, transfer, land transfer, sales, goods and services, harmonized
sales, use, value-added, excise, stamp, withholding, business, franchising,
property, employer health, payroll, employment, health, social services,
education and social security taxes, all surtaxes, all customs duties and import
and export taxes, all license, franchise and registration fees and all
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employment insurance, health insurance and Canada and other government pension
plan premiums or contributions.
"Transaction" means the purchase of the Purchased Shares by Cellegy
pursuant to the terms of this Agreement and the other transactions contemplated
hereby.
"Transaction Expenses" has the meaning more particularly described in
Section 7.8 hereto.
"Union Plans" means Benefit Plans which are or are required to be
established and maintained pursuant to a Collective Agreement and which are not
maintained or administered by Vaxis or any of its affiliates.
"Vaxis" has the meaning more particularly described in the Preamble.
"Vaxis Common Shares" means the common shares in the capital of Vaxis.
"Vaxis Intellectual Property Rights" means all Intellectual Property Rights
that are part of the conduct of the business of Vaxis.
ARTICLE II
THE TRANSACTION
2.1 The Purchase. At the Closing, Cellegy shall purchase the Purchased
Shares from the Stockholders, and the Stockholders shall sell the Purchased
Shares to Cellegy, on the terms and subject to the conditions of this Agreement.
2.2 Further Assurances. If, at any time before or after the Closing,
Cellegy believes or is advised that any further instruments, deeds, assignments
or assurances are reasonably necessary or desirable to consummate the
Transaction or to carry out the purposes and intent of this Agreement at or
after the Closing, then (i) each of Vaxis and each Stockholder covenants and
agrees that before the Closing it will, upon the reasonable request of Cellegy,
use best efforts to do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered all such further acts, deeds, assignments,
instruments and assurances as may be required for the better carrying out and
performance of all the terms of this Agreement, and (ii) after the Closing
Cellegy, Vaxis and their respective officers and directors may execute and
deliver all such proper acts, deeds, assignments, instruments and assurances as
may be required for the better carrying out the performance of all the terms of
this Agreement.
ARTICLE III
PURCHASE AND SALE OF SHARES
3.1 Purchase Price. Subject to Sections 3.7 and 3.8:
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(a) The purchase price for the Purchased Shares shall be paid to each
Stockholder for each Purchased Share as follows:
(i) a number of shares of Cellegy Common Stock equal to the
Stock Ratio payable to that Stockholder; provided, however,
that the Stockholders specified in Exhibit 3.1 shall receive
the Cash Amount, allocated in the amounts specified on
Exhibit 3.1, in lieu of a number of shares of Cellegy Common
Stock with a value, based on the Cellegy Average Price
determined as of the date of this Agreement (or such other
date before the Closing as Cellegy and Vaxis agree), equal
to the U.S. dollar equivalent of the Cash Amount;
(ii) any Cash Amount owing to that Stockholder as more
particularly set forth in Exhibit 3.1; and
(iii) the Pro-Rata Share of the Earn-Out Consideration payable to
that Stockholder, as set forth in Section 3.2 below.
The shares of Cellegy Common Stock and the Cash Amount referred to in
paragraphs (i) and (ii) above are collectively referred to as the "Initial
Consideration". The number of shares of Cellegy Common Stock to be received by
each Stockholder shall be set forth in a Schedule of Purchasers mutually agreed
to by Cellegy and the Stockholders on or before the Closing. The right of a
Stockholder immediately before the Closing to receive the Initial Consideration
and Earn-Out Consideration may not be transferred or assigned in any manner
other than by will or by the laws of intestacy, or by instrument to an inter
vivos or testamentary trust in which such rights are to be passed to
beneficiaries upon the death of the settlor, in each case with the transferee
agreeing to be bound by all of the provisions of this Agreement relating to the
Initial Consideration and Earn-Out Consideration.
(b) At the Closing, each certificate representing any Purchased Shares
(a "Certificate") shall be delivered to Cellegy as set forth in Section 3.3
hereof and, subject to the provisions of Sections 3.7 and 3.8 hereof, Cellegy
shall pay the Initial Consideration to the Stockholder. If before the Closing
Cellegy should split or combine the shares of Cellegy Common Stock, or pay a
stock dividend or other stock distribution in, or in exchange of, shares of
Cellegy Common Stock, or engage in any similar transaction, then the Stock Ratio
will be appropriately adjusted to reflect such split, combination, dividend,
exchange or other distribution or similar transaction.
(c) At or before the Closing, Vaxis shall take such actions as are
necessary so that all outstanding and unexercised stock options, warrants,
convertible securities or any right of any kind to acquire any securities of
Vaxis shall terminate and/or expire, so that no such options, warrants,
securities or rights survive beyond the Closing Date.
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3.2 Earn-Out Consideration.
(a) The Earn-Out Consideration shall consist, in the aggregate, of up
to CDN $11,000,000. Such Earn-Out Consideration shall consist of 50% of the
nonrefundable cash or non-cash property consideration ("Nonrefundable
Consideration") actually received by Vaxis or Cellegy after the Closing Date
pursuant to:
(i) commercial sales of the products currently being developed
by Vaxis or derived therefrom or sales of other products by
or on behalf of Cellegy or Vaxis that would constitute an
infringement of the patents and patent applications (to the
extent that patents ultimately issue on such applications)
that Cellegy acquires from Vaxis under this Agreement
("Products"); or
(ii) the sale, license or assignment of patents or patent
applications that Cellegy acquires from Vaxis under this
Agreement or the transactions contemplated hereby (or
technology covered by the patents and patent applications
that Cellegy acquires from Vaxis under this Agreement or the
transactions contemplated hereby) ("Patents").
The Products and Patents are more particularly set forth on
Exhibit 3.1(b) hereto.
(b) The obligation to pay the Earn-Out Consideration shall survive in
the event of the sale of all or any portion of Cellegy's right, title and
interest with respect to the Products or Patents to a third party, or in
connection with a sale of all or substantially all of Vaxis' or Cellegy's
business (whether by merger, sale of assets or otherwise) and Cellegy shall
require, as a condition of such sale, that any acquirer of the Products or
Patents to be bound by the terms of this Agreement relating to payment of the
Earn-Out Consideration; but the receipt of consideration from any such sale
transaction shall not constitute Nonrefundable Consideration.
(c) If the Nonrefundable Consideration received by Vaxis or Cellegy is
other than cash, Cellegy may at its sole option pay the Earn-Out Consideration
as cash with a value (determined in good faith by Cellegy) equal to the non-cash
consideration received.
(d) For greater certainty, Nonrefundable Consideration shall include,
but shall not be limited to:
(i) upfront money, option payments, milestone payments or any
other form of cash or non-cash property consideration
received from any licensee of the Products or Patents;
(ii) royalty payments received by Vaxis or Cellegy from any
licensee with respect to its sales of the Products or
license of the Patents; and
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(iii) operating earnings generated by the Products if Cellegy
commercializes the Products anywhere in the world.
(e) Where a product of Cellegy (such as Anogesic) is prescribed for
indications that are not covered by the patents and patent applications (to the
extent that patents ultimately issue with respect to such applications) that
Cellegy is acquiring from Vaxis pursuant to this Agreement, but may also be used
for conditions that are so covered ("off-label sales"), if Cellegy, in its
reasonable discretion, can determine the amount of such off-label sales with
reasonable precision using a reputable published source selected by Cellegy
(such as IMS, NDTI, or ▇▇▇▇▇ ▇▇▇▇▇), then the amount of such off-label sales
that can be so determined shall also be treated as "Product" sales with respect
to which Earn-Out Consideration is payable.
(f) The Earn-Out Consideration will be paid, at Cellegy's option, in
the form of cash, Cellegy Common Stock or a combination thereof. Payments will
be made within 60 days after the end of each quarter in which Cellegy has
received Nonrefundable Consideration. If payment is made in Cellegy Common
Stock, it will be based on the Cellegy Average Price as of the end of any such
calendar quarter. The Earn-Out Consideration will only be calculated and payable
during the term of seven (7) years from the date of this Agreement, and no
payment will be made with respect to Nonrefundable Consideration received
following expiration of such period.
(g) Cellegy shall prepare and deliver to each Stockholder with payment
of the Earn-Out Consideration a statement showing the amount of the Earn-Out
Consideration for the applicable quarter.
(h) Cellegy shall use commercially reasonable efforts, consistent with
Cellegy's other products and opportunities, to develop and commercialize such of
the Products as Cellegy believes have commercial potential. Notwithstanding the
foregoing, nothing in this Agreement or otherwise shall restrict Cellegy's
ability to operate its business and exercise its business judgment with respect
to the Products and other Intellectual Property from which Earn-Out
Consideration may be derived.
3.3 Delivery of Certificates. At Closing, each of the Stockholders shall
deliver certificates representing the Purchased Shares held by such Stockholder,
with properly executed instruments of assignment or transfer.
3.4 Transfer Taxes; No Fractional Shares.
(a) If any certificates for any shares of Cellegy Common Stock are to
be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such exchange that
the person requesting such exchange shall (i) pay to Cellegy any transfer or
other taxes required by reason of the issuance of certificates for such shares
of Cellegy Common Stock in a name other than that of the registered holder of
the Certificate surrendered or (ii) establish to the satisfaction of Cellegy
that such tax has been paid or is not applicable.
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(b) No fractional shares of Cellegy Common Stock shall be issued
pursuant to the Transaction.
3.5 Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP,
20th Floor, ▇▇ ▇'▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ at 9:00 a.m., local time, on the
first Business Day (the "Closing Date") after which all of the conditions set
forth in Article VIII hereof are satisfied or waived, or at such other date,
time and place as Cellegy and Vaxis shall agree.
3.6 Supplementary Action. If at any time after the Closing, any further
assignments or assurances in law or any other things are necessary or desirable
to vest or to perfect or confirm or record in Vaxis the title to any property or
rights of Vaxis, or otherwise to carry out the provisions of this Agreement, the
officers and directors of Vaxis are hereby authorized and empowered on behalf of
Vaxis to execute and deliver any and all things necessary or proper to vest or
to perfect or confirm title to such property or rights, and otherwise to carry
out the purposes and provisions of this Agreement.
3.7 Escrow.
(a) Cellegy will withhold the stock portion of the Initial
Consideration and deposit with the Escrow Agent, as soon as reasonably
practicable after the Closing, the certificates for the Escrow Shares (as
defined below). The Escrow Shares will be issued in the name of the Stockholders
but withheld from the Cellegy Common Stock to be delivered to Stockholders at
the Closing. For this purpose, "Escrow Shares" means all of the shares of
Cellegy Common Stock that are included in the Initial Consideration. Any shares
of Cellegy Common Stock or other equity securities issued or distributed by
Cellegy (including shares issued upon a stock split, stock dividend,
recapitalization or other similar event) in respect of Escrow Shares shall also
be withheld in the Escrow Funds and shall also be considered to be Escrow
Shares. In addition, the full amount of any Earn-Out Consideration paid or
payable with respect to the period ending forty-eight (48) months after the
Closing Date will be withheld by Cellegy and deposited with the Escrow Agent to
be held as part of the Escrow. Any Earn-Out Consideration that is deposited into
the Escrow will be referred to herein as the "Escrow Earn-Out Consideration."
The Escrow Shares and any Escrow Earn-Out Consideration may be collectively
referred to herein as the "Escrow Funds." Cash dividends on Escrow Shares or
interest on any cash Escrow Earn-Out Consideration shall be added to the Escrow
Funds and shall not be distributed to the record holders of such Escrow Funds.
Cellegy will hold the certificates representing such Escrow Funds as security
for the Stockholders' indemnification obligations for Damages under Article X.
Except as may be expressly provided otherwise in this Agreement with respect to
breach of a Stockholder's representations and warranties under Article XI, the
payment of any Escrow Funds in satisfaction of any indemnification obligations
under Article X shall be made in proportion to the Escrow Funds (each valued at
the Cellegy Average Price Per Share as of the date that such Escrow Shares are
forfeited to satisfy such indemnity obligations) held for each Stockholder in
the Escrow Fund.
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(b) The Escrow Funds will be released to the Stockholders by the Escrow
Agent on the following release dates ("Escrow Release Dates"), subject to any
Escrow Funds being withheld pursuant to Section 10.2(b):
(i) the Escrow Shares will be released twelve (12) months from
the Closing Date in the case of Stockholders other than the
Founders and eighteen (18) months from the Closing Date in
the case of the Founders; and
(ii) the Escrow Earn-Out Consideration will be released
forty-eight (48) months from the Closing Date.
3.8 Non-Resident of Canada Stockholder; Section 116 Requirements. On or
before the Closing, each non-resident Stockholder shall take all reasonable
steps to obtain and deliver to Cellegy a certificate issued by the Minister of
National Revenue under subsection 116(2) of the Income Tax Act (Canada).
(a) If a certificate is so delivered to Cellegy on or before the
Closing Date, Cellegy shall be entitled to withhold from the Initial
Consideration twenty-five percent (25%) of the amount, if any, by which such
non-resident Stockholder's proportionate share of the Initial Consideration
exceeds the certificate limit as defined in subsection 116(2) of the Income Tax
Act (Canada) and fixed by the Minister of National Revenue in such certificate
(b) If a certificate is not so delivered to Cellegy on or before the
Closing Date, Cellegy shall be entitled to withhold from the Initial
Consideration an amount equal to twenty-five percent (25%) of such non-resident
Stockholder's proportionate share of the Initial Consideration.
(c) If Cellegy has withheld any amount under the provisions of
paragraphs (a) or (b) above and a non-resident Stockholder delivers to Cellegy,
after the Closing and within 29 days after the end of the month in which the
Closing occurs, a certificate issued by the Minister of National Revenue under
subsection 116(2) or 116(4), as the case may be, of the Income Tax Act (Canada),
Cellegy shall:
(i) if such certificate was issued under subsection 116(2) of the
Income Tax Act (Canada), pay forthwith to the Receiver General twenty-five
percent (25%) of the amount, if any, by which the non-resident Stockholder's
proportionate share of the Initial Consideration exceeds the certificate limit
fixed in such certificate, and the amount so paid shall be credited as payment
on account of the Initial Consideration; and
(ii) pay forthwith to the non-resident Stockholder any amount that
Cellegy has withheld and is not required to pay to the Receiver General in
accordance with subparagraph (i) above (and which is not otherwise constitute
Escrow Funds), and the amount so paid shall be credited as payment on account of
the Initial Consideration.
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(d) If Cellegy has withheld any amount under the provisions of
paragraphs (a) or (b) above and no certificate has been delivered to Cellegy by
the non-resident Stockholder in accordance with the provisions of paragraph (c)
above, such withheld amount shall be paid by Cellegy to the Receiver General on
the 30th day after the end of the month in which the Closing occurs on account
of Cellegy's liability pursuant to subsection 116(5) of the Income Tax Act
(Canada), and the amount so paid shall be credited as payment on account of the
Purchase Price.
All amounts withheld by Cellegy in accordance with this Section shall be
paid to and held by the Escrow Agent. The applicable non-resident Stockholder
shall pay any expenses of the Escrow Agent in connection with this Section.
3.9 Securities Laws Compliance. The parties to this Agreement intend
that Cellegy shall issue the shares of Cellegy Common Stock hereunder pursuant
to a private placement under Section 4(2) of the Securities Act (and/or
Regulation D or Regulation S promulgated under the Securities Act) and
applicable state securities laws, and under Sections 72(1)(j) and 93(1)(d) of
Securities Act (Ontario). The shares of Cellegy Common Stock issuable pursuant
to this Agreement shall constitute "restricted securities" within the meaning of
the Securities Act. The certificates for Cellegy Common Stock to be issued in
the Transaction shall bear appropriate legends to identify such shares as being
restricted under the Securities Act, and, if applicable, to notice the
restrictions on transfer set forth in this Agreement. Vaxis shall use its best
efforts to furnish Cellegy with all information concerning Vaxis and the
Stockholders as Cellegy may reasonably request in connection with establishing
the availability of federal and state private placement exemptions for any
action contemplated by this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VAXIS
Except as set forth in the corresponding section or subsection of the
disclosure schedule delivered to Cellegy at or before the execution of this
Agreement ("Disclosure Schedule"), Vaxis represents and warrants to Cellegy as
follows:
4.1 Organization. Vaxis is a corporation duly organized, validly existing
and in good standing under the OBCA and has the corporate power to carry on its
business as it is now being conducted. Vaxis is duly qualified to do business,
and is in good standing (to the extent the concept of good standing exists), in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary. Vaxis
does not have any wholly-owned or partially-owned Subsidiaries.
