Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BIOQUEST, INC.,
BIOQUEST ACQUISITION CORP.
AND
BIOKEYS, INC.
TABLE OF CONTENTS
I. THE MERGER.................................................................1
1.01 The Merger......................................................1
1.02 Preliminary Actions.............................................2
1.03. Conversion of Capital Stock by Merger...........................2
1.04. Exchange of Certificates........................................3
1.05. Lost Certificates...............................................4
1.06. The Closing.....................................................4
1.07. Stockholder Approval and Voting of Shares.......................4
II. THE SURVIVING CORPORATION.................................................4
2.01. Certification of Incorporation & Bylaws.........................4
2.02. Surviving Corporation...........................................5
2.03. Directors and Officers; Insurance...............................5
III. REPRESENTATIONS AND WARRANTIES OF BIOKEYS................................6
3.01. Organization and Qualification.................................6
3.02. Corporate Records..............................................6
3.03. Capitalization.................................................6
3.04. Books and Records..............................................7
3.05. Subsidiaries and Investments...................................7
3.06. Authority Relative to this Agreement...........................7
3.07. Non-Contravention; Approvals and Consents......................7
3.08. Financial Statements...........................................8
3.09. Absence of Undisclosed Liabilities.............................8
3.10. Absence of Sales and Customers.................................8
3.11. Contracts......................................................8
3.12. No Material Restrictions.......................................9
3.13. Title to Assets................................................9
3.14. Related Party Transactions.....................................9
3.15 Compensation of Employees......................................9
3.16 Employee Relations.............................................9
3.17. Legal Proceedings.............................................10
3.18. Environmental Compliance......................................10
3.19. Insurance.....................................................10
3.20. Intellectual Property.........................................10
3.21. Bank Accounts and Powers of Attorney..........................12
3.22. Corporate and Fictitious Names................................12
3.23. Absence of Certain Changes or Events..........................12
3.24. Compliance with Laws and Orders...............................13
3.25. Compliance with Agreements; Certain Agreements................14
3.26. Employee Benefit Plans........................................14
3.27. Brokers.......................................................14
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3.28. Consents Without Any Condition................................14
3.29. Tax Matters...................................................14
3.30. OSHA..........................................................15
3.31. Immigration Matters...........................................15
3.32. Information Supplied..........................................15
IV. REPRESENTATIONS AND WARRANTIES
OF BIOQUEST AND MERGER SUB...........................................16
4.01. Organization and Qualification................................16
4.02. Corporate Records.............................................16
4.03. Capitalization................................................16
4.04. Books and Records.............................................17
4.05. Subsidiaries and Investments..................................17
4.06. Authority Relative to this Agreement..........................17
4.07. Non-Contravention; Approvals and Consents.....................17
4.08. Financial Statements..........................................18
4.09. Absence of Undisclosed Liabilities............................18
4.10. Absence of Sales and Customers................................19
4.11. Contracts.....................................................19
4.12. No Material Restrictions......................................19
4.13. Title to Assets...............................................19
4.14. Related Party Transactions....................................19
4.15 Compensation of Employees.....................................20
4.16 Employee Relations............................................20
4.17. Legal Proceedings.............................................20
4.18. Environmental Compliance......................................20
4.19. Insurance.....................................................21
4.20. Intellectual Property.........................................21