4.2 Capitalization.
(a) As of the date hereof, the authorized share capital of Vaxis
consists of an unlimited number of Vaxis Common Shares and unlimited number of
preferred shares in the capital of Vaxis ("Vaxis Preferred Shares"). As of the
date of this Agreement, 2,111,269 Vaxis Common Shares were issued and
outstanding, no Vaxis Preferred Shares were issued and outstanding, no warrants
to acquire Vaxis Common Shares ("Vaxis Warrants") and no stock
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options to acquire Vaxis Common Shares (the "Vaxis Stock Options") were
outstanding. All issued and outstanding Vaxis Common Shares are validly issued,
fully paid, nonassessable and free of pre-emptive rights or similar rights
created by statute, the Articles of Incorporation or Bylaws of Vaxis or any
agreement to which Vaxis is a party or by which Vaxis is bound.
(b) Except as set forth above or pursuant to Vaxis Benefit Plans, there
are not now, and at the Closing there will not be, any shares in the capital of
Vaxis issued or outstanding or any options, warrants, subscriptions, calls,
rights, convertible securities or other agreements or commitments obligating
Vaxis to issue, transfer or sell any shares in its capital. As of the date
hereof, no bonds, debentures, notes or other indebtedness having the right to
vote (or convertible into or exercisable for securities having the right to
vote) on any matters on which Stockholders may vote ("Voting Debt") of Vaxis
were issued or outstanding, nor will there be any issued or outstanding at the
Closing. Except as provided in this Agreement, after the Closing Vaxis will have
no obligation to issue, transfer or sell any shares in its capital pursuant to
any employee benefit plan or otherwise. There are no voting trust or other
agreements or understandings to which Vaxis is a party with respect to the
voting of the capital of Vaxis. Vaxis is not required to redeem, repurchase or
otherwise acquire shares of Vaxis as a result of the transactions contemplated
by this Agreement. Immediately after the Closing, there will be no option,
warrant, call, right or agreement obligating Vaxis to issue, deliver or sell, or
cause to be issued, delivered or sold, any Vaxis Common Shares or any Voting
Debt, or obligating Vaxis to grant, extend, or enter into any such option,
warrant, call, right or agreement.
4.3 Authority Relative to this Agreement. Vaxis has the corporate power to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by Vaxis and the consummation by Vaxis
of the Transaction have been duly authorized by Vaxis' Board of Directors, and
no other corporate or stockholder proceedings on the part of Vaxis are necessary
to approve this Agreement or the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Vaxis and
constitutes the valid and binding agreement of Vaxis, enforceable against Vaxis
in accordance with its terms, subject to applicable bankruptcy, insolvency or
other similar laws relating to creditors' rights and general principles of
equity.
4.4 Consents and Approvals; No Violations. Except for applicable
requirements of the Securities Act and the Securities Act (Ontario) no filing
with, and no permit, authorization, consent or approval of, any public or
governmental body or authority is necessary for the consummation by Vaxis of the
transactions contemplated by this Agreement. Neither the execution and delivery
of this Agreement by Vaxis, nor the consummation by Vaxis of the Transaction,
nor compliance by Vaxis with any of the provisions hereof, will (a) result in
any breach of the Articles of Incorporation or Bylaws of Vaxis, (b) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
acceleration or change in the award, grant, vesting or determination) under,
require the consent of any third party under, or give rise to creation of any
Encumbrance upon any of the respective properties or assets of Vaxis under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, contract, lease, agreement, arrangement or other
instrument or obligation to which Vaxis is a party or by which any of them or
any of their properties or assets may be bound or (c) violate any order, writ,
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injunction, decree, statute, rule or regulation applicable to Vaxis or any of
its properties or assets. No vote of Stockholders is necessary to approve this
Agreement and the transactions contemplated hereby.
4.5 Financial Statements.
(a) Vaxis has delivered to Cellegy copies of its audited balance sheets
as of October 31, 1999 and October 31, 2000, and its unaudited balance sheet as
of September 30, 2001 (such balance sheets referred to as the "Balance Sheets"
and September 30, 2001 referred to as the "Balance Sheet Date") and the related
audited combined statements of operations and cash flows for each of the
one-year periods ended October 31, 1999 and October 31, 2000, respectively, and
the related unaudited combined statements of operations and cash flows for the
nine month period ended September 30, 2001 (collectively, the Financial
Statements"). The Financial Statements, including the related schedules and
notes thereto, have been prepared in accordance with Canadian GAAP applied on a
consistent basis throughout the periods indicated and consistent with each other
(subject, in the case of unaudited statements, to normal audit adjustments which
would not in the aggregate be material in amount or effect and the absence of
any notes thereto). The Financial Statements fairly present the financial
position of Vaxis as of the dates thereof, and the results of operations and the
changes in cash flows of Vaxis for the respective periods set forth therein.
(b) The books, records and accounts of Vaxis (i) have been maintained
in accordance with good business practices on a basis consistent with prior
years, (ii) are stated in reasonable detail and accurately and fairly reflect
the transactions and dispositions of the assets of Vaxis and (iii) accurately
and fairly reflect the basis for the Financial Statements. Vaxis has devised and
maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization, and (ii) transactions are
recorded as necessary (A) to permit preparation of financial statements in
conformity with Canadian GAAP or any other criteria applicable to such
statements and (B) to maintain accountability for assets.
4.6 Absence of Certain Changes or Events. Except as disclosed in Section
4.6 of the Disclosure Schedule, since the Balance Sheet Date, Vaxis has
conducted its business in the ordinary course consistent with past practice, and
there has not been with respect to Vaxis any:
(a) material adverse change in the business of Vaxis;
(b) amendment or change in the Articles of Incorporation or Bylaws of
Vaxis;
(c) incurrence, creation or assumption by Vaxis of (i) any mortgage,
deed of trust, security interest, pledge, lien, title retention device,
collateral assignment, claim, charge, restriction or other Encumbrance of any
kind on any of the assets or properties of Vaxis; or (ii) any obligation or
liability or any indebtedness for borrowed money;
(d) offer, issuance or sale of any debt or equity securities of Vaxis,
or any options, warrants or other rights to acquire from Vaxis, directly or
indirectly, any debt or equity
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securities of Vaxis (except options granted in the ordinary course in amounts
and with terms consistent with Vaxis' past practices and reflected in the option
figures set forth in Section 4.2 above);
(e) payment or discharge by Vaxis of any security interest, lien,
claim, or Encumbrance of any kind on any asset or property of Vaxis, or the
payment or discharge of any liability that was not either shown on the Balance
Sheets or incurred in the ordinary course of Vaxis' business after the Balance
Sheet Date in an amount not in excess of $25,000 for any single liability to a
particular creditor;
(f) purchase, license, sale, assignment or other disposition or
transfer, or any agreement or other arrangement for the purchase, license, sale,
assignment or other disposition or transfer, of any of the assets, properties or
goodwill of Vaxis other than a purchase, license, sale, assignment or other
disposition or transfer (or agreement therefor) made in the ordinary course of
Vaxis' business that does not involve any transfer of title of, or an exclusive
license to, or the creation of any Encumbrance on, any product, invention or
proprietary technology of Vaxis;
(g) damage, destruction or loss of any property or asset, whether or
not covered by insurance, having a Material Adverse Effect on Vaxis;
(h) declaration, setting aside or payment of any dividend on, or the
making of any other distribution in respect of, shares in the capital of Vaxis,
any split, combination or recapitalization of shares in the capital of Vaxis or
any direct or indirect redemption, purchase or other acquisition of any shares
in the capital of Vaxis or any change in any rights, preferences, privileges or
restrictions of any outstanding security of Vaxis;
(i) change or increase in the compensation payable or to become payable
to any of the officers, directors, or employees of Vaxis, or any bonus or
pension, insurance or other benefit payment or arrangement (including without
limitation stock awards, stock option grants, stock appreciation rights or stock
option grants) made to or with any of such officers, employees or agents except
in connection with normal employee salary or performance reviews or otherwise in
the ordinary course of Vaxis' business;
(j) change with respect to the management, supervisory or other key
personnel of Vaxis;
(k) obligation or liability incurred by Vaxis to any of its officers,
directors or stockholders except for normal and customary compensation and
expense allowances payable to officers in the ordinary course of Vaxis'
business;
(l) making by Vaxis of any loan, advance or capital contribution to, or
any investment in, any officer, director or stockholder of Vaxis or any firm or
business enterprise in which any such person had a direct or indirect material
interest at the time of such loan, advance, capital contribution or investment;
(m) entering into, amendment of, relinquishment, termination or
non-renewal by Vaxis of any contract, lease, transaction, commitment or other
right or obligation other than in
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the ordinary course of its business or any written or oral indication or
assertion by the other party thereto of any material problems with Vaxis'
services or performance under such contract, lease, transaction, commitment or
other right or obligation or its desire to so amend, relinquish, terminate or
not renew any such contract, lease, transaction, commitment or other right or
obligation;
(n) assertion by any third party against Vaxis of any complaint (where
the amounts involved exceed $25,000 either individually or in the aggregate)
against Vaxis;
(o) entering into by Vaxis of any transaction, contract or agreement
that by its terms requires or contemplates a current and/or future financial
commitment, expense (inclusive of overhead expense) or obligation on the part of
Vaxis involving in excess of $25,000 or that is not entered into in the ordinary
course of Vaxis's business, or the conduct of any business or operations other
than in the ordinary course of Vaxis's business;
(p) license, transfer or grant of a right under any Vaxis Intellectual
Property Rights, other than those licensed, transferred or granted in the
ordinary course of Vaxis' business consistent with its past practices; or
(q) agreement or arrangement made by Vaxis to take any action which, if
taken before the date of this Agreement, would have made any representation or
warranty of Vaxis set forth in Article IV of this Agreement untrue or incorrect
as of the date when made.
4.7 No Undisclosed Liabilities. Vaxis does not have any liability,
indebtedness, obligation, expense, claim, guarantee or endorsement of any type,
whether accrued, absolute, contingent, matured, unmatured or other, which
individually or in the aggregate (i) has not been reflected in the Balance
Sheets, or (ii) has not arisen in the ordinary course of Vaxis' business since
the Balance Sheet Date, consistent with past practices and does not reflect a
material change to the business (as previously conducted), results of operations
or financial condition of Vaxis.
4.8 Litigation. As of the date of this Agreement: (i) there is no action,
suit, judicial or administrative proceeding, hearing, arbitration or
investigation pending or, to the knowledge of Vaxis, threatened against or
involving Vaxis, or any of their properties or rights, before any court,
arbitrator, or administrative or governmental body; (ii) there is no judgment,
decree, injunction, rule or order of any court, Governmental Authority,
commission, agency, instrumentality or arbitrator, or agreement or memorandum of
understanding outstanding against Vaxis; and (iii) Vaxis is not in violation of
any term of any judgments, decrees, injunctions or orders outstanding against
them.
4.9 Contracts.
(a) Each of the contracts, instruments, mortgages, notes, security
agreements, leases, agreements or understandings, to which Vaxis is a party that
relates to or affects the assets or operations of Vaxis or to which Vaxis or its
assets or operations may be bound or subject is a valid and binding obligation
of Vaxis and in full force and effect with respect to Vaxis and, to the
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knowledge of Vaxis, with respect to all other parties thereto. Except to the
extent that the consummation of the transactions contemplated by this Agreement
may require the consent of third parties, there are no existing defaults by
Vaxis thereunder or, to the knowledge of Vaxis, by any other party thereto; and
no event of default has occurred, and no event, condition or occurrence exists,
that (whether with or without notice, lapse of time, the declaration of default
or other similar event) would constitute a default by Vaxis thereunder. Section
4.9(a) of the Disclosure Schedule lists all consents of third parties required
for the consummation of the transactions contemplated by this Agreement.
(b) Section 4.9(b) of the Disclosure Schedule lists the following
contracts and other agreements to which Vaxis is a party:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any person providing for
lease payments in excess of $25,000 per annum;
(ii) any agreement concerning a partnership or joint venture;
(iii) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease
obligation or under which it has imposed a security interest
on any of its assets, tangible or intangible;
(iv) any agreement concerning confidentiality or noncompetition,
to which Vaxis or any of the Founders are a party;
(v) any agreement with any of the Stockholders and their
affiliates;
(vi) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other
material plan or arrangement for the benefit of its current
or former directors, officers, or employees;
(vii) any agreement or offer letter for the employment of any
individual on a full-time, part-time, consulting, or other
basis providing annual compensation in excess of $25,000 or
providing severance benefits;
(viii) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees
outside the ordinary course of business;
(ix) any agreement under which Vaxis is performing services for
customers or clients providing for payments in excess of
$25,000
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per annum or any agreement under which Vaxis is receiving
services providing for payments in excess of $25,000 per
annum;
(x) any license agreement relating to any Vaxis Intellectual
Property;
(xi) any license agreement relating to any intellectual property
of another Person;
(xii) any other agreement, contract, commitment or instrument
that is material to the business of Vaxis or that involves a
future commitment by Vaxis in excess of $25,000; and
(xiii) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect.
(c) Vaxis has delivered to Cellegy a correct and complete copy of each
agreement listed in Section 4.9(b) of the Disclosure Schedule and a written
summary setting forth the terms and conditions of each oral agreement referred
to in Section 4.9(b) of the Disclosure Schedule. With respect to each such
agreement: (A) the agreement is legal, valid, binding, enforceable, and in full
force and effect; (B) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (C) no party is in breach
or default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no party has repudiated any provision
of the agreement.
(d) Vaxis has no agreement or plan, including any stock incentive plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement.
(e) Vaxis has no agreements or arrangements to sell or otherwise
dispose of, or lease, acquire or otherwise invest in, any property, lines of
business or other assets, other than agreements and arrangements entered into in
the ordinary course of Vaxis' business.
4.10 Employee Benefit Plans.
(a) Section 4.10 of the Disclosure Schedule set forth a complete list
of the Benefit Plans.
(b) Current and complete copies of all written Benefit Plans or, where
oral, written summaries of the material terms thereof, have been delivered or
made available to Cellegy together with current and complete copies of all
documents relating to the Benefit Plans, including, as applicable,
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(i) all documents establishing, creating or amending any of the
Benefit Plans;
(ii) all trust agreements and funding agreements;
(iii) all insurance contracts, investment management agreements,
subscription and participation agreements;
(iv) all financial statements and accounting statements and
reports, and investment reports for each of the last six
years and the three most recent actuarial reports;
(v) all reports, statements, annual information returns or other
returns, filings and material correspondence with any
regulatory authority in the last six years;
(vi) all legal opinions, consultants' reports and correspondence
relating to the administration or funding of any Benefit
Plan or the use of the funds held under such plans;
(vii) all booklets, summaries, manuals and communications of a
general nature distributed or made available to any
Employees or former employees concerning any Benefit Plans;
(viii) a copy of the most recent letter of confirmation of
registration of the Pension Plan(s), if any, pursuant to any
Laws; and
(ix) a copy of any statement of investment policies and goals
prepared in respect of the Pension Plans, if any, whether or
not such statement has been filed with the applicable
Governmental Authority.
(c) Except as disclosed in Section 4.10 of the Disclosure Schedule,
each Benefit Plan is, and has been established, registered (where required),
qualified, administered and invested, in compliance with (i) the terms of such
Benefit Plan, (ii) all Laws and (iii) any Collective Agreements; and Vaxis has
not received, in the last six years, any notice from any Person questioning or
challenging such compliance (other than in respect of any claim related solely
to that Person), and Vaxis does not have any knowledge of any such notice from
any Person questioning or challenging such compliance beyond the last six years.
(d) All obligations to or under the Benefit Plans (whether pursuant to
the terms thereof or any Laws) have been satisfied, and there are no outstanding
defaults or violations thereunder by Vaxis or, to the knowledge of Vaxis, any
default or violation by any other party to any Benefit Plan.
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(e) Except as disclosed in Section 4.10 of the Disclosure Schedule,
there have been no improvements, increases or changes to, or promised
improvements, increases or changes to, the benefits provided under any Benefit
Plan. None of the Benefit Plans provide for benefit increases or the
acceleration of, or an increase in, funding obligations that are contingent upon
or will be triggered by the entering into of this Agreement or the completion of
the transactions contemplated herein.
(f) All employer or employee payments, contributions or premiums
required to be remitted, paid to or in respect of each Benefit Plan have been
paid or remitted in a timely fashion in accordance with its terms and all Laws,
and no Taxes, penalties or fees are owing or eligible under any Benefit Plan.
(g) There is no investigation by a Governmental Authority, or Claim
(other than routine claims for payment of benefits) pending or threatened
involving any Benefit Plan or their assets, and no facts exist which could
reasonably be expected to give rise to any such investigation or Claim (other
than routine claims for benefits).
(h) No event has occurred respecting any registered Benefit Plan which
would result in the revocation of the registration of such Benefit Plan (where
applicable) or entitle any Person (without the consent of Vaxis) to wind-up or
terminate any Benefit Plan, in whole or in part, or which could otherwise
reasonably be expected to adversely affect the tax status of any such plan.
(i) There are no going concern unfounded actuarial liabilities, past
service unfounded liabilities or solvency deficiencies respecting any of the
Benefit Plans.
(j) No material changes have occurred in respect of any Benefit Plan
since the date of the most recent financial, accounting, actuarial or other
report, as applicable, issued in connection with any Benefit Plan, which could
reasonably be expected to adversely affect the relevant report (including
rendering it misleading in any material respect).
(k) Vaxis has not received, or applied for, any payment of surplus out
of any Benefit Plan or any payment in respect of the demutualization of the
insurer of any Benefit Plan.
(l) Except as disclosed in Section 4.10 of the Disclosure Schedule, (i)
Vaxis has not taken any contribution or premium holidays under any Benefit Plan
and, where so disclosed, Vaxis was entitled under the terms of the Benefit Plan,
applicable Collective Agreements and under all Laws to take such contribution or
premium holidays; and (ii) there have been no withdrawals or transfers of assets
from any Benefit Plan and where so disclosed, such withdrawals or transfers of
assets were in accordance with the terms of such Benefit Plan, any applicable
Collective Agreements and all Laws.
(m) None of the Benefit Plans is a Union Plan or a "multi-employer"
pension plan or benefit plan as defined under Laws.
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(n) All employee data necessary to administer each Benefit Plan is in
the possession of Vaxis and is complete, correct and in a form which is
sufficient for the proper administration of the Benefit Plan in accordance with
its terms and all Laws.
(o) None of the Benefit Plans, other than the Pension Plans, provide
benefits beyond retirement or other termination of service to Employees or
former employees or to the beneficiaries or dependents of such employees, or
such benefits have been properly accrued on the Financial Statements in
accordance with Canadian GAAP.
(p) None of the Benefit Plans require or permit a retroactive increase
in premiums or payments, or require additional premiums or payments or
termination of the Benefit Plan or any insurance contract relating thereto, and
the level of insurance reserves, if any, under any insured Benefit Plan is
reasonable and sufficient to provide for all incurred but unreported Claims.
(q) Vaxis' sole obligation to or in respect of any Union Plans is to
make monetary contributions to the Union Plans in the amounts and in the manner
set forth in the Collective Agreements, if any, disclosed to Cellegy under this
Agreement.
4.11 Tax Matters.
(a) Vaxis has duly and timely prepared all Tax Returns required to be
prepared by it, has duly and timely filed its Tax Returns required to be filed
by it with the appropriate Governmental Authority and has duly, completely and
correctly reported all income and all other amounts and information required to
be reported thereon.
(b) Vaxis has duly and timely paid all Taxes, including all
installments on account of Taxes for the current year, that are due and payable
by it whether or not assessed by the appropriate Governmental Authority.
Provision has been made on the Balance Sheet for amounts at least equal to the
amount of all Taxes owing by Vaxis that are not yet due and payable and that
relate to periods ending on or prior to the Closing Date.
(c) Vaxis has not requested, offered to enter into or entered into any
agreement or other arrangement or executed any waiver providing for, any
extension of time within which (i) to file any Tax Return covering any Taxes for
which Vaxis is or may be liable; (ii) to file any elections, designations or
similar filings relating to Taxes for which Vaxis is or may be liable; (iii)
Vaxis is required to pay or remit any Taxes or amounts on account of Taxes; or
(iv) any Governmental Authority may assess or collect Taxes for which Vaxis is
or may be liable.
(d) All Canadian federal and provincial income, sales and capital tax
liabilities of Vaxis have been assessed by the relevant taxing authorities and
notices of assessment have been issued to it by all relevant taxing authorities
for all taxation years prior to and including the taxation year ended October
31, 2000.
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(e) There are no proceedings, investigations, audits or Claims now
pending or, to the knowledge of Vaxis, threatened, against Vaxis in respect of
any Taxes and there are no matters under discussion, audit or appeal with any
Governmental Authority relating to Taxes.
(f) Vaxis has duly and timely withheld the amount of all Taxes and
other deductions required by law to be withheld from any amount paid or credited
by it to or for the account or benefit of any Person, including any Employees,
officers or directors and any non-resident Person, and has duly and timely
remitted to the appropriate Governmental Authority, such Taxes and other
deductions required by law to be remitted.
(g) Except pursuant to this Agreement or as specifically disclosed in
writing to Cellegy, for purposes of the Income Tax Act (Canada) or any other
applicable Tax statute, except for the Stockholders no Person or group of
Persons has ever acquired or had the right to acquire control of Vaxis.
(h) None of Sections 78, 80, 80.01, 80.02, 80.03 or 80.04 of the Income
Tax Act (Canada), or any equivalent provision of the Tax legislation of any
province or any other jurisdiction, have applied or will apply to Vaxis at any
time up to and including the Closing Date.
(i) Vaxis has not acquired property from a non-Arm's Length Person,
within the meaning of the Income Tax Act (Canada), for consideration, the value
of which is less than the fair market value of the property acquired in
circumstances which could subject it to a liability under Section 160 of the
Income Tax Act (Canada).
(j) For all transactions between Vaxis and any non-resident Person with
whom Vaxis was not dealing at Arm's Length during a taxation year commencing
after 1998 and ending on or before the Closing Date, Vaxis has made or obtained
records or documents that meet the requirements of paragraphs 247(4)(a) to (c)
of the Income Tax Act (Canada).
(k) Vaxis is duly registered under subdivision (d) of Division V of
Part IX of the Excise Tax Act (Canada) with respect to the goods and services
tax and harmonized sales tax and its registration number is 886332568.
(l) The only reserves under the Income Tax Act (Canada) or any
equivalent provincial statute to be claimed by Vaxis for the taxation year ended
immediately prior to the acquisition of control by Cellegy are disclosed in
Section 4.11 of the Disclosure Schedule.
(m) Vaxis has not filed any elections, designations or similar filings
which will be applicable for any period ending after the Closing Date.
(n) Vaxis has duly and timely collected the amount of any sales or
transfer taxes, including any goods and services, harmonized sales and
provincial sales taxes, required by Law to be collected by it and has duly and
timely remitted to the appropriate Governmental Authority such sales or transfer
taxes required by Law to be remitted by it.
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(o) Cellegy has been provided with copies of all Tax Returns and all
communications to or from any Governmental Authority relating to the Taxes of
Vaxis, to the extent relating to periods or events in respect of which any
Governmental Authority may by Law assess or otherwise impose any such Tax on
Vaxis.
4.12 Compliance With Applicable Law. Vaxis holds all licenses, franchises,
permits, variances, exemptions, orders, approvals and authorizations necessary
for the lawful conduct of its business under and pursuant to, and the business
of Vaxis is not being conducted in material violation of, any provision of any
federal, provincial, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license or
other Governmental Authorization or approval applicable to Vaxis.
4.13 Subsidiaries. Vaxis has no subsidiaries.
4.14. No Bankruptcy Proceedings. There is no Bankruptcy Proceeding (as
defined below) pending against Vaxis, and to the best knowledge of Vaxis, no
other person has threatened to commence any such Bankruptcy Proceeding against
Vaxis. Vaxis is not Insolvent (as defined below), and Vaxis has no reason to
believe that it may become Insolvent in the ordinary course of its business. For
purposes of this Section, a Bankruptcy Proceeding shall mean and include any
action, suit or judicial or administrative proceeding under any applicable
bankruptcy, fraudulent conveyance or insolvency law, including but not limited
to, any such action, suit or judicial or administrative proceeding: (i)
involving the filing of a voluntary or involuntary bankruptcy petition, or
petition from relief from Claims of creditors, with respect to Vaxis; (ii) in
which it is alleged that Vaxis is insolvent; or (iii) seeking the liquidation of
Vaxis, the appointment of a receiver or trustee over all or substantially all of
the assets of Vaxis, or the composition or assignment of all or a substantial
portion of the assets of Vaxis for the benefit of the creditors of Vaxis . For
purposes of this Section, Vaxis shall be "Insolvent" if it is generally not
paying, or is or will be unable or lacks the means to pay, its debts as they
become in the ordinary course of its business.
4.15 Labor and Employment Matters.
(a) Section 4.15 of the Disclosure Schedule sets forth a complete list
of the Employees, together with their titles, service dates and material terms
of employment, including current wages, salaries or hourly rate of pay,
benefits, vacation entitlement, commissions and bonus (whether monetary or
otherwise) or other material compensation paid since the beginning of the most
recently completed fiscal year or payable to each such Employee, the date upon
which each such term of employment became effective if it became effective in
the 12 month period prior to the date of this Agreement and the date upon which
each such Employee was first hired by Vaxis. Except as disclosed in Section 4.15
of the Disclosure Schedule, no Employee is on short-term or long-term disability
leave, parental leave, extended absence or receiving benefits pursuant to the
Workplace Safety and Insurance Act (Ontario) or similar workers' compensation
legislation in other jurisdictions.
(b) Except for the Employment Contracts listed in Section 4.15 of the
Disclosure Schedule, there are no Employment Contracts which are not terminable
on the giving
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of reasonable notice in accordance with applicable law, nor are any management
agreements, retention bonuses or Employment Contracts providing for cash or
other compensation or benefits upon the consummation of the transactions
contemplated by this Agreement.
(c) Except for the Benefit Plans or as disclosed in Section 4.15 of the
Disclosure Schedule, there are no employment policies or plans, which are
binding upon Vaxis.
(d) (i) Vaxis has been and are being operated in full compliance with
all Laws relating to employees, including employment standards, Occupational
Health and Safety Laws, workers compensation, human rights, labour relations,
pay equity and employment equity. Vaxis has complied with and posted plans as
required under applicable pay equity legislation. There have been no Claims nor,
to the knowledge of Vaxis, are there any threatened complaints under such
employment-related Laws against Vaxis.
(e) There are no Claims or complaints nor, to the knowledge of Vaxis,
are there any threatened Claims or complaints, against Vaxis pursuant to any
Laws relating to Employees, including employment standards, human rights, labour
relations, Occupational Health and Safety Laws, worker's compensation, pay
equity or employment equity. To the knowledge of Vaxis nothing has occurred
which might lead to a Claim or complaint against Vaxis under any such Laws.
There are no outstanding decisions, orders or settlements or pending settlements
which place any obligation upon Vaxis to do or refrain from doing any act.
(f) All current assessments under the Workplace Safety and Insurance
Act (Ontario) and any similar workers compensation legislation in other
provinces in relation to Vaxis and all of their respective contractors and
subcontractors have been paid or accrued and Vaxis has not been subject to any
special or penalty assessment under such legislation which has not been paid.
(g) Vaxis has previously made available to Cellegy for review all
inspection reports under the Occupational Health and Safety Act (Ontario) and
Workplace Safety and Insurance Act (Ontario) relating to Vaxis. There are no
outstanding inspection orders made under the Occupational Health and Safety Act
(Ontario) against Vaxis. Except as set forth in Section 4.15 of the Disclosure
Schedule, Vaxis are operating in compliance with all Occupational Health and
Safety Laws, including but not limited to the Workplace Hazardous Materials
Information System (WHMIS). To the knowledge of Vaxis, there are no pending or
threatened charges against Vaxis under Occupational Health and Safety Laws.
There have been no fatal or critical accidents which might lead to charges
against Vaxis under Occupational Health and Safety Laws. To the knowledge of
Vaxis, there are no materials present in the assets owned or used by Vaxis,
exposure to which may result in an industrial disease as defined in the
Workplace Safety and Insurance Act (Ontario). If such materials including
asbestos, have to be removed to comply with Occupational Health and Safety laws,
Vaxis shall indemnify and save harmless Cellegy for any and all costs arising
from such removal. Vaxis have complied in all respects with any Remedial Orders
issued under Occupational Health and Safety Laws. To the knowledge of Vaxis,
there are no appeals of any Remedial Orders under Occupational Health and Safety
Laws against Vaxis which are currently outstanding.
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4.16 Ownership of Shares of Cellegy Common Stock. As of the date hereof,
neither Vaxis nor, to its knowledge, any of its affiliates or associates (as
such terms are defined under the Securities Act (Ontario)), (a) beneficially
owns, directly or indirectly, or (b) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, shares of Cellegy Common Stock, except for the "standstill"
provisions of the Memorandum of Terms dated October 18, 2001, between Cellegy
and Vaxis (the "No-Shop Agreement") relating to the transactions contemplated by
this Agreement.
4.17 Insurance. As of the date hereof, Vaxis is insured by insurers
reasonably believed by Vaxis to be of recognized financial responsibility
against such losses and risks and in such amounts as are customary in the
businesses in which they are engaged. All material policies of insurance and
fidelity or surety bonds insuring Vaxis or its businesses, assets, employees,
officers and directors are in full force and effect. There are no Claims by
Vaxis under any such policy or instrument as to which any insurance company is
denying liability or defending under a reservation of rights clause.
4.18 Products and FDA Matters.
(a) Vaxis has not received any written notices, citations or decisions
by any Governmental Authority that any material product developed, under
development, produced, manufactured, marketed or distributed at any time by
Vaxis (the "Vaxis Products") is defective or fails to meet any applicable
standards promulgated by any such Governmental Authority. Vaxis has complied in
all material respects with the laws, regulations, policies, procedures and
specifications with respect to the development, design, manufacture, labeling,
testing, record keeping and inspection of the Vaxis Products and the operation
of manufacturing facilities promulgated by the Food and Drug Administration (the
"FDA") and Health Canada. Since January 1, 1998, there have been no recalls,
field notifications or seizures ordered or, to the knowledge of Vaxis,
threatened by any such Governmental Authority with respect to any of the Vaxis
Products. Since January 1, 1998, Vaxis has not received a warning letter or
Section 305 notice from the FDA or corresponding document from Health Canada.
(b) Vaxis has obtained, in all countries where either Vaxis or any
corporate partner thereof is conducting research or trials regarding, developing
or marketing any Vaxis Products, all applicable licenses, registrations,
approvals, clearances and authorizations required by local, state, provincial or
federal agencies (including the FDA and Health Canada) in such countries
regulating the safety, effectiveness and market clearance of the Vaxis Products
currently being researched, developed or marketed by Vaxis or any corporate
partner thereof in such countries. Vaxis has made available for examination by
Cellegy all material information relating to the regulation of the Vaxis
Products.
(c) To the knowledge of Vaxis, there have been no adverse events in any
clinical trials conducted by or on behalf of Vaxis of such a nature that would
be required to be reported to any applicable Governmental Authority that have
not been so reported to such authority.
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(d) Vaxis will promptly provide Cellegy with copies of any document
that is issued, prepared, or otherwise becomes available from the date of this
Agreement until the Closing which bears on the regulatory status of Vaxis or
Vaxis Products with the FDA or Health Canada or other foreign Governmental
Authorities, including, but not limited to, any filing, deficiency letter,
warning letter, non-approval letter/order, withdrawal letter/order or any
similar document.
4.19 Environmental Matters.
(a) Section 4.19 of the Disclosure Schedule sets forth a complete list
of the Environmental Approvals.
(b) All operations of Vaxis conducted on the Real Property and the Real
Property itself while occupied by Vaxis, or at other properties over which Vaxis
currently or in past had charge, management or control and to the knowledge of
Vaxis, while occupied by Vaxis' predecessors in title, have been and are now, in
compliance with all Environmental Laws and any future Environmental Laws that,
to the knowledge of Vaxis, are presently planned or proposed by any Governmental
Authority. Any Release by Vaxis and to the knowledge of Vaxis, by Vaxis'
predecessors in title of any Hazardous Substance into the Environment complied
and complies with all Environmental Laws.
(c) All Environmental Approvals have been obtained, are valid and in
full force and effect, have been and are being complied with, and there have
been and are no proceedings commenced or threatened to revoke or amend any
Environmental Approval..
(d) Vaxis or any of its operations has not been or is not now the
subject of any Remedial Order, nor does Vaxis have any knowledge of any
investigation or evaluation commenced or threatened as to whether any such
Remedial Order is necessary nor has any threat of any such Remedial Order been
made nor are there any circumstances which could result in the issuance of any
such Remedial Order.
(e) Vaxis has not been prosecuted for or convicted of any offence under
any Environmental Law, nor has Vaxis been found liable in any proceeding to pay
any fine, penalty, damages, amount or judgment to any Person as a result of any
Release or threatened Release or as a result of the breach of any Environmental
Law and to the knowledge of Vaxis, there is no basis for any such proceeding or
action.