4.21. Bank Accounts and Powers of Attorney..........................22
4.22. Corporate and Fictitious Names................................22
4.23. Absence of Certain Changes or Events..........................22
4.24. Compliance with Laws and Orders...............................24
4.25. Compliance with Agreements; Certain Agreements................24
4.26. Employee Benefit Plans........................................24
4.27. Brokers.......................................................25
4.28. Consents Without Any Condition................................25
4.29. Tax Matters...................................................25
4.30. OSHA..........................................................26
4.31. Immigration Matters...........................................26
4.32. Information Supplied..........................................26
V. COVENANTS.................................................................27
5.01. Information Statement.........................................27
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5.02. Stockholder Approval..........................................27
5.03. Access to Information.........................................27
5.04. Public Disclosure............................................28
5.05. Approvals....................................................28
5.06. Notification of Certain Matters..............................28
5.07. Additional Documents and Further Assurances..................28
5.08. Maintenance of Business......................................28
5.09. Conduct of Business; Restrictions............................28
5.10. Confidentiality..............................................30
5.11. Directors' and Officers' Insurance...........................30
5.12. Necessary Actions............................................31
5.13. Agreement Among Stockholders.................................31
5.14. Interim Financing............................................31
VI. CONDITIONS PRECEDENT TO OBLIGATIONS OF
BIOQUEST AND MERGER SUB..............................................31
6.01. Accuracy of Representations and Warranties...................31
6.02. Performance of Agreements....................................31
6.03. Opinion of Counsel for Biokeys...............................32
6.04. Compliance Certificate.......................................32
6.05. Material Adverse Change......................................32
6.06. Approvals and Consents.......................................32
6.07. Proceedings and Documents; Secretary's Certificate...........32
6.08. Compliance With Laws.........................................32
6.09. Shareholder Approval.........................................32
6.10. Legal Proceedings............................................32
6.11. Employment Arrangements......................................33
6.12. Consents to the Merger.......................................33
6.13. Delivery of Financial Statements.............................33
6.14. Satisfactory Due Diligence...................................33
6.15. Opinion of Tax Counsel.......................................33
VII. CONDITIONS PRECEDENT TO OBLIGATIONS OF
BIOKEYS..............................................................33
7.01. Accuracy of Representations and Warranties...................33
7.02. Performance of Agreements....................................34
7.03. Opinion of Counsel...........................................34
7.04. Compliance Certificate.......................................34
7.05. Legal Proceedings............................................34
7.06. Material Adverse Change......................................34
7.07. Approvals and Consents.......................................34
7.08. Compliance with Laws.........................................34
7.09. Shareholder Approval.........................................34
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7.10. Employment Arrangements......................................35
7.11. Satisfactory Due Diligence...................................35
7.12. Proceedings and Documents; Secretary's Certificate...........35
7.13. Consents to the Merger.......................................35
7.14. Delivery of Financial Statements.............................35
7.15. Opinion of Tax Counsel.......................................35
XIII. TERMINATION, AMENDMENT AND WAIVER......................................36
8.01. Termination...................................................36
8.02. Effect of Termination.........................................36
8.03. Amendment.....................................................36
8.04. Waiver........................................................36
IX. SURVIVAL AND INDEMNIFICATION.............................................37
9.01. Survival......................................................37
9.02. Indemnification by Biokeys....................................37
9.03. Indemnification by Biokeys Principals.........................37
9.04. Indemnification by BioQuest and Merger Sub....................37
9.05. Indemnification by BioQuest Principals........................38
9.06. Limits on Indemnification.....................................38
9.07. Indemnity Fund; Escrow........................................38
9.08. Indemnification Procedure for Claims..........................39
9.09. Defense by Indemnifying Party.................................39
X. MISCELLANEOUS.............................................................40
10.01. Expenses.....................................................40
10.02. Notices.....................................................41
10.03. Governing Law................................................41
10.04. Severability.................................................42
10.05. Assignment; Binding Effect; Benefit..........................42
10.06. Headings.....................................................42
10.07. Entire Agreement.............................................42
10.08. Counterparts.................................................42
10.09. Waivers......................................................42
EXHIBITS
a. Exhibit A - Opinion of Counsel - Camhy Xxxxxxxxx & Xxxxx, LLP
b. Exhibit B - Opinion of Counsel - Xxxxxxx Xxxxxxx & Xxxxxxxx, LLP
c. Exhibit C - Biokeys Escrow Agreement
d. Exhibit D - BioQuest Escrow Agreement
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SCHEDULES
a. Schedule 2.03 - Directors and Officers
b. Schedule 3.02 - Corporate Records
c. Schedule 3.03 - Capitalization
d. Schedule 3.05 - Subsidiaries and Investments
e. Schedule 3.07 - Non-Contravention; Approvals and Consents
f. Schedule 3.08 - Financial Statements
g. Schedule 3.11 - Contracts
h. Schedule 3.12 - No Material Restrictions
i. Schedule 3.13 - Title to Assets
j. Schedule 3.14 - Related Party Transactions
k. Schedule 3.15 - Compensation to Employees
l. Schedule 3.19 - Insurance
m. Schedule 3.20 - Intellectual Property
n. Schedule 3.21 - Bank Accounts and Powers of Attorney
o. Schedule 3.22 - Corporate and Fictitious Names
p. Schedule 3.23 - Absence of Certain Changes or Events
q. Schedule 3.24 - Compliance with Laws and Orders
r. Schedule 3.25 - Compliance with Agreements; Certain Agreements
s. Schedule 3.27 - Brokers
t. Schedule 3.29 - Tax Matters
u. Schedule 3.30 - OSHA
v. Schedule 3.31 - Immigration Matters
w. Schedule 4.02 - Corporate Records
x. Schedule 4.03 - Capitalization
y. Schedule 4.05 - Subsidiaries and Investments
z. Schedule 4.07 - Non-Contravention; Approvals and Consents
aa. Schedule 4.11 - Contracts
bb. Schedule 4.12 - No Material Restrictions
cc. Schedule 4.13 - Title to Assets
dd. Schedule 4.14 - Related Party Transactions
ee. Schedule 4.15 - Compensation to Employees
ff. Schedule 4.17 - Legal Proceedings
gg. Schedule 4.18 - Environmental Compliance
hh. Schedule 4.19 - Insurance
ii. Schedule 4.20 - Intellectual Property
jj. Schedule 4.21 - Bank Accounts and Powers of Attorney
kk. Schedule 4.22 - Corporate and Fictitious Names
ll. Schedule 4.23 - Absence of Certain Changes or Events
mm. Schedule 4.24 - Compliance with Laws and Orders
nn. Schedule 4.25 - Compliance with Agreements; Certain Agreements
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oo. Schedule 4.27 - Brokers
pp. Schedule 4.29 - Tax Matters
qq. Schedule 4.30 - OSHA
rr. Schedule 4.31 - Immigration Matters
ss. Schedule 5.09 - Conduct of Business; Restrictions
tt. Schedule 5.13 - Agreement Among Stockholders
uu. Schedule 5.14 - Interim Financing
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of May 19,
2000 among BIOQUEST, INC., a Delaware corporation ("BioQuest"), BIOQUEST
ACQUISITION CORP., a Delaware corporation ("Merger Sub") and BIOKEYS, INC., a
Delaware corporation ("Biokeys").
W I T N E S S E T H:
WHEREAS, Merger Sub is a newly formed, wholly owned subsidiary of
BioQuest; and
WHEREAS, the Boards of Directors of BioQuest, Merger Sub and Biokeys
deem it advisable and in the best interests of each corporation and their
respective shareholders that BioQuest and Biokeys combine their businesses in
order to advance the long-term business interests of BioQuest and Biokeys; and
WHEREAS, the combination of BioQuest and Biokeys shall be effected by
the terms of this Agreement through a transaction in which Merger Sub will merge
with and into Biokeys, Biokeys will become a wholly-owned subsidiary of BioQuest
and the stockholders of Biokeys will become stockholders of BioQuest; and
WHEREAS, for federal income tax purposes, the parties to this Agreement
intend, by approving resolutions authorizing this Agreement, to adopt this
Agreement as a plan of reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder, and that the merger of Merger Sub with and into Biokeys shall
qualify as a reorganization within the meaning of Section 368(a)(1)(a) of the
Code.