(f) No part of the Real Property or any other of the assets of Vaxis
has ever been used by Vaxis as a landfill or for the disposal of waste and to
the knowledge of Vaxis, no part of the Real Property or any other of the assets
of Vaxis has been used by any other Person as a landfill or for the disposal of
waste.
(g) Except in compliance with applicable Environmental Laws, no
asbestos or asbestos containing materials are used, stored or otherwise present
in or on the Real Property or any other assets of Vaxis. No equipment, waste or
other material containing polychlorinated
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biphenyls (PCBs) are used, stored or otherwise present in or on the Real
Property or any other assets of Vaxis.
(h) All material environmental data and studies (including the results
of any environmental audit assessment or environmental management system)
relating to Vaxis have been delivered or made available to Cellegy.
(i) There has been no Release by Vaxis of any Hazardous Substance which
is now present in, on or under any of the Real Property or any other assets of
Vaxis or any property currently or in the past under the charge, management or
control of Vaxis (including underlying soils and substrata, vegetation, surface
water and groundwater) at levels which exceed decommissioning or remediation
standards under any applicable Environmental Laws or standards published or
administered by the Governmental Authority responsible for establishing or
applying such standards.
(j) Vaxis has no knowledge of any Hazardous Substance in, on or under
the Real Property or any other assets of Vaxis.
(k) There are no underground storage tanks ("USTs") on the Real
Property and any storage tanks or any USTs formerly on the Real Property have
been removed and any affected soil, surface water or ground water has been
remediated in material compliance with all Laws.
(l) Vaxis has no knowledge of any Hazardous Substance originating from
any neighboring or adjoining properties which has migrated onto, into or under
or is migrating towards any of the Real Property or any other assets of Vaxis.
(m) Vaxis has no knowledge of any Hazardous Substance originating from
any of the Real Property or any other assets of Vaxis which has migrated onto,
or is migrating towards any neighboring and/or adjoining properties.
(n) Vaxis has no knowledge of any proposed changes to Environmental
Laws which may affect the operations of Vaxis.
4.20 Intellectual Property Rights.
(a) Section 4.20(a) of the Disclosure Schedule sets forth an accurate
and complete list of all Vaxis Intellectual Property Rights, including without
limitation (i) patents, applications for patents, registrations of trademarks
(including service marks) and applications therefor and registrations of
copyrights and applications therefor that are owned by Vaxis; (ii) unexpired
licenses relating to Vaxis Intellectual Property Rights that have been granted
to or by Vaxis; and (iii) other agreements, including but not limited to options
to other Intellectual Property Rights, relating to Intellectual Property Rights
that are part of the business of Vaxis as presently conducted and as proposed to
be conducted.
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(b) Except as specifically identified in Section 4.20 of the Disclosure
Schedule, Vaxis is the sole beneficial and registered owner of the Intellectual
Property listed and described in such Schedule (such Intellectual Property owned
by Vaxis being referred to herein as the "Owned Intellectual Property"), with
good and marketable title thereto, free and clear of any Claims and Encumbrances
or obligations to make any past, present or future payments to or confer any
benefit on any other Person. Vaxis is exclusively entitled to possess, use,
transfer, license and exploit the Owned Intellectual Property, without the
consent or permission of or payment to any third party. Except as set out in
Section 4.20 of the Disclosure Schedule, no Person other than Vaxis has any
Intellectual Property Rights in or to the Owned Intellectual Property or any
aspect or component thereof. There has been no sale, transfer or assignment of
the Owned Intellectual Property or any granting of any agreement or right
capable of becoming an agreement or option for the purchase, transfer or
assignment of any such assets.
(c) With respect to any Intellectual Property used in whole or in part
in or required for the carrying on of the business of Vaxis as conducted and as
proposed to be conducted, or otherwise held by Vaxis, of which Vaxis is not the
sole beneficial and registered owner, as identified in Section 4.20 of the
Disclosure Schedule (such Intellectual Property being referred to herein as
"Third Party Intellectual Property"), Vaxis has been granted all necessary
rights for the continuing use of such Third Party Intellectual Property in the
business of Vaxis as conducted and as proposed to be conducted, pursuant to
valid, written agreements. All such agreements are in good standing and no
breach or default by Vaxis or, to the knowledge of Vaxis, by any other party
thereto, has occurred thereunder. All assignment of Intellectual Property rights
to Vaxis have been properly executed and duly recorded.
(d) Except as otherwise specifically identified in Section 4.20 of the
Disclosure Schedule, Vaxis has not granted any license, waiver or other right to
any other Person with respect to the Owned Intellectual Property.
(e) All registrations or issuances of Intellectual Property Rights in
any jurisdiction, and all applications in any jurisdiction for any such
issuances or registrations, by or for the benefit of Vaxis, as listed in Section
4.20 of the Disclosure Schedule, are unexpired, have not been abandoned, are
recorded in the name of Vaxis and, to the knowledge of Vaxis, are valid and
enforceable. No registrations or issuances of Intellectual Property Rights in
any jurisdiction, or any application in any jurisdiction for any such issuances
or registrations, by or for the benefit of Vaxis, as listed in Section 4.20 of
the Disclosure Schedule, has been rejected (without such rejection being
subsequently withdrawn or overcome by amendment), and, to the knowledge of
Vaxis, no Person has challenged the validity or opposed any such registration or
issuance.
(f) All employees, consultants or other Persons who have been involved
in the development, modification or use of the Intellectual Property Rights or
who have had access to confidential Technical Knowledge relating to the
Intellectual Property Rights, are under a legal obligation of confidentiality to
Vaxis with respect to such information, have assigned all of their rights in and
to the Intellectual Property Rights to Vaxis, expressly waived any moral rights
in the Intellectual Property Rights and have executed written agreements with
Vaxis to that effect. No such employee or other Person has excluded in writing
works or inventions made prior to his or her employment or engagement with Vaxis
from his or her assignment of
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inventions pursuant to such agreement. To the knowledge of Vaxis after due and
reasonable inquiry, none of the employees of Vaxis is subject to any obligation
to any other Person, whether contractual or otherwise, including obligations
relating to confidentiality, non-competition or possession of proprietary
information, or have executed any assignment or license of any Intellectual
Property Rights with any Person other than Vaxis, or are subject to any
judgment, decree or order of any court or administrative agency, relating to the
Intellectual Property Rights or otherwise, that would interfere with their
duties to Vaxis or that would conflict with Vaxis's business as presently
conducted and proposed to be conducted. To Vaxis' knowledge, no independent
contractors who have performed services related to Vaxis' business have any
right, title or interest in Vaxis' Intellectual Property Rights. "Technical
Knowledge" means know-how, processes, methods, techniques, formulae, algorithms,
inventions, plans, architectures, designs, layouts, structures, sequences,
organizations, flow charts, configurations, models, concepts, specifications,
technical data, descriptions, instructions, records, notes, and other
information of a technological or scientific nature, regardless of form.
(g) To the knowledge of Vaxis, there are no Canadian or United States
governmental prohibitions or restrictions on the use, transfer or export of the
Intellectual Property Rights. Notwithstanding the foregoing, there may be
prohibitions or restrictions on the use, transfer or export of the products
contemplated by the business of Vaxis as conducted and as proposed to be
conducted, such as for example, United States Food and Drug Administration
approval or Canadian Health Protection branch approval or approval of any other
governmental or regulatory organization, association or agency of any
jurisdiction in which such products may be used or to which such products may be
transferred or exported.
(h) There is no pending or, to the knowledge of Vaxis, threatened
action, suit, proceeding, claim or investigation relating to the Owned
Intellectual Property or to the Third Party Intellectual Property, whether or
not involving Vaxis, contesting the rights of Vaxis or any third party thereto
or that would prevent, limit or impair Vaxis's ability to utilize the Owned
Intellectual Property or the Third Party Intellectual Property in the business
of Vaxis as presently conducted and proposed to be conducted.
(i) The carrying on of the business of Vaxis as presently conducted and
as proposed to be conducted, including (i) the manufacture, marketing, license,
sale or use of any product currently or proposed to be developed, manufactured,
marketed, licensed, sold or used by Vaxis, (ii) any service currently or
proposed to be marketed or provided by Vaxis, or (iii) the use of any trademarks
identified in Section 4.20 of the Disclosure Schedule by Vaxis, has not, does
not and will not violate or infringe any Intellectual Property Rights or other
rights of any other Person, including rights relating to defamation, rights of
privacy or publicity and contractual rights, nor requires the payment of any
royalty, fees or other payment or the conferral of any other benefit on another
Person. Vaxis and its employees have not received any communication alleging
that Vaxis, or their employees, agents or contractors, have violated or may
violate any Intellectual Property Rights of any other Person.
(j) To the knowledge of Vaxis, no Person has infringed or violated the
Intellectual Property Rights of Vaxis.
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(k) Vaxis has taken commercially reasonable steps sufficient to
safeguard and maintain the secrecy and confidentiality of and Vaxis' proprietary
rights in the unpatented know-how, technology, proprietary processes, formulae,
and other information that is in the aggregate material to the conduct of Vaxis'
business.
(l) Except as disclosed in Section 4.20 of the Disclosure Schedule,
there are no royalties, honoraria, fees or other payments payable by Vaxis to
any person by reason of the ownership, use, license, sale or disposition of any
of Vaxis' Intellectual Property Rights.
(m) The execution, delivery and performance of this Agreement by Vaxis,
and the consummation by Vaxis of the transactions contemplated hereby, will not
breach, violate or conflict with any agreement governing Vaxis' Intellectual
Property Rights, will not cause the forfeiture or termination or give rise to a
right of forfeiture or termination of Vaxis' Intellectual Property Right or in
any way impair the right of Vaxis to use, sell, license or dispose of, or bring
any action for the infringement of, Vaxis' Intellectual Property Rights or
portion thereof.
(n) For purposes of this Section 4.20, "use," with respect to
Intellectual Property Rights, includes make, have made, offer for sale, import,
reproduce, display or perform (publicly or otherwise), prepare derivative works
based on, sell, distribute, disclose and otherwise exploit such Intellectual
Property Rights and products incorporating or subject to such Intellectual
Property Rights.
4.21 Real Property.
(a) Section 4.21(a) of the Disclosure Schedule lists all of the real
property owned or currently used by Vaxis in the course of Vaxis' business (the
"Real Property"). Section 4.21(a) of the Disclosure Schedule also lists all real
property owned or used by Vaxis in the course of Vaxis' business at any time
since January 1, 1998, other than the Real Property.
(b) All Real Property is in all material respects suitable and adequate
for the uses for which it is currently devoted. Vaxis has good and marketable
title in fee simple absolute to Real Property indicated on Section 4.21(a) of
the Disclosure Schedule to be owned by it, and to the buildings, structures and
improvements thereon, and a valid leasehold interest in all other Real Property,
in each case free and clear of all Encumbrances.
(c) All buildings, structures, fixtures and other improvements on Real
Property are in good repair, and free of defects (latent or patent), ordinary
wear and tear excepted, and fit for the uses to which they are currently
devoted. To Vaxis' knowledge, all such buildings, structures, fixtures and
improvements on the Real Property conform to all applicable laws.
(d) To Vaxis' knowledge, none of the Real Property is subject to any
Other Agreement or other restriction of any nature whatsoever (recorded or
unrecorded) preventing or limiting Vaxis' right to use it in the manner such
property is currently being used. "Other Agreement" means any agreement or
arrangement between two or more persons (or entities) with respect to their
relative rights and/or obligations or with respect to a thing done or to be done
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(whether or not conditional, executory, express, implied, in writing or meeting
the requirements of contract), including, without limitation, contracts, leases,
promissory notes, covenants, easements, rights of way, commitments or
understanding.
(e) To Vaxis' knowledge, no portion of the Real Property or any
building, structure, fixture or improvement thereon is the subject of, or
affected by, any expropriation or condemnation or similar proceeding currently
instituted or pending or threatened, and Vaxis has no knowledge that any of the
foregoing are, or will be, the subject of, or affected by, any such proceeding.
(f) The Real Property has direct and unobstructed access to adequate
electric, gas, water, sewer and telephone lines, and public streets, all of
which are adequate for the uses to which the Real Property is currently devoted.
4.22 Residence of Vaxis. Vaxis is not a non-resident of Canada for the
purposes of the Income Tax Act (Canada).
4.23 Taxable Transaction. Vaxis acknowledges that the transactions
contemplated by this Agreement, including the Transaction and the issuance of
the Initial Consideration and Earn-Out Consideration, will be taxable
transactions under United States and Canadian tax laws.
4.24 Complete Copies of Requested Documents. Vaxis has delivered or made
available (through public sources or directly) true and complete copies of each
document that has been requested by Cellegy or its counsel in connection with
their legal and accounting review of Vaxis.
4.25 Disclosure. No representation or warranty made by Vaxis in this
Agreement, nor any document, written information, statement, financial
statement, certificate or exhibit prepared and furnished or to be prepared and
furnished by Vaxis or its representatives pursuant hereto or in connection with
the transactions contemplated hereby, when taken together, contained any untrue
statement of a material fact when made, or omitted to state a material fact
necessary to make the statements or facts contained herein or therein not
misleading in light of the circumstances under which there were furnished.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CELLEGY
Cellegy represents and warrants to Vaxis and each Stockholder as follows:
5.1 Organization. Cellegy is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and has the
corporate power to carry on its business as it is now being conducted. Cellegy
is duly qualified as a foreign corporation to do business, and is in good
standing (to the extent the concept of good standing exists), in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its
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activities makes such qualification necessary, except where failure to be so
qualified would not have a Material Advance Effect on Cellegy.
5.2 Authority Relative to this Agreement. Cellegy has the corporate power
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation by Cellegy of the
transactions contemplated hereby and thereby have been duly authorized by the
Boards of Directors of Cellegy, and no other corporate proceedings on the part
of Cellegy are necessary to approve this Agreement or the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Cellegy and constitutes a valid and binding agreement of Cellegy
and is enforceable against Cellegy in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
5.3 Consents and Approvals; No Violations. Except for applicable
requirements of the Securities Act, the Exchange Act, Securities Act (Ontario),
the Investment Canada Act or blue sky laws, and if required filing a notice of
listing of additional shares with the NASDAQ, no filing with, and no permit,
authorization, consent or approval of, any public or governmental body or
authority is necessary for the consummation by Cellegy of the transactions
contemplated by this Agreement, including, without limitation, the issue of
shares of Cellegy Common Stock. Neither the execution and delivery of this
Agreement by Cellegy, nor the consummation by Cellegy of the transactions
contemplated hereby, nor compliance by Cellegy with any of the provisions
hereof, will (a) result in any breach of the Articles of Incorporation or Bylaws
of Cellegy, (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, acceleration or change in the award, grant,
vesting or determination) under, or give rise to creation of any lien, charge,
security interest or Encumbrance upon, any of the respective properties or
assets of Cellegy or any of its subsidiaries under, any agreement or instrument
to which Cellegy is a party or by which any of their properties or assets may be
bound or (c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Cellegy or any of its properties or assets, except such
as would not in the aggregate have a Material Adverse Effect on Cellegy.
5.4 Cellegy Common Stock. The shares of Cellegy Common Stock that are
issuable pursuant to this Agreement will be delivered to the Stockholders free
and clear of all Encumbrances other than as set forth herein or from any liens
or Encumbrances created by or through, or otherwise resulting from, actions or
inactions by the Stockholders or under applicable Law. Upon issuance in
accordance with this Agreement, the shares of Cellegy Common Stock that are
issuable pursuant to this Agreement will be validly issued, fully paid and
non-assessable.
5.5 SEC Filings. Cellegy has filed all forms, reports and documents that
are required to be filed by Cellegy with the Securities and Exchange Commission
(the "SEC") since December 31, 2000. All such required forms, reports and
documents (including such forms, reports and documents that Cellegy may file
subsequent to the date hereof) are referred to herein as the "Cellegy SEC
Reports." As of their respective dates, to Cellegy's knowledge the Cellegy SEC
Reports (i) complied as to form in all material respects with the requirements
of the Securities Act or the Securities Exchange Act of 1934, as applicable, and
the rules and regulations of the SEC thereunder applicable to such Cellegy SEC
Reports, and (ii) did not at the
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time they were filed (or if amended or superseded by a filing, then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except to the extent corrected by a subsequently filed
Cellegy SEC Report that was filed before the date of this Agreement.
5.6 Absence of Certain Changes. Except as set forth in the Cellegy SEC
Reports, since September 30, 2001, Cellegy has operated its business in the
ordinary course consistent with past practice, and since such date there has not
occurred with respect to Cellegy: (a) any change, event or condition (whether or
not covered by insurance) that has resulted in a Material Adverse Effect on
Cellegy; (b) any material change in accounting methods or practices (including
any change in depreciation or amortization policies or rates) by Cellegy or any
material revaluation by Cellegy of any of its material assets; or (c) any
declaration, setting aside or payment of a dividend on, or the making of any
other distribution in respect of, the capital stock of Cellegy, or any split,
combination or recapitalization of the capital stock of Cellegy or any direct or
indirect redemption, purchase or other acquisition of any capital stock of
Cellegy or any change in any rights, preferences, privileges or restrictions of
any outstanding security of Cellegy.