NOW, THEREFORE, in consideration of the mutual premises, covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
I. THE MERGER
1.01 THE MERGER. (a) Subject to the provisions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"), Merger Sub
shall be merged with and into Biokeys (the "Merger"). As a result of the Merger,
(i) the outstanding shares of capital stock of Merger Sub and of Biokeys shall
be converted, canceled and replaced in the manner provided in Section 1.03 of
this Agreement; (ii) the separate corporate existence of Merger Sub shall cease;
and (iii) Biokeys shall be the surviving corporation (the "Surviving
Corporation") in the Merger and shall become a wholly-owned subsidiary of
BioQuest.
(b) As soon as practicable after satisfaction of, or, to the extent
permitted hereunder,
written waiver of all conditions to the Merger set forth herein,Biokeys and
Merger Sub will file a certificate of merger (the "Certificate of Merger") with
the Delaware Secretary of State and make all other filings or recordings
required by the DGCL in connection with the Merger. The Merger shall become
effective at such time (the "Effective Time") as the Certificate of Merger is
duly filed with the Delaware Secretary of State (or at such later time as may be
agreed in writing by the parties hereto and specified in the Certificate of
Merger).
(c) From and after the Effective Time, the separate existence of Merger
Sub shall cease, and the Surviving Corporation shall be a wholly-owned
subsidiary of BioQuest and possess all the rights, powers, privileges and
franchises and be subject to all of the obligations, liabilities, restrictions
and disabilities of Biokeys and Merger Sub, all as provided under the DGCL.
(d) It is intended that the Merger shall qualify as a "reorganization"
within the meaning Section 368(a)(1)(a) of the Code.
1.02 PRELIMINARY ACTIONS. Immediately prior to the Effective Time:
(a) BioQuest shall take such actions and complete such corporate
proceedings as are necessary (including, without limitation, a reverse stock
split or combination of its shares) so as to cause it to (i) have 14,000,009
shares of BioQuest Common Stock, $0.001 par value, issued and outstanding, of
which 6,999,990 shares shall have been issued to Merger Sub to be used as
consideration for the cancellation and exchange of outstanding shares of Biokeys
as set forth below, and 7,000,009 shares shall be held by all other stockholders
of BioQuest (ii) outstanding warrants and options for the purchase of not more
than 1,526,090 shares of BioQuest Common Stock; and no other outstanding shares
(or options, warrants, or other rights to purchase any such shares) of any kind.
(b) Biokeys shall take such actions and complete such corporate
proceedings as are necessary (including, without limitation, a stock split or
division or distribution of its shares) so as to cause it to have (i) 6,999,990
shares of Biokeys Common Stock, $0.01 par value ("Biokeys Common Stock"), issued
and outstanding, (ii) outstanding warrants and options for the purchase of not
more than 1,525,090 shares of Biokeys Common Stock; and no other outstanding
shares of any kind.
(c) Merger Sub shall have 100 shares of its Common Stock issued and
outstanding, all of which shall be owned by BioQuest.
1.03. CONVERSION OF CAPITAL STOCK BY MERGER. As of the Effective Time,
by virtue of the Merger and without any further action on the part of BioQuest,
Merger Sub, Biokeys or any stockholder of any of such corporations:
(a) CAPITAL STOCK OF MERGER SUB. Each of the 100 issued and outstanding
shares of the capital stock of Merger Sub shall be converted into and become one
fully paid and nonassessable
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share of common stock, $0.01 par value, of Biokeys as the Surviving Corporation.