5.7 Securities Law Compliance Regarding Issuance of Shares; Listing of
Shares on Nasdaq. Assuming the accuracy of the representations, warranties and
covenants made by the Stockholders in this Agreement, the shares of Cellegy
Common Stock to be issued to the Stockholders pursuant to this Agreement, when
issued in accordance with the provisions of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable and will be issued in
compliance with all applicable material U.S. federal and state securities laws.
Before the time that the Stockholders may first sell any such shares in
compliance with U.S. and Canadian securities laws, Cellegy will take such
actions (including, if required, filing a Notification Form for Listing of
Additional Shares) as are necessary to cause the shares of Cellegy Common Stock
to be issued to the Stockholders pursuant to this Agreement to be approved for
trading on the Nasdaq National Market.
5.8 Rule 144 and Public Sales of Purchased Shares. Subject to compliance
with the provisions of Rule 144 and/or Rule 905 of Regulation S under the
Securities Act, commencing one year after the Closing Date each of the
Stockholders will be eligible to publicly sell their shares of Cellegy Common
Stock without restriction in ordinary "brokers' transactions" (as defined in
Rule 144) by complying with the provisions of Rule 144. Rule 144 governs, among
other things, the sale of "restricted securities." Rule 144 defines "restricted
securities" as including, among other things, securities "acquired ... from the
issuer...in a transaction or chain of transactions not involving any public
offering" as well as "equity securities of domestic issuers acquired in a
transaction...subject to the conditions of...Regulation S". Under Rule 144, the
amount of "restricted securities" sold for the account of any person who is not
an affiliate of the issuer, together with all other sales of restricted
securities of the same class for the account of such person within the preceding
three months, shall not exceed the greater of (i) one percent of the outstanding
shares of Common Stock as shown by the most recent report (such as a quarterly
report on Form 10-Q or annual report on Form 10-K) published by the issuer, or
(ii) the average weekly reported volume of trading in such securities (in the
case of the Company, as reported on
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the Nasdaq National Market) during the four calendar weeks preceding the filing
of a Form 144 (if a Form 144 is required to be filed). Moreover, if the amount
of securities to be sold in reliance on Rule 144 during any three-month period
exceeds 500 shares or has an aggregate sale price in excess of $10,000, three
copies of a notice on Form 144 must be filed with the SEC, and if the securities
are admitted to trading on any national securities exchange, one copy of the
Form 144 must also be transmitted to the principal exchange where such
securities are so admitted (which in the case of the Company is the Nasdaq
National Market). In addition, securities sold pursuant to Rule 144 must be sold
in "brokers' transactions" or in transactions directly with a "market maker", as
that term is defined in Section 3(a)(38) of the Exchange Act, and the person
selling the securities must not (i) solicit or arrange for the solicitation of
orders to buy the securities in anticipation of or in connection with such
transactions, or (2) make any payment in connection with the offer or sale of
the securities to any person other than the broker who executed the order to
sell the securities. For this purpose, the term "brokers' transactions" includes
transactions by a broker in which the broker
(1) does no more than execute the order or orders to sell the
securities as agent for the person for whose account the securities are
sold; and receives no more than the usual and customary broker's
commission;
(2) neither solicits nor arranges for the solicitation of customers'
orders to buy the securities in anticipation of or in connection with the
transaction; provided, that the foregoing shall not preclude (i) inquiries
by the broker of other brokers or dealers who have indicated an interest in
the securities within the preceding 60 days, (ii) inquiries by the broker
of his customers who have indicated an unsolicited bona fide interest in
the securities within the preceding 10 business days; or (iii) the
publication by the broker of bid and ask quotations for the security in an
inter-dealer quotation system provided that such quotations are incident to
the maintenance of a bona fide inter-dealer market for the security for the
broker's own account and that the broker has published bona fide bid and
ask quotations for the security in an inter-dealer quotation system on each
of at least twelve days within the preceding thirty calendar days with no
more than four business days in succession with such two-way quotations;
and
(3) after reasonable inquiry is not aware of circumstances indicating
that the person for whose account the securities are sold is an underwriter
with respect to the securities or that the transaction is a part of a
distribution of securities of the issuer. Without limiting the foregoing,
the broker shall be deemed to be aware of any facts or statements contained
in the Form 144.
The volume limitations, manner of sale and Form 144 requirements of Rule 144 do
not apply to restricted securities sold for the account of a person who is not
an affiliate of the issuer at the time of the sale and has not been an affiliate
during the preceding three months, provided that a period of at least two years
has elapsed since the later of the date the securities were acquired from the
issuer or from an affiliate of the issuer.
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ARTICLE VI
CONDUCT OF BUSINESS
6.1 Conduct of Business by Vaxis Pending the Transaction. During the period
from the date of this Agreement and continuing until the Closing, except as set
forth in or contemplated by this Agreement, as agreed to in writing by Cellegy,
or as set forth in Section 6.1 of the Disclosure Schedule, Vaxis:
(i) shall conduct its operations in the ordinary course consistent with
the manner as heretofore conducted;
(ii) shall use commercially reasonable efforts, to preserve intact its
business organizations and goodwill, keep available the services of its officers
and employees and maintain satisfactory relationships with those persons having
business relationships with it;
(iii) shall not amend its Articles of Incorporation or Bylaws or
comparable governing instruments;
(iv) shall not (A) acquire or agree to acquire by merging or
consolidating with, or by acquiring any equity interest in or purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or other business
organization or division thereof, or (B) acquire or agree to acquire assets
other than in the ordinary course of business or (C) release or relinquish or
agree to release or relinquish any material contract rights;
(v) shall not effect any stock split or otherwise change its
capitalization or issue any shares of its capital stock or securities
convertible into or exchangeable or exercisable for shares of its capital stock,
except upon exercise of options outstanding as of the date hereof to purchase
Vaxis Common Shares under the Vaxis Stock Options;
(vi) shall not grant, confer or award any options, warrants, conversion
rights or other rights, not existing on the date hereof, to acquire any shares
or other securities of Vaxis or amend or otherwise modify any outstanding
options or warrants;
(vii) shall not set aside, make or pay any dividend or other
distribution, payable in cash, shares, property or otherwise, with respect to
any of its capital, or to redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital, except for the payment to certain employees of
Vaxis cash in lieu of stock options to a maximum of $22,000 in Canadian funds;
(viii) shall not, except in the ordinary course of business consistent
with past practice, (x) incur, create, assume or otherwise become liable for
borrowed money or assume, guarantee, endorse or otherwise become responsible or
liable for the obligations of any other individual, corporation or other entity
or (y) make any loans or advances to any other Person;
(ix) shall not (x) make, revoke or change any material election with
respect to Taxes unless required by applicable law or (y) settle or compromise
any material Tax liability;
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(x) shall not authorize capital expenditures which are, in the
aggregate, in excess of $50,000;
(xi) shall not, except for the payment of reasonable professional fees
relating to the Transaction or otherwise and reasonable fees to financial
advisors (which financial advisory fees have heretofore been disclosed or are
otherwise acceptable, to Cellegy), pay, discharge or satisfy any Claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) in an amount in excess of $50,000 in the aggregate,
other than the payments, discharges or satisfactions, in the ordinary course of
business and consistent with past practice, of liabilities reflected or reserved
against in Balance Sheet (as defined in Section 4.5 hereto) or subsequently
incurred in the ordinary course of business and consistent with past practice or
collect, or accelerate the collection of, any amounts owed (including accounts
receivable) other than collection in the ordinary course;
(xii) shall not, except in the ordinary course of business or as
otherwise expressly contemplated hereby, grant or acquire any material licenses
to use any Intellectual Property Rights or unpatented inventions set forth in
the Disclosure Schedule; provided that the Vaxis shall not grant any material
licenses to use any material Intellectual Property Rights or unpatented
inventions so set forth without the prior written consent of Cellegy, which
consent shall not be unreasonably withheld;
(xiii) shall not allow any insurance policy naming it as a beneficiary
or a loss payee to be cancelled, terminated or materially altered, except in the
ordinary course of business and consistent with past practice and following
written notice to Cellegy (provided that an insurer refusing to renew a policy
shall not be deemed a breach of this covenant);
(xiv) shall not enter into any hedging, option, derivative or other
similar transaction;
(xv) shall notify Cellegy a reasonable time in advance of, and shall
permit a representative of Cellegy to review or participate in, any
communications, meetings, or correspondence between Vaxis and the FDA, Health
Canada, the European Agency for the Evaluation of Medical Products or similar
Canadian or other regulatory agency and in any of the Vaxis' internal planning
meetings that cover substantive issues relating to products or strategic
partners, except, in each case, as may be inconsistent with applicable law or
regulation; and
(xvi) shall not agree, in writing or otherwise, to take any of the
foregoing actions.
6.2 Invention Assignment and Confidentiality Agreements. Vaxis will use its
best efforts to obtain from each employee, contractor and consultant of Vaxis
who has had access to any Vaxis Intellectual Property or to any other
confidential or proprietary information of Vaxis, or its clients, an invention
assignment and confidentiality agreement in a form reasonably acceptable to
Cellegy, duly executed by such employee, contractor or consultant and delivered
to Vaxis and/or Cellegy.
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6.3 Compensation Plans. During the period from the date of this Agreement
and continuing until the Closing Vaxis agrees that it will not, without the
prior written consent of Cellegy: (a) enter into, adopt or amend any bonus,
profit sharing, compensation, stock option, Pension Plan, retirement, deferred
compensation, employment, severance or other Benefit Plan, agreement, trust,
plan, fund or other arrangement between Vaxis and one or more of its officers,
directors or Employees, in each case so as to materially increase benefits
thereunder (collectively, "Compensation Plans"); (b) grant or become obligated
to grant any increase in the compensation or fringe benefits of directors,
officers or Employees (including any such increase pursuant to any Compensation
Plan) or any increase in the compensation payable or to become payable to any
officer, except, with respect to Employees other than officers, for increases in
compensation in the ordinary course of business consistent with past practice,
or enter into any contract, commitment or arrangement to do any of the
foregoing; (c) institute any new employee benefit, welfare program or
Compensation Plan; (d) make any change in any Compensation Plan or other
employee welfare or benefit arrangement or enter into any employment or similar
agreement or arrangement with any employee; or (e) enter into or renew any
contract, agreement, commitment or arrangement providing for the payment to any
director, officer or Employee of compensation or benefits contingent, or the
terms of which are materially altered in favor of such individual, upon the
occurrence of any of the transactions contemplated by this Agreement.
6.4 Current Information. From the date of this Agreement to the Closing,
Vaxis will cause one or more of its designated representatives to confer on a
regular and frequent basis (not less than weekly) with representatives of
Cellegy and to report the general status of its ongoing operations and to
deliver to the other (not less than quarterly) unaudited consolidated balance
sheets and related consolidated statements of income, changes in stockholders
equity and changes in financial position for the period since the last such
report. Vaxis will promptly notify the other of any material change in the
normal course of its business or in its properties.
6.5 Legal Conditions to Transaction. Each of Vaxis and Cellegy shall, and
shall cause its subsidiaries to, use all reasonable efforts (a) to take, or
cause to be taken, all actions necessary to comply promptly with all legal
requirements which may be imposed on such party or its subsidiaries with respect
to the Transaction and the consummation of the transactions contemplated by this
Agreement, and (b) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Authority or any other public or private third party which is
required to be obtained or made by such party or any of its subsidiaries in
connection with the Transaction and the transactions contemplated by this
Agreement. Each of Vaxis and Cellegy will promptly cooperate with and furnish
information to the other in connection with any such burden suffered by, or
requirement imposed upon, any of them or any of their subsidiaries in connection
with the foregoing.
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ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access and Information.
(a) Vaxis shall afford Cellegy and its financial advisors, legal
counsel, accountants, consultants and other representatives reasonable access
during normal business hours throughout the period from the date hereof to the
Closing to all of its books, records, properties, facilities, personnel
commitments and records (including but not limited to Tax Returns) and, during
such period, shall furnish promptly to Cellegy all information concerning Vaxis'
business, properties and personnel, as Cellegy may reasonably request.
(b) All information furnished by Vaxis to Cellegy or furnished by
Cellegy to Vaxis pursuant to this Agreement shall be treated as the sole
property of the party furnishing the information until consummation of the
Transaction contemplated hereby. The parties will hold any such information
which is nonpublic in confidence to the extent required by, and in accordance
with the Confidentiality Agreement between Vaxis and Cellegy dated March 22,
2000 ("Confidentiality Agreement") and the Memorandum of Terms dated October 18,
2001 between Cellegy and Vaxis, and such agreements shall survive the
termination of this Agreement.
7.2 Acquisition Proposals. From the date hereof until the earlier of
termination of this Agreement or the Closing, without the prior written consent
of Cellegy Vaxis will not, and shall use best efforts to cause Vaxis' directors,
officers, employees, agents, stockholders, advisors, legal counsel, and
affiliates ("Representatives") not to, directly or indirectly, (a) solicit,
initiate or encourage submission of proposals or offers from any party relating
to (i) any acquisition or purchase of substantial assets or any equity interest
in Vaxis, any acquisition, consolidation, business combination, tender offer,
exchange offer, dissolution or similar transaction with Vaxis or (ii) any other
transaction incompatible with the transactions described in this Agreement
(including, without limitation, a joint venture or other similar transaction),
or (b) participate in any discussions or negotiations regarding, or furnish to
any other person any confidential information with respect to, or otherwise
cooperate in any way with, or participate in, facilitate or encourage, any
effort or attempt by any person related to Vaxis or any other person to do or
seek any of the foregoing, and promptly will terminate any such pending
discussions and will notify Cellegy promptly if it shall receive any indications
of interest or offer or request for information with respect to any of the
foregoing.
7.3 Nasdaq National Market. Cellegy shall take all actions that may be
required in order to permit the shares of Cellegy Common Stock issuable to the
Stockholders to be approved for trading on the NASDAQ National Market.
7.4 Ongoing Operations. Cellegy agrees to use all commercially reasonable
efforts to maintain the business of Vaxis at its current location, and to
continue to operate the business of Vaxis in a manner consistent in material
respects with the historical business of Vaxis, subject to Cellegy's overall
right to make decisions with respect to the business of Vaxis consistent with
Cellegy's good faith business judgment, for a period of at least 18 months after
the Closing Date.
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7.5 Certain Employee Benefit Plans Matters.
(a) Cellegy confirms to Vaxis that it is Cellegy's present intention to
provide, after the Closing, to continuing Employees employee benefit programs
that are not less favourable to such Employees than those being provided by
Vaxis immediately before the Closing. Cellegy shall have no obligation to
continue employment of any Employee.
(b) Immediately before the Closing, Vaxis shall pay any amounts that
may be owed under the terms of any employment, consulting, termination and
severance agreements to which Vaxis is a party.
7.6 Stock Options, Warrants; Employee Benefit Plans. Before the Closing,
Vaxis shall terminate all Benefit Plans and shall take such actions as are
necessary to cause all outstanding options, warrants or other rights to acquire
securities of Vaxis to terminate on or before the Closing.
7.7 Public Announcements. The initial press release relating to this
Agreement shall be a joint press release. Thereafter, so long as this Agreement
is in effect, Vaxis agrees that it will obtain the approval of Cellegy (which
shall not be unreasonably withheld) before issuing any press release or any
other written communication (including any written communication to employees)
relating to the transactions contemplated by this Agreement.
7.8 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (whether or not the
Transaction is completed) shall be paid by the party incurring such expenses,
including each party's respective legal and auditors' fees ("Transaction
Expenses"). Notwithstanding the foregoing, Vaxis shall pay for reasonable fees
and expenses of a single counsel to the Stockholders, Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
LLP, in the preparation and review of any transaction documents by its advisors
on behalf of the Stockholders but any Stockholder shall pay for any additional
fees and expenses of any additional advisor hired by that Stockholder.
7.9 Additional Agreements.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement. In case at any time
after the Closing any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and/or directors of Cellegy and
Vaxis shall take all such necessary action.
(b) Cellegy and Vaxis each will cooperate with one another and use all
reasonable efforts to prepare all necessary documentation to effect promptly all
necessary filings and to obtain all necessary permits, consents, approvals,
orders and authorizations of or any
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exemptions by, all third parties and Governmental Authorities necessary to
consummate the transactions contemplated by this Agreement.