(b) EXCHANGE OF BIOQUEST SHARES FOR BIOKEYS SHARES. Each issued and
outstanding share of Biokeys Common Stock (other than the 100 shares issued in
accordance with Section 1.03(a)) shall be converted into the right to receive
one (1) fully paid and nonassessable share of Common Stock, $0.001 par value, of
BioQuest ("BioQuest Common Stock"). Each share of Biokeys Common Stock issued
and outstanding at the Effective Time (other than the shares issued pursuant to
Section 1.03(a)) shall cease to be outstanding, and shall be cancelled and
retired and shall cease to exist, and each holder of certificates representing
such shares (the "Biokeys Certificates") shall cease to have any rights with
respect thereto, except the right to receive BioQuest Common Stock therefor upon
the surrender of such certificates in accordance with this Section 1.03 and
Section 1.04. All shares of BioQuest Common Stock issued upon the surrender for
exchange of Biokeys Common Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Biokeys Common Stock, and there shall be no further registration of
transfers on the stock transfer books of Biokeys. If, after the Effective Time,
Biokeys Certificates are presented to Biokeys for any reason, they shall be
canceled and exchanged as provided in this Section 1.03 and in Section 1.04.
(c) CANCELLATION OF TREASURY STOCK. Each share of Biokeys Common Stock
held by Biokeys as treasury stock prior to the Effective Time shall
automatically be canceled and retired and shall cease to exist, and no shares of
BioQuest Common Stock or other consideration shall be delivered in exchange
therefor.
(d) OPTIONS AND WARRANTS. Biokeys shall have 1,525,090 outstanding
options and warrants for the purchase of shares of Biokeys Common Stock
outstanding immediately prior to the Effective Time ("Biokeys Options"). The
Biokeys Options shall, from and after the Effective Time, be exercisable at a
price of $0.49 per share, for the purchase of the same number of shares of
BioQuest Common Stock as the number of Biokeys Options. BioQuest shall have
1,526,090 outstanding options and warrants for the purchase of shares of
BioQuest Common Stock outstanding immediately prior to the Effective Time
("BioQuest Options"). The BioQuest Options shall, from and after the Effective
Time, be exercisable at a price of $0.49 per share, for the purchase of the same
number of shares of BioQuest Common Stock. The parties shall take such actions
as may be necessary to ensure that the holders of such Biokeys Options will
receive, upon the due exercise thereof, the proper number of shares of BioQuest
Common Stock pursuant to the provisions of this Section 1.03 and 1.04.
1.04. EXCHANGE OF CERTIFICATES. (a) Promptly after the Effective Time,
BioQuest and/or its transfer agent will send to each holder of shares of Biokeys
Common Stock at the Effective Time a letter of transmittal for use by such
holder in the exchange of share certificates. Each holder of shares of Biokeys
Common Stock that have been converted into the right to receive the Merger
Consideration will be entitled to receive, upon surrender to BioQuest of such
holder's Biokey's certificate, a new certificate for shares of BioQuest Common
Stock. Until so surrendered, each such Biokeys Certificate shall, after the
Effective Time, represent for all purposes only the right to receive
3
BioQuest Common Stock. Upon surrender to BioQuest or BioQuest's transfer agent
of the Biokeys Certificates by holders of Biokeys Common Stock for cancellation,
together with any other required documents, each such holder shall received
BioQuest Common Stock issuable in the Merger. No Biokeys Certificates for shares
of BioQuest Common Stock shall be delivered to any Biokeys stockholders who have
objected to the Merger and have asserted appraisal rights under applicable
provisions of the DCGL.
(b) After the Effective Time, there shall be no further registration of
transfers of shares of Biokeys Common Stock. If, after the Effective Time,
Biokeys Certificates are presented to BioQuest, they shall be canceled and
exchanged for the consideration provided for and in accordance with the
procedures set forth, in this Section.
1.05. LOST CERTIFICATES. If any Biokeys Certificates shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Biokeys Certificate to be lost, stolen or destroyed and, if
required by BioQuest, the posting by such person of a bond, in such reasonable
amount as BioQuest may direct, as indemnity against any claim that may be made
against BioQuest and Merger Sub with respect to such Biokeys Certificate,
BioQuest will issue in exchange for such lost, stolen or destroyed Biokeys
Certificate shares to be paid in respect of the shares of Biokeys Common Stock
represented by such Biokeys Certificates as contemplated by this Article.
1.06. THE CLOSING. The closing for the merger (the "Closing") shall be
held beginning at 10:00 a.m. on June 15, 2000 (the "Closing Date"), or such
other date and time specified by BioQuest to Biokeys on five days' notice, but
in no event later than July 5, 2000. The closing shall occur at a location to be
determined by BioQuest, Merger Sub and Biokeys.
1.07. STOCKHOLDER APPROVAL AND VOTING OF SHARES. The actions set forth
in this Article I shall be conditioned upon the approval by the stockholders of
BioQuest and the stockholders of Biokeys of this Agreement, as set forth in
Section 5.02 below. By their signatures to this Agreement, the principal
stockholders of BioQuest and the principal stockholders of Biokeys agree to vote
their respective shares of BioQuest and Biokeys in favor of the approval of this
Agreement and to cause BioQuest and Biokeys, respectively, to take the actions
necessary in order to permit the completion of the transactions contemplated by
this Agreement.
II. THE SURVIVING CORPORATION
2.01. CERTIFICATION OF INCORPORATION AND BYLAWS. At the Effective Time:
(i) the separate existence of Merger Sub shall cease and Merger Sub shall be
merged with and into Biokeys; (ii) the Certificate of Incorporation of Merger
Sub as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation; and (iii) the Bylaws
of Merger Sub as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation. Merger Sub and Biokeys are sometimes
referred to herein as the "Constituent Corporations."
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2.02. SURVIVING CORPORATION. From and after the Effective Time; (i) the
Surviving Corporation shall possess all the rights, privileges, immunities,
powers and purposes of each of the Constituent Corporations; (ii) all the
property, real and personal, including subscriptions to shares, causes of action
and every other asset of each of the Constituent Corporations, shall vest in the
Surviving Corporation without further act or deed; (iii) the Surviving
Corporation shall assume and be liable for all the liabilities, obligations and
penalties of each of the Constituent Corporations; and (iv) the Merger shall
have the further effects set forth in this Agreement and in the DGCL.
2.03. DIRECTORS AND OFFICERS; INSURANCE. (a) From and after the
Effective Time, and at least until the next annual meeting of stockholders of
BioQuest and until their successors are duly elected or appointed and shall
qualify, the Board of Directors of BioQuest shall consist of nine (9) members,
four (4) of whom shall be designated by the Board of Directors of Biokeys as
such Biokeys Board exists immediately prior to the Effective Time, and four (4)
of whom shall be designated by the Board of Directors of BioQuest as such
BioQuest Board exists immediately prior to the Effective Time. The ninth
director shall be chosen by the members of the Board of BioQuest constituted
immediately after the Effective Time. Concurrently with the designation of four
directors by the Board of Directors of BioQuest, as such Board exists
immediately prior to the Effective Time, any director serving on the Board of
BioQuest prior to the Effective Time, who is not one of the four directors
designated by the Board of Directors of BioQuest, shall submit his resignation.
For purposes hereof, the names of the Biokeys directors intended to be
designated by Biokeys and the names of the BioQuest directors intended to be
designated by Bioquest, known as of the date of this Agreement, are set forth in
SCHEDULE 2.03(A). The principal stockholders of BioQuest and the principal
stockholders of Biokeys are agreeing, by their signatures to a separate
Agreement Among Stockholders described in Section 5.13, to vote their shares,
and to take such other action necessary so as to constitute a Board of Directors
of BioQuest as described in this Section 2.03. In addition, the Surviving
Corporation shall have a board of directors constituted in a like manner.
(b) From and after the Effective Time, and until successor are duly
appointed by and qualified in accordance with applicable law, the officers of
the Surviving Corporation shall be as set forth in SCHEDULE 2.03(B).
(c) Notwithstanding the foregoing, if any person designated to hold
office as a director or officer under the preceding provisions of this section
2.03 declines to serve because BioQuest has not yet obtained directors and
officers liability insurance, the position which such person is intended to fill
may remain vacant until such insurance is obtained, but not beyond six (6)
months past the Effective Time (it being understood that such person may elect
to serve in such position even in the absence of such insurance).