7.10 Holding Period for Cellegy Common Stock. Each Stockholder agrees and
covenants with Cellegy and Vaxis that the Stockholder shall not (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Cellegy Common Stock that may be issued as part of the Initial
Consideration or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
any such shares of Cellegy Common Stock, for a period of (i) eighteen (18)
months in the case of the Founders, and (ii) twelve (12) months in the case of
all other Stockholders (such 12-month period referred to as the "Investor
Lock-Up Period"), after the Closing. However, if the trading volume for the
Cellegy Common Stock on the Nasdaq Stock Market is greater than 150,000 shares
per day for a period of thirty (30) consecutive trading days after the Closing
Date and before expiration of the Investor Lock-Up Period, then the Investor
Lock-Up Period under clause (ii) of the preceding sentence shall no longer
apply.
7.11 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC which may at any time permit the sale
of the Cellegy Common Stock to the public without registration, Cellegy agrees
to:
(a) use its best efforts to make and keep public information available,
as those terms are understood and defined in Rule 144 under the Securities Act;
(b) File with the SEC in a timely manner all reports and other
documents required of Cellegy under the Securities Act and the Exchange Act; and
(c) So long as any Stockholder owns any shares of Cellegy Common Stock
acquired pursuant to this Agreement, to furnish to the Stockholder forthwith
upon request a written statement by Cellegy as to its compliance with the
reporting requirements of Rule 144 and a copy of such publicly available reports
and documents of Cellegy as a Stockholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing a Stockholder to sell any
such Cellegy Common Stock without registration.
(d) Cellegy shall have no obligations pursuant to this Section 7.11
after two years from the Closing Date, provided that a Stockholder is eligible
to sell such shares of Cellegy Common Stock pursuant to Rule 144(k) under the
Securities Act.
7.12 Tax Returns. Cellegy shall cause to be prepared and filed on a timely
basis, all Tax Returns for Vaxis for any period which ends on or before the
Closing Date and for which Tax Returns have not been filed as of such date.
Cellegy shall also cause to be prepared and filed on a timely basis, all Tax
Returns of Vaxis for periods beginning before and ending after the Closing.
Vaxis, Cellegy and the Stockholders shall cooperate fully with each other and
make available to each other in a timely fashion such data and other information
as may reasonably be required for the preparation of any Tax Return of Vaxis for
a period ending on, prior to or
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including the Closing and shall preserve such data and other information until
the expiration of any applicable limitation period under any applicable law with
respect to Taxes.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE TRANSACTION
8.1 Conditions to Each Party's Obligation to Effect the Transaction. The
respective obligations of each party to effect the Transaction shall be subject
to the satisfaction at or before the Closing of the following conditions, any
one of which may be waived by either or both of Vaxis and Cellegy:
(a) No preliminary or permanent injunction or other order by any
federal, state or foreign court of competent jurisdiction which prohibits the
consummation of the Transaction shall have been issued and remain in effect. No
statute, rule, regulation, executive order, stay, decree, or judgment shall have
been enacted, entered, issued, promulgated or enforced by any court or
governmental authority which prohibits or restricts the completion of the
Transaction. All authorizations, consents, orders or approvals of, or
declarations or filings with, and all expirations of waiting periods imposed by,
any governmental entity (all of the foregoing, "Consents") which are necessary
for the consummation of the Transaction, shall have been filed, occurred or been
obtained (all such permits, approvals, filings and consents and the lapse of all
such waiting periods being referred to as the "Requisite Regulatory Approvals")
and all such Requisite Regulatory Approvals shall be in full force and effect.
(b) Cellegy shall have received all state securities or blue sky
permits and other authorizations necessary to issue the shares of Cellegy Common
Stock in exchange for the Purchased Shares and to complete the Transaction.
8.2 Conditions to Obligation of Vaxis to Effect the Transaction. The
obligation of Vaxis to effect the Transaction shall be further subject to the
satisfaction at or before the Closing of the following additional conditions,
which may be waived by Vaxis:
(a) Cellegy shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or before the
Closing and the representations and warranties of Cellegy contained in this
Agreement shall be true and correct in all respects at and as of the Closing as
if made at and as of such time, except for such breaches as would not result in
a Material Adverse Effect on Cellegy, and Vaxis shall have received a
certificate of the President or any Vice President of Cellegy as to the
satisfaction of this condition.
(b) Cellegy shall have obtained the consent or approval of each Person
whose consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease, license or other agreement or instrument, except those for
which failure to obtain such consents and approvals would not materially
adversely affect the consummation of the transactions contemplated hereby or in
the aggregate have a Material Adverse Effect on Cellegy and its subsidiaries
taken as a whole.
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(c) There shall not have occurred following the date of this Agreement
and before the Closing Date any Material Adverse Effect on Cellegy.
8.3 Conditions to Obligations of Cellegy to Effect the Transaction. The
obligations of Cellegy to effect the Transaction shall be further subject to the
satisfaction at or before the Closing of the following additional conditions,
which may be waived by Cellegy:
(a) Vaxis and each Stockholder shall have executed and delivered this
Agreement and performed in all material respects its obligations under this
Agreement required to be performed and complied with by it at or before the
Closing, and the representations and warranties of Vaxis and the Stockholders
contained in this Agreement shall be true and correct in all respects at and as
of the Closing as if made at and as of such time, except for such breaches as
would not result in a Material Adverse Effect on Vaxis, and Cellegy shall have
received a Certificate of the President or any Vice President of Vaxis as to the
satisfaction of this condition.
(b) Vaxis shall have obtained the consent or approval of each Person
whose consent or approval shall be required in connection with the Transaction
and under any agreement or instrument required to be described in Section 4.9 of
the Disclosure Schedule.
(c) As of the Closing Date, any outstanding options, warrants or other
rights to acquire any securities of Vaxis shall have been terminated.
(d) There shall not have occurred following the date of this Agreement
and before the Closing Date any Material Adverse Effect on Vaxis.
(e) Parteq Research and Development, Inc. ("Parteq") shall have
executed and delivered to Cellegy (i) an agreement relating to assignment of
certain intellectual property to Cellegy and granting Cellegy the right to
manage such intellectual property, on terms satisfactory to Cellegy, and (ii) an
amendment to the License Agreement dated as of October 30, 1998, by and between
Parteq and Vaxis, in form and substance satisfactory to Cellegy.
(f) There will not be any issued, enacted or adopted, or threatened in
writing by any Governmental Authority, any order, decree, temporary, preliminary
or permanent injunction, legislative enactment, statute, regulation, action or
proceeding, or any judgment or ruling by any Governmental Authority that
prohibits or renders illegal or imposes limitations on: (i) the Transaction or
any other material transactions contemplated by this Agreement or (ii) the right
of any Cellegy subsidiary to own, retain, use or operate any of Cellegy's
products, properties or assets on or after consummation of the Transaction or
seeking a disposition or divesture of any such properties or assets. No
litigation or proceeding will be threatened in writing or pending for the
purpose or with the probable effect of enjoining or preventing the consummation
of any of the transactions contemplated by this Agreement, or which could
reasonably be expected to have a Material Adverse Effect on Vaxis or Cellegy.
(g) All of the Stockholders shall have delivered certificates
representing the Purchased Shares together with such instruments of transfer or
assignment as Cellegy shall reasonably request.
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(h) Vaxis shall have paid in full all Transaction Expenses incurred by
it.
(i) The officers and directors of Vaxis that are specified by Cellegy
shall have duly executed and delivered resignations as officers and directors of
Vaxis effective as of the Closing.
(j) Each of the Founders and Dr. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have executed a
Non-Competition Agreement.
(k) Any and all outstanding Vaxis preferred shares shall have been
converted into Vaxis Common Shares.
(l) Each Stockholder who is a non-resident of the United States shall
have executed and delivered to Cellegy a Form W-8.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and the Transaction
contemplated hereby abandoned at any time before the Closing:
(a) by mutual written consent of Cellegy and Vaxis;
(b) by either Cellegy or Vaxis, if the Transaction shall not have been
completed on or before December 31, 2001; provided, that the terminating party
shall not have breached in any material respect its obligations under this
Agreement or contributed substantially to the delay in completion of the
Transaction.
(c) by Vaxis if there shall have been any breach of a representation
and warranty or covenant of Cellegy hereunder that would result in a Material
Adverse Effect on Cellegy and, if such breach is curable, such default shall
have not been remedied within ten days after receipt by Cellegy of notice in
writing from Vaxis specifying such breach and requesting that it be remedied;
provided, that such ten-day period shall be extended for so long as Cellegy
shall be making all reasonable attempts to cure such breach, unless the breach
is not susceptible of a cure; and provided further, that the right to terminate
this Agreement pursuant to this subparagraph shall not be available if the party
seeking to terminate the Agreement is at that time in breach of this Agreement;
(d) by Cellegy if there shall have been any breach of a representation
and warranty or covenant of Vaxis hereunder that would result in a Material
Adverse Effect on Vaxis and, if such breach is curable, such default shall not
have been remedied within ten days after receipt by Vaxis of notice in writing
from Cellegy specifying such breach and requesting that it be remedied;
provided, that such ten-day period shall be extended for so long as Vaxis shall
be making all reasonable attempts to cure such breach, unless the breach is not
susceptible of a cure;
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and provided further, that the right to terminate this Agreement pursuant to
this subparagraph shall not be available if the party seeking to terminate the
Agreement is at that time in breach of this Agreement; and
(e) by either Cellegy or Vaxis if any court of competent jurisdiction
in the United States or Canada or other United States or Canadian Governmental
Authority shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Transaction and such order,
decree, ruling or any other action shall have become final and non-appealable;
provided, that the party seeking to terminate this Agreement pursuant to this
clause (e) shall have used all reasonable efforts to remove such order, decree
or ruling.
9.2 Effect of Termination. In the event of termination of this Agreement as
provided above, this Agreement shall forthwith become of no further effect and,
except for a termination resulting from a breach by a party of this Agreement,
there shall be no liability or obligation on the part of either Cellegy or Vaxis
or their respective officers or directors. Moreover, nothing herein shall
prejudice the ability of the non-breaching party from seeking damages from any
other party for any breach of this Agreement, including, without limitation,
legal fees and the right to pursue any remedy at law or in equity. Upon request
therefor, each party will redeliver or, at the option of the party receiving
such request, destroy all documents, work papers and other material of any other
party relating to the transactions contemplated hereby, whether obtained before
or after the execution hereof, to the party furnishing same.
9.3 Amendment. This Agreement may be amended by means of a written
instrument executed by Cellegy and Vaxis at any time before the Closing, or
after the Closing by Cellegy, Vaxis and the Representative.
9.4 Extension; Waiver. At any time before the Closing, the parties hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Such waiver shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
ARTICLE X
SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION
AND REMEDIES, CONTINUING COVENANTS
10.1 Survival of Representations. All representations, warranties and
covenants of Vaxis and the Stockholders contained in this Agreement and the
other agreements, certificates and documents contemplated hereby will remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any of the parties to this Agreement, until that date which is
the earlier of (a) the termination of this Agreement in accordance with its
terms or (b) eighteen (18) months after the Closing Date; provided, however,
that the representations and
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warranties of Vaxis contained in Sections 4.2, 4.3, 4.4, 4.11, 4.18, 4.19 and
4.20 and the representations and warranties of the Stockholders contained in
Sections 11.1-11.5 will remain operative and in full force and effect until that
date which is the earlier of (a) the termination of this Agreement in accordance
with its terms or (b) forty-eight (48) months after the Closing Date (in each
case, such period referred to as the "Survival Period"). All representations,
warranties and covenants of Cellegy contained in this Agreement and the other
agreements, certificates and documents contemplated hereby (other than covenants
which by their terms are required to be performed after the Closing Date, which
shall survive for the period of time during which such obligations are required
to be performed) will terminate at the earlier of (a) the termination of this
Agreement in accordance with its terms or (b) the Closing.
10.2 Agreement to Indemnify.
(a) For the Survival Period, each Stockholder agrees, jointly and
severally, and to the extent of the limitation set forth in Section 10.3 hereof,
to indemnify and hold harmless Cellegy and Vaxis and their respective officers,
directors, agents, representatives, stockholders and employees, and each person,
if any, who controls or may control Cellegy or Vaxis within the meaning of the
Securities Act or the Exchange Act (each hereinafter referred to individually as
a "Cellegy Indemnified Person" and collectively as "Cellegy Indemnified
Persons") from and against any and all Claims and expenses including attorneys'
fees other professionals' and experts' fees, and court or arbitration costs
(hereinafter collectively referred to as "Damages") incurred, paid or accrued
(in accordance with U.S. or Canadian GAAP) in connection with or directly or
indirectly resulting from or arising out of:
(i) any inaccuracy, misrepresentation, breach of, or default in,
any of the representations, warranties or covenants given or
made by Vaxis or any Stockholder in this Agreement or in the
Disclosure Schedule or in any certificate delivered by or on
behalf of Vaxis or any Stockholder pursuant hereto;
(ii) Claims based on fraud, willful misrepresentation or gross
negligence in connection with this Agreement; or
(iii) any Damages in connection with the patent interferences,
oppositions, and infringement or similar actions, claims or
proceedings that may be brought by or against Cellegy or
Vaxis relating to the Vaxis patents and patent applications
set forth on Section 10.2 of the Disclosure Schedule
(excluding any actions, claims or proceedings brought by
Cellegy against Vaxis not relating to this Agreement
("Patent Actions").
(b) Any Claim made by a Cellegy Indemnified Person under this Section
10.2 must be raised in a Notice of Claim delivered to the Representative (as
later defined) by no later than the applicable Survival Period and, if raised by
such date, such claim shall survive the Survival Period until final resolution
thereof. Escrow Funds, other than Escrow Funds having a value equal to the
amount of Damages asserted in any Claim which has not been resolved
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pursuant to the terms hereof prior to the applicable Escrow Release Date, shall
be released to the Stockholders on the Escrow Release Date or, in the case of
any such withheld Escrow Funds, upon the final resolution of such Claim.
(c) The amount which any party is or may be required to pay to or on
behalf of any other person pursuant to Article X shall be reduced (including
retroactively) by (i) any amounts received by a Cellegy Indemnified Person from
an insurance carrier or paid and resolved by an insurance carrier on behalf of
the insured (in a manner which shall result in no further liability to a Cellegy
Indemnified Person), in either case net of any applicable premium adjustment,
retrospectively rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of the insured ("Insurance Proceeds") or (ii) other
amounts actually recovered by or on behalf of such Cellegy Indemnified Person in
reduction of the related Damages. For greater certainty, Cellegy agrees that in
any case in which it has been successful, in whole or in part, in the defense of
any Patent Action brought by a third party against Cellegy or Vaxis, Cellegy
shall take reasonable commercial steps to recover the costs and expenses
incurred by Cellegy in connection with such defense (including, but not limited
to, reasonable attorneys' fees, other professionals' and experts' fees and court
or arbitration costs). If a Cellegy Indemnified Person shall have received the
payment required by this Agreement from an indemnifying party in respect of
Damages and shall subsequently actually receive Insurance Proceeds or other
amounts in respect of such Damages as specified above, then such indemnified
person shall pay to such indemnifying party a sum equal to the amount of any
such double recovery actually received.
10.3 Limitations.
(a) The maximum amount of Damages for which a Stockholder shall be
liable pursuant to Section 10.2(a) shall be the amount of Escrowed Funds
withheld and deposited into the Escrow pursuant to Section 3.7(a) (the
"Indemnity Cap"); provided, however, in the event of Claims based on any breach
or inaccuracy of Sections 11.1-11.5 by a Stockholder, the Damages shall first be
paid from the amount of Escrowed Funds held for that Stockholder and then, if
not satisfied, pro-rata among the remaining Stockholders in proportion to the
Escrowed Funds remaining. The value of each share of Cellegy Common Stock held
in escrow shall, for such purposes of satisfying claims for Damages, be deemed
to equal the Cellegy Average Price determined as of the time the shares are
forfeited in satisfaction of an indemnification obligation hereunder. In the
event of a capital change after the Closing, the Cellegy Average Price Per Share
will, for purposes of this Section, be proportionally and equitably adjusted.
For income tax purposes, the use of Cellegy Common Stock to satisfy a Claim
shall be treated as a purchase price adjustment.
(b) The indemnification provided for in Section 10.2 shall not apply
unless and until the aggregate Damages for which one or more Cellegy Indemnified
Persons seeks or has sought indemnification hereunder exceeds a cumulative
aggregate of $50,000 (the "Basket"), in which event the Stockholders shall,
subject to the other limitations herein, be liable to indemnify the Cellegy
Indemnified Persons for all Damages; provided, however, that the Basket shall
not apply to any and all Damages incurred, paid or accrued in connection with or
directly or
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indirectly resulting from or arising out of Claims based on fraud, willful
misrepresentation or gross negligence.