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III. REPRESENTATIONS AND WARRANTIES OF BIOKEYS
Biokeys represents and warrants to BioQuest and Merger Sub, and
BioQuest and Merger Sub are relying materially thereon in entering into this
Agreement, as follows:
3.01. ORGANIZATION AND QUALIFICATION. Biokeys is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full power and authority to conduct its business as and to the
extent now conducted and to own, use and lease its assets and properties, except
for such failures to have such power and authority which, individually or in the
aggregate, do not and are not reasonably expected to have a Material Adverse
Effect (as defined in this Section 3.01) on Biokeys, as the case may be. Biokeys
is duly qualified, licensed or admitted to do business and is in good standing
in each jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, do not and are not reasonably expected to have a Material Adverse
Effect on Biokeys. As used in this Agreement, a "Material Adverse Effect" shall
mean a material adverse effect on the businesses, properties, assets,
liabilities, condition (financial or otherwise) or results of operations of an
entity (or group of entities taken as a whole). Notwithstanding the foregoing, a
Material Adverse Effect shall not include any change in political or economic
matters of general applicability. Biokeys does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
3.02. CORPORATE RECORDS. The copies of the Certificate of Incorporation
and By-laws of Biokeys, as amended to date and annexed hereto as SCHEDULE 3.02,
are true and complete copies of such documents as now in effect. The minute
books of Biokeys as presented for inspection by BioQuest are accurate and
complete in all material respects.
3.03. CAPITALIZATION. (a) The authorized capital stock of Biokeys
consists of 25,000,000 shares of Common Stock, $0.01 par value, of which
6,300,395 shares are issued and outstanding as of the date hereof. Except as set
forth in SCHEDULE 3.03(A), there is no other authorized class, series or unit of
securities of any kind (whether or not convertible into Common Stock), and there
are no options, warrants or rights of any kind, evidencing a proprietary
interest (or permitting a third party to obtain a proprietary interest) in
Biokeys. None of the shares of Biokeys have been issued in a manner giving rise
to claims for violation of the securities laws of any jurisdiction.
(b) Except as contemplated hereby, there are no outstanding contractual
obligations of Biokeys to repurchase, redeem or otherwise acquire any shares of
Biokeys or to grant, extend or enter into any option with respect thereto.
(c) There are no debt obligations of Biokeys of any nature whatsoever,
and as of the Closing Date, Biokeys will not have any debt, liabilities,
obligations or contingent liabilities of any
6
nature whatsoever, except as set forth on SCHEDULE 3.03(C).
(d) All of Biokeys' shares are fully paid, duly and validly issued and
owned of record and beneficially by the stockholders; and in the amounts, listed
in SCHEDULE 3.03(D).
3.04. BOOKS AND RECORDS. The books and records of Biokeys are true,
accurate and complete in all material respects.
3.05. SUBSIDIARIES AND INVESTMENTS. Except as disclosed on Schedule
3.05, Biokeys does not own, directly or indirectly, any capital stock or other
equity or ownership or proprietary interest in any other corporation,
partnership, association, trust, joint venture or other entities.
3.06. AUTHORITY RELATIVE TO THIS AGREEMENT. Biokeys has full corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Biokeys and the consummation by
Biokeys of the Merger and the transactions contemplated hereby have been duly
and validly approved by the Board of Directors of Biokeys. No other corporate
proceedings on the part of Biokeys, other than stockholder approval as set forth
in this Agreement, are necessary to authorize the execution, delivery and
performance of this Agreement by Biokeys and the consummation by Biokeys of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Biokeys, and constitutes a legal, valid and binding
obligation of Biokeys enforceable against Biokeys in accordance with its terms.
3.07. NON-CONTRAVENTION; APPROVALS AND CONSENTS. (a) The execution and
delivery of this Agreement by Biokeys does not, and the performance by Biokeys
of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in, or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any lien on any of the assets or properties of Biokeys
under any of the terms