(c) With respect to Patent Actions brought in the Survival Period,
Cellegy may withhold damages without regard to the Basket, but (i) the aggregate
amount of reimbursable Damages under this Article X for Patent Actions with
respect to claims, actions or proceedings initiated by Cellegy or Vaxis shall
not exceed U.S.$500,000, and (ii) only Escrow Funds that consist of portions of
the Earn-Out Consideration shall be subject to the provisions of this
subparagraph (c).
10.4 Appointment of Representative. By entering into the Transaction, each
of the Stockholders approves the designation of and designates ▇▇▇▇ ▇▇▇▇▇▇, for
as long as he is employed by Parteq Research and Development Innovations Inc. or
an affiliate thereof ("Parteq") (and if ▇▇. ▇▇▇▇▇▇ is no longer so employed,
then Parteq may designate another officer of Parteq to succeed ▇▇. ▇▇▇▇▇▇), as
the representative of the Stockholders and as the attorney-in-fact and agent for
and on behalf of each Stockholder (the "Representative") with respect to Claims
for indemnification under Article X and any other Claims of or other matters
affecting any Stockholder arising out of or relating to this Agreement or the
transactions contemplated hereby, including without limitation any disputes
concerning the payment of Earn-Out Consideration, and the taking by the
Representative of any and all actions and the making of any decisions required
or permitted to be taken by the Representative under this Agreement, including
the exercise of the power to: (a) authorize the release or delivery to Cellegy
of Escrow Funds in satisfaction of indemnity claims by Cellegy or any other
Cellegy Indemnified Person pursuant to Article X; (b) agree to, negotiate, enter
into settlements and compromises of, and comply with orders of courts and awards
of arbitrators with respect to, such Claims; (c) arbitrate, resolve, settle or
compromise any claim for indemnity made pursuant to Article 10; and (d) take all
actions necessary in the judgment of the Representative for the accomplishment
of the foregoing. The Representative will have authority and power to act on
behalf of each Stockholder with respect to the disposition, settlement or other
handling of all Claims under Article X or otherwise under this Agreement and all
rights or obligations arising under Article X or otherwise under this Agreement.
The Representative shall, forthwith upon receipt of any correspondence or
documentation arising out of or relating to this Agreement, send a copy of such
correspondence and documentation to each of the Stockholders. The Representative
shall also provide to each of the Stockholders a minimum of five (5) full
business days written notice prior to taking any action in the exercise of the
powers set forth in clauses (a)-(d) above. The Stockholders will be bound by all
actions taken and documents executed by the Representative in connection with
Article X or otherwise under this Agreement, and Cellegy will be entitled to
rely on any action or decision of the Representative. In performing the
functions specified in this Agreement, the Representative will not be liable to
any Stockholder in the absence of gross negligence or willful misconduct on the
part of the Representative. The Stockholders shall severally indemnify the
Representative and hold him harmless against any loss, liability or expense
incurred without gross negligence or willful misconduct on the part of the
Representative and arising out of or in connection with the acceptance or
administration of his or her duties hereunder. Cellegy (or, in Cellegy's
discretion, Vaxis) shall pay the Representative, for his services hereunder, an
annual fee of $6,000 per year during the Survival Period, with the first such
payment due within thirty (30) days after the Closing Date and future payments
due before each anniversary of the Closing
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Date, and shall also pay any out-of-pocket costs and expenses reasonably
incurred by the Representative in connection with actions taken by the
Representative pursuant to the terms of Article X (including the hiring of legal
counsel and the incurring of legal fees and costs), up to a maximum of $5,000
per year (and Cellegy may request that the Representative submit customary
documentation concerning such expenses). However, Cellegy shall be entitled to
offset and withhold from any Earn-Out Consideration that would otherwise be
payable to the Stockholders hereunder the full amount, in proportion to their
respective share of the Earn-Out Consideration, of all such payments pursuant to
the preceding sentence.
10.5 Notice of Claim. Cellegy shall give written notice of a Claim executed
by an officer of Cellegy (a "Notice of Claim") whether for its own Damages or
for Damages incurred by any other Cellegy Indemnified Person. Cellegy may
deliver a Notice of Claim at any time Cellegy or any other Cellegy Indemnified
Person suffers Damages or is subject to a claim, demand, suit, action, cause of
action or other dispute that may give rise to a Claim. In the event that Cellegy
delivers a Notice of Claim on its own behalf or is requested to deliver a Notice
of Claim on behalf of any other Cellegy Indemnified Person, Cellegy will do so
promptly after Cellegy becomes aware of the existence of any Claim by a Cellegy
Indemnified Person for indemnity from the Stockholders under Article X. Cellegy
shall deliver a Notice of Claim before the expiration of the applicable Survival
Period, arising from or relating to:
(a) any inaccuracy, misrepresentation, breach of, or default in, any of
the representations, warranties or covenants given or made by Vaxis in this
Agreement or in the Disclosure Schedule or in any certificate delivered by Vaxis
or an officer of Vaxis pursuant hereto; or
(b) the assertion, whether orally or in writing, against Cellegy or
against any other Cellegy Indemnified Person of a Claim, inquiry or proceeding
brought by a third party against such Indemnified Person (in each such case, a
"Third-Party Claim") that is based upon, or includes assertions that would, if
true, constitute any inaccuracy, misrepresentation, breach of, or default in,
any of the representations, warranties or covenants given or made by Vaxis in
this Agreement or in the Disclosure Schedule or in any certificate delivered by
or on behalf of Vaxis or an officer of Vaxis pursuant hereto.
Until the expiration of the applicable Survival Period, no delay on the
part of Cellegy in giving the Representative a Notice of Claim will relieve the
Representative or any Stockholder from any of its obligations under Article X
unless (and then only to the extent) that the Representative or the Stockholders
are materially prejudiced thereby.
10.6 Defense of Third-Party Claims.
Cellegy shall defend any Third-Party Claim, and the costs and expenses
incurred by Cellegy in connection with such defense (including, but not limited
to, reasonable attorneys' fees, other professionals' and experts' fees and court
or arbitration costs) shall be included in the Damages for which Cellegy may
seek indemnity pursuant to a Claim made by any Cellegy Indemnified Person
hereunder.
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The Representative shall have the right to receive copies of all pleadings,
notices and communications with respect to the Third-Party Claim to the extent
that receipt of such documents by the Representative does not affect any
privilege relating to the Cellegy Indemnified Person, and may participate in
settlement negotiations with respect to the Third-Party Claim. No Cellegy
Indemnified Person shall enter into any settlement of a Third-Party Claim
without the prior written consent of the Representative (which consent shall not
be unreasonably withheld), provided, that if the Representative shall have
consented in writing to any such settlement, then the Representative shall have
no power or authority to object to any Claim by any Cellegy Indemnified Person
for indemnity under Section 10.2 for the amount of such settlement; and the
Stockholders will remain responsible to indemnify the Cellegy Indemnified
Persons for all Damages they may incur arising out of, resulting from or caused
by the Third-Party Claim to the fullest extent provided in Article X.
10.7 Contents of Notice of Claim. Each Notice of Claim by Cellegy given
pursuant to Section 10.5 will contain the following information:
(a) that Cellegy has incurred, paid or accrued or, in good faith,
believes it will have to incur, pay or accrue, Damages and, if reasonably
determinable at the time, a good faith estimate of the aggregate amount of
Damages arising from such Claim (which amount may be the amount of damages
claimed by a third party in an action brought against any Cellegy Indemnified
Person based on alleged facts, which if true, would give rise to liability for
Damages to such Cellegy Indemnified Person under Article X); and
(b) a brief description, in reasonable detail (to the extent reasonably
available to Cellegy), of the facts, circumstances or events giving rise to the
alleged Damages based on Cellegy's good faith belief thereof, including the
identity and address of any third-party claimant and copies of any formal demand
or complaint, the amount of Damages, the date each such item was incurred, paid
or accrued, or the basis for such anticipated liability, and the specific nature
of the breach to which such item is related.
10.8 Resolution of Notice of Claim. Each Notice of Claim delivered by
Cellegy will be resolved as follows:
(a) Uncontested Claims. In the event that, within ten calendar days
after a Notice of Claim is received by the Representative, the Representative
does not contest such Notice of Claim in writing to Cellegy as provided in
Section 10.8(b) (an "Uncontested Claim"), the Representative will be
conclusively deemed to have consented, on behalf of all Stockholders, to the
recovery by the Cellegy Indemnified Person of the full amount of Damages
specified in the Notice of Claim in accordance with this Article X, and, without
further notice, to have stipulated to the entry of a final judgment for damages
against the Stockholders for such amount in any court having jurisdiction over
the matter.
(b) Contested Claims. In the event that the Representative gives
Cellegy written notice contesting all or any portion of a Notice of Claim (a
"Contested Claim") within the ten calendar day period specified in Section
10.8(a), then such Contested Claim will be resolved by either (A) a written
settlement agreement executed by Cellegy and the Representative or
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(B) in the absence of such a written settlement agreement, by the judgment of a
court of competent jurisdiction.
10.9 Distribution Upon Termination of Escrow Period. Within ten business
days following the applicable Escrow Release Date, Cellegy shall deliver to the
Stockholders all of the Escrow Funds in excess of any amount of Escrow Funds
that Cellegy determines in good faith may be necessary to satisfy any then
unsatisfied, unresolved or contested Claims for Damages specified in any Notice
of Claim delivered to the Representative before the Escrow Release Date. As soon
as all such Claims have been finally resolved, Cellegy shall deliver to the
Stockholders all remaining Escrow Funds not applied to the satisfaction of such
Claims.
10.10 Offset of Earn-Out Consideration. Cellegy shall be entitled to offset
the amount of any Damages from any Earn-Out Consideration that would otherwise
become payable in accordance with the terms of this Agreement for a period of
forty-eight (48) months after the Closing Date.
10.11 Limitation of Escrow Agent's Liability.
(a) The Escrow Agent will incur no liability with respect to any action
taken or suffered by it in reliance upon any notice, direction, instruction,
consent, statement or other document believed by it to be genuine and duly
authorized, nor for any other action or inaction, except its own willful
misconduct. The Escrow Agent shall have no duty to inquire into or investigate
the validity, accuracy or content of any document delivered to it. In all
questions arising under this Agreement, the Escrow Agent may rely on the advice
or opinion of counsel, and for anything done, omitted or suffered in good faith
by the Escrow Agent based on such advice, the Escrow Agent will not be liable to
anyone. The Escrow Agent will not be required to take any action hereunder
involving any expense unless the payment of such expense is made or provided for
in a manner satisfactory to it.
(b) In the event conflicting demands are made or conflicting notices
are served upon the Escrow Agent with respect to the Escrow Funds, the Escrow
Agent will have the absolute right, at the Escrow Agent's election, to do either
or both of the following: (i) resign so a successor can be appointed pursuant to
Section 10.12 hereof or (ii) file a suit in interpleader and obtain an order
from a court of competent jurisdiction requiring the parties to interplead and
litigate in such court their several claims and rights among themselves. In the
event such interpleader suit is brought, the Escrow Agent will thereby be fully
released and discharged from all further obligations imposed upon it under this
Agreement, and Cellegy will pay the Escrow Agent's costs, expenses and
attorney's fees expended or incurred by the Escrow Agent pursuant to the
exercise of Escrow Agent's rights under this Section 10.11(b). However, Cellegy
shall be entitled to reimbursement from the Stockholders (solely out of Escrow
Funds) of such fees and expenses of the Escrow Agent in the event Cellegy
prevails in such dispute.
(c) The Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder either directly or by or through the
Escrow Agent's agents or attorneys. The Escrow Agent shall have no liability for
the conduct of any outside attorneys, accountants or other similar professionals
it retains. Nothing in this Agreement shall
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be deemed to impose upon Escrow Agent any duty to qualify to do business or to
act as a fiduciary or otherwise in any jurisdiction.
10.12 Successor Escrow Agent. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by giving
notice of its resignation to the parties to this Agreement, specifying a date
not less than ten days following such notice date of when such resignation will
take effect. Cellegy will designate a successor Escrow Agent prior to the
expiration of such ten-day period by giving written notice to the Escrow Agent
and the Representative. The Escrow Agent will promptly transfer the Escrow Funds
to such designated successor.
ARTICLE XI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE STOCKHOLDERS
Each of the Stockholders severally and not jointly represents and
warrants to Cellegy and Vaxis as follows:
11.1 Binding Obligation. Each Stockholder has the right (and, if a
corporation, the power and authority) to enter into this Agreement, to sell the
Stockholder's Purchased Shares in the manner contemplated herein and to perform
all of the Stockholder's obligations under this Agreement. This Agreement is a
legal, valid and binding obligation of each Stockholder, enforceable against
each Stockholder in accordance with its terms subject to:
(a) bankruptcy, insolvency, moratorium, reorganization and other laws
relating to or affecting the enforcement of creditors' rights
generally, and
(b) the fact that equitable remedies, including the remedies of specific
performance and injunction, may only be granted in the discretion of a
court.
11.2 No Other Purchase Agreements. Except in respect of any rights under
agreements which shall be exercised in full or cancelled prior to the Closing,
no person has any agreement, option, understanding or commitment or any right or
privilege (whether by law, pre-emptive or contractual) capable of becoming an
agreement, option or commitment, including convertible securities, warrants or
convertible obligations of any nature, for the purchase, subscription, allotment
or issuance of, or conversion into, any of the unissued shares in the capital of
Vaxis or any securities of Vaxis, except for any such pre-emptive rights which
have been waived in writing.
11.2 Ownership. Each Stockholder represents and warrants that such
Stockholder is the registered and beneficial owner of the Purchased Shares
listed opposite such Stockholder's name in Exhibit 3.1(a) annexed hereto, free
and clear of all liens, charges, security interests, Encumbrances and rights of
others.
11.3 Authority Relative to this Agreement. Each Stockholder, if a
corporation, has the corporate power to enter into this Agreement and to carry
out its obligations hereunder. The
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execution and delivery of this Agreement by each Stockholder and the
consummation by each Stockholder of the Transaction have been duly authorized by
any individual, corporate, partnership or other action necessary on the part of
each of the Stockholders, if necessary, and no other corporate or stockholder
proceedings on the part of any Stockholder are necessary to approve this
Agreement or the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each Stockholder and constitutes the valid
and binding agreement of each Stockholder, enforceable against each Stockholder
in accordance with its terms, subject to applicable bankruptcy, insolvency or
other similar laws relating to creditors' rights and general principles of
equity.
11.4 Consents and Approvals; No Violations. Except for applicable
requirements of the Securities Act and the Securities Act (Ontario) no filing
with, and no permit, authorization, consent or approval of, any public or
governmental body or authority is necessary for the consummation by any
Stockholder of the Transaction. Neither the execution and delivery of this
Agreement by any Stockholder, nor the consummation by any Stockholder of the
Transaction, nor compliance by any Stockholder with any of the provisions
hereof, will (a) result in any breach of the Articles of Incorporation or Bylaws
of any Stockholder (if a corporation), (b) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation, acceleration or change
in the award, grant, vesting or determination) under, require the consent of any
third party under, or give rise to creation of any Encumbrance upon any of the
respective properties or assets of any Stockholder under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, contract, lease, agreement, arrangement or other instrument or
obligation to which any Stockholder is a party or by which any of them or any of
their properties or assets may be bound or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to any Stockholder or
any of their respective properties or assets. No vote of Stockholders is
necessary to approve this Agreement and the transactions contemplated hereby.
11.5 Residence of Stockholder. Except for those Stockholders having an
address outside of Canada as set forth in Exhibit 3.1(a) of the Disclosure
Schedule, each Stockholder is not a non-resident of Canada for the purposes of
the Income Tax Act (Canada).
11.6 Investment Representations and Warranties of Stockholder. Each of the
Stockholders severally and not jointly represents and warrants to Cellegy and
Vaxis as follows:
(a) "Accredited" Investor. Only if a Stockholder so indicates on the
signature page to this Agreement, Stockholder is either (A) a natural person and
either (x) Stockholder's individual net worth, or joint net worth with
Stockholder's spouse, will, at the time of the investment in the Cellegy Common
Stock, exceed US$1,000,000 or (y) Stockholder had an individual income in excess
of US$200,000 in each of the two most recent years or joint income with
Stockholder's spouse in excess of US$300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year,
(B) a corporation with total assets in excess of US$5,000,000, not formed for
the specific purpose of acquiring the shares of Cellegy Common Stock, or (C) an
entity all of the equity owners of which are as specified in (A) or (B) (an
"Accredited Stockholder").
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(b) Holding For Own Account. Stockholder is acquiring the shares of
Cellegy Common Stock for Stockholder's own account, for investment purposes
only, and not with a view toward the resale or distribution thereof within the
meaning of the Securities Act, except pursuant to effective registrations or
qualifications relating thereto under the Securities Act and applicable Canadian
and U.S. federal, provincial and state securities or blue sky laws or pursuant
to an exemption therefrom.
(c) Stockholder's Business Experience. Stockholder has, alone or
together with Stockholder's Stockholder representative, if any, such knowledge
and experience in financial and business matters so that Stockholder is capable
of evaluating the relative merits and risks of acquiring the shares of Cellegy
Common Stock. Stockholder has adequate means of providing for its, his or her
current economic needs and possible personal contingencies, has no need for
liquidity in its, his or her investment in Cellegy and is able financially to
bear the risks of such investment.
(d) Availability of Information. Stockholder acknowledges that all
documents, records and books pertaining to the investment in Cellegy resulting
from the Transaction that Stockholder or Stockholder's representative, if any,
has requested have been made available or delivered to Stockholder, to the
extent that Cellegy possesses such information without unreasonable efforts or
expense.
(e) Opportunity to Ask Questions. Stockholder or Stockholder's
Stockholder representative, if any, has had an opportunity to discuss Cellegy's
business, management and financial affairs with Cellegy's management and to ask
questions of and receive answers from Cellegy, or a person or persons acting on
behalf of Cellegy, concerning the business of Cellegy. Stockholder acknowledges
that all such questions, if any, have been answered to the Stockholder's
satisfaction and that Stockholder has received all information about Cellegy
which Stockholder deems necessary in connection with the Transaction.
(f) Investment Representation Article. Stockholder has carefully read
this Article XI and, to the extent Stockholder believes necessary, has discussed
with Stockholder's counsel the representations, warranties and agreements that
Stockholder makes herein and the applicable limitations upon Stockholder's
resale of the Cellegy Common Stock.
(g) Cellegy Information. Stockholder has the opportunity to review and
has reviewed each of the following documents: (i) Annual Report of Cellegy on
Form 10-K for the fiscal year ended December 31, 2000, (ii) Quarterly Reports of
Cellegy on Form 10-Q for the quarterly periods ended March 31, 2001 and June 30,
2001 and September 30, 2001, and (iii) definitive Proxy Statement for Cellegy's
Annual Meeting of Stockholders held in 2001. Stockholder is also aware of and
acknowledges the following:
(i) that no federal or state agency has made any finding or
determination regarding the fairness of this investment, or
any recommendation or endorsement of the Cellegy Common
Stock;
(ii) that neither the officers, directors, agents, affiliates or
employees of Cellegy, nor any other person other than
Cellegy, has expressly or by
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implication, made any representation or warranty concerning
Cellegy other than as set forth in this Agreement; and
(iii) that the past performance or experience of Cellegy or
Cellegy's officers, directors, agents or employees will not
in any way indicate or predict the results of the ownership
of Cellegy Common Stock or of Cellegy's activities.
(h) Unregistered Cellegy Common Stock; Restrictions on Transfer. (a)
Stockholder understands that: (A) the Cellegy Common Stock has not been
registered under the Securities Act or the securities laws of any state or other
jurisdiction in reliance upon exemptions from such registration requirements for
non-public offerings; (B) the Cellegy Common Stock may not be sold, pledged or
otherwise transferred except pursuant to effective registrations or
qualifications relating thereto under the Securities Act and other applicable
securities laws or pursuant to an exemption therefrom; and (C) Cellegy is not
under any obligation to register or qualify the Cellegy Common Stock under the
Securities Act or any other applicable securities laws, or to take any action to
make any exemption from any such registration provisions available.
(i) No Public Solicitation. Stockholder represents that at no time was
Stockholder presented with or solicited by any general mailing, leaflet, public
promotional meeting, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or general solicitation
in connection with the Transaction.
(j) Principal Residence or Principal Place of Business. The address
shown on the schedule of Stockholders separately delivered by Vaxis to Cellegy
before the Closing is Stockholder's principal residence if Stockholder is an
individual or Stockholder's principal place of business if it is a corporation.
11.7 Additional Covenants of Stockholders. Each of the Stockholders
severally and not jointly covenants to Cellegy and Vaxis as follows:
(a) Lock-Up Period. Stockholder agrees to comply with the transfer
restrictions set forth in Section 7.10 above.
(b) Securities Law Restrictions. Stockholder will not sell, assign or
transfer any of the Cellegy Common Stock received by Stockholder in connection
with the Acquisition Agreement except (i) pursuant to an effective registration
statement under the Securities Act, (ii) in conformity with the volume and other
limitations of Rule 144 promulgated under the Securities Act, or (iii) in a
transaction which, in the opinion of independent counsel to the Stockholder
delivered to Cellegy and satisfactory to Cellegy, is not required to be
registered under the Act.
Cellegy shall place the following legend (and any other appropriate
legend) on each certificate or instrument representing shares of Cellegy Common
Stock acquired under this Agreement:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
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AMENDED (THE "ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION
WHICH IS NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE ACT OR ANY
APPLICABLE SECURITIES OR BLUE SKY LAWS AND, IN THE CASE OF A TRANSACTION
NOT SUBJECT TO SUCH REGISTRATION REQUIREMENTS, UNLESS THE ISSUER HAS
RECEIVED AN OPINION OF COUNSEL TO THE HOLDER REASONABLY SATISFACTORY TO IT
THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE ACT.
Cellegy agrees that no opinion of counsel shall be required in connection
with a request to remove the foregoing legend in connection with routine Rule
144 sale transactions pursuant to customary documentation including a Form 144
and brokers' and sellers' representation letters and will instruct its transfer
agent to such effect.
(c) Stop Transfer Instructions; No Requirement to Transfer. Stockholder
agrees that, in order to ensure compliance with the restrictions referred to
herein, Cellegy may issue appropriate "stop transfer" instructions to its
transfer agent. Cellegy shall not be required (i) to transfer or have
transferred on its books any Cellegy Common Stock that have been sold or
otherwise transferred in violation of any of the this Agreement or (ii) to treat
as owner of such Cellegy Common Stock or to accord the right to vote or pay
dividends to any Stockholder or other transferee to whom such Cellegy Common
Stock shall have been so transferred in violation of any provision of this
Agreement.
11.8 Regulation S, Representations and Warranties. Except with respect to
the one Stockholder who has been previously identified to Cellegy as being a
"U.S. person" (which Stockholder shall not be deemed to make the representations
and warranties in this Section 11.8):
(a) Compliance With Laws. Stockholder hereby represents that he or she
has satisfied himself or herself as to the full observance of the laws of his or
her jurisdiction in connection with the transactions contemplated by this
Agreement and the issuance of the Cellegy Common Stock to the Stockholder,
including (i) the legal requirements within his or her jurisdiction for the
acquisition of the Cellegy Common Stock, (ii) any foreign exchange restrictions
applicable to such acquisition, (iii) any governmental or other consents that
may need to be obtained, and (iv) the income tax and other tax consequences, if
any, that may be relevant to the acquisition, purchase, holding, redemption,
sale or other transfer of the Cellegy Common Stock. The Stockholder's initial
receipt, and his or her continued beneficial ownership, of the Cellegy Common
Stock will not violate any applicable securities or other laws of his or her
jurisdiction.
(b) Offshore Transaction. The offer and sale of the Cellegy Common
Stock to the Stockholder was made in an offshore transaction (as defined in Rule
902(h) of Regulation S). The offer to Stockholder to acquire the Cellegy Common
Stock was not made to any person within the United States (which, for purposes
of this Agreement, includes the
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territories and possessions of the United States, any State of the United States
and the District of Columbia), and, at the time Stockholder voted in favor of
the Transaction and acquired the Cellegy Common Stock, Stockholder was outside
the United States. Stockholder certifies that it is not a U.S. person and that
it is not acquiring the Cellegy Common Stock for the account or benefit of any
U.S. person.
(c) Offering Restrictions. Stockholder acknowledges and agrees that the
Cellegy Common Stock (i) have not been registered under the Act, will be issued
under an exemption from registration under the Securities Act provided for in
Regulation S promulgated under the Securities Act ("Regulation S") and (ii) in
addition to any other restrictions set forth herein, may not be offered or sold
in the United States or to any U.S. person (other then distributors) unless the
Cellegy Common Stock are registered under the Securities Act or an exemption
from the registration requirements of the Act is available.
(d) Resale Restrictions. Stockholder acknowledges and agrees that
hedging transactions involving the Cellegy Common Stock may not be conducted
unless in compliance with the Securities Act. Stockholder acknowledges and
agrees that during the one year period beginning on the Clsoing Date (the
"Restriction Period"): (i) Stockholder may resell the Cellegy Common Stock only
in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act or pursuant to an available exemption from the
registration requirements of the Securities Act; (ii) Stockholder may not engage
in hedging transactions with regard to the Cellegy Common Stock prior to the end
of the Restriction Period; and (iii) (A) any offer or sale of the Cellegy Common
Stock shall not be to a U.S. person or for the account or benefit of a U.S.
person; (B) prior to such purchase, the Stockholder of such Cellegy Common Stock
shall certify that (1) it is not a U.S. person and is not acquiring such Cellegy
Common Stock for the account or benefit of any U.S. person or (2) it is a U.S.
person who purchased such Cellegy Common Stock in a transaction that did not
require registration under the Securities Act; (C) prior to such purchase, the
Stockholder of such Cellegy Common Stock shall agree to resell during the
Restriction Period such Cellegy Common Stock only in accordance with the
provisions of Regulation S, pursuant to registration under the Securities or
pursuant to an exemption from the registration requirements of the Act; and (D)
prior to such purchase, the Stockholder of such Cellegy Common Stock shall agree
that hedging transactions including such Cellegy Common Stock may not be
conducted unless in compliance with the Securities Act.
(e) No Directed Selling Efforts. No directed selling efforts (as
defined in Rule 902(c) of Regulation S) were made in the United States, the
Stockholder is not acquiring the Cellegy Common Stock for the account or benefit
of any U.S. Person and Stockholder acknowledges and agrees that it is not aware
of any activity initiated for the purpose or with the effect of conditioning the
market in the United States for the Cellegy Common Stock offered to it.
(f) Stop Transfer Instructions and Legends. Stockholder understands
that Cellegy will issue, and Stockholder consents to the issuing of, stop
transfer instructions to Cellegy's transfer agent with respect to the Purchased
Shares to assure compliance with the Securities Act. Stockholder consents to the
placement of such legends on each certificate representing the Cellegy Common
Stock as Cellegy may deem reasonably appropriate to reflect the restrictions
imposed by Regulation S.
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(g) Definition of U.S. Person. A "U.S. person", as used in this Article
XI, means (i) any natural person resident in the United States; (ii) any
partnership or corporation organized or incorporated under the laws of the
United States; (iii) any estate of which any executor or administrator is a U.S.
person; (iv) any trust of which any trustee is a U.S. person; (v) any agency or
branch of a foreign entity located in the United States; (vi) any
non-discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary for the benefit or account of a U.S. person;
(vii) any discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated or (if an
individual) resident in the United States; and (viii) any partnership or
corporation if: (A) organized or incorporated under the laws of any foreign
jurisdiction; and (B) formed by a U.S. person principally for the purpose of
investing in securities not registered under the Securities Act, unless it is
organized or incorporated, and owned, by accredited investors (as defined in
Rule 501(a) under the Securities Act) who are not natural persons, estates or
trusts.
11.9 Compliance With Laws And Regulations. The issuance and transfer of the
Cellegy Common Stock will be subject to and conditioned upon compliance by Vaxis
and Stockholder with all applicable U.S., Canadian, provincial, state and
federal laws and regulations and with all applicable requirements of any stock
exchange or automated quotation system on which Cellegy's Common Stock may be
listed or quoted at the time of such issuance or transfer.
ARTICLE XII
GENERAL PROVISIONS
12.1 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
12.2 Brokers.
(a) Vaxis represents and warrants to Cellegy that no broker, finder or
financial advisor is entitled to any brokerage, finder's or other fee or
commission in connection with the Transaction or the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Vaxis.
(b) Cellegy represents and warrants to Vaxis that no broker, finder or
financial advisor is entitled to any brokerage, finder's or other fee or
commission in connection with the Transaction or the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Cellegy.
12.3 Notices. All notices, Claims, demands and other communications
hereunder shall be in writing and shall be deemed given upon delivery if
delivered in person, one Business Day after transmission by telecopier with
confirmation of receipt, one business after deposit with a reputable national
overnight courier for overnight delivery, or three Business Days after deposit
in the mail, certified mail with return receipt requested, to the respective
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
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(a) If to Cellegy, to:
Cellegy Pharmaceuticals, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
with a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇ Esq.
(b) if to Vaxis, to:
Vaxis Therapeutics Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
Blake, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
20th Floor, ▇▇ ▇'▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
(c) if to a Stockholder, to the address for such Stockholder
that is set forth on Exhibit 3.1(a).
12.4 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When a reference is made in this Agreement to
Exhibits or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The parties have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption
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or burden of proof shall arise favoring or disfavoring any party by virtue of
the authorship of any of the provisions of this Agreement. Any reference to any
federal, state, provincial, local, or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein
unless the Disclosure Schedule identifies the exception with particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). The parties
intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
12.5 Entire Agreement; Assignment. This Agreement including the Exhibits,
and other documents and instruments referred to herein (a) constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written and oral, among the parties or any of them, with respect to the
subject matter hereof; (b) is not intended to confer upon any other person any
rights or remedies hereunder; and (c) shall not be assigned by operation of law
or otherwise, provided that Cellegy may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Cellegy or to another entity in
connection with the acquisition of all or substantially all of Cellegy's
business (whether by merger, sale of assets or otherwise), but no such
assignment shall relieve Cellegy, as the case may be, of its obligations
hereunder. This Agreement shall be binding upon and inure to the benefit of the
parties named herein and their respective successors and permitted assigns.
12.6 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to the provisions thereof relating to conflicts of law.
Each of the parties submits to the exclusive jurisdiction of any state or
federal court sitting in Delaware, in any action or proceeding arising out of or
relating to this Agreement and agrees that all Claims in respect of the action
or proceeding may be heard and determined in any such court. Each of the parties
waives any defense of inconvenient forum to the maintenance of any action or
proceeding so brought and waives any bond, surety, or other security that might
be required of any other party with respect thereto. Each party agrees that
service of process in any such action may be made upon the other party in the
manner provided herein for delivery of notices. Nothing in this Section,
however, shall affect the right of any party to serve legal process in any other
manner permitted by law or in equity. Each party agrees that a final judgment in
any action or proceeding so brought shall be conclusive and may be enforced by
suit on the judgment or in any other manner provided by law or in equity.
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12.7 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
12.8 Severability. The provisions of this Agreement are severable and the
invalidity of any provision will not affect the validity of any other provision.
12.9 Signatures of Escrow Agent and Representative. By their execution of a
counterpart signature page to this Agreement, each of the Representative and the
Escrow Agent accept and agree to be bound by the provisions of Articles X and
XII of this Agreement, for the benefit of the other parties hereto.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, each of Cellegy, Vaxis and each Stockholder has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
VAXIS THERAPEUTICS CORPORATION
By:___________________________
Name:
Title:
CELLEGY PHARMACEUTICALS, INC.
By:_________________________________
Name:
Title:
STOCKHOLDER
By:_________________________________
Its: _______________________________
Address: ___________________________
___________________________
___________________________
Stockholder [check one] is_______ is not
_______ an accredited investor as defined
in Regulation D (see Section 11.6(a) above)
ESCROW AGENT REPRESENTATIVE
By:_____________________________ ___________________________________
Name:
Title:
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Exhibit 3.1(b)
Exhibit 3.1 (b)
Vaxis Products
1. The use of an endothelin receptor antagonist in the treatment of sexual
dysfunction. (e.g. erectile dysfunction).
2. The use of an nitric oxide mimetic (as defined in the Vaxis Patents) to
offset the hyperalgesia associated with prostaglandin administration in the
treatment of sexual dysfunction.
3. The use of a nitric oxide mimetic in the treatment of male and female
sexual dysfunction.
4. The use of a nitric oxide mimetic in the treatment of Raynaud's disease.
5. The use of a nitric oxide mimetic in the treatment of cancer (e.g.
prostate).
6. The use of a nitric oxide mimetic to offset drug resistance related to
chemotherapy in the treatment of cancer (e.g. Drug resistance to 5-FU).
7. The use of a nitric oxide mimetic in the treatment of temporary sleep
disturbances (e.g. Restless Leg's Syndrome or insomnia).
Vaxis Patents
Please see attached list.
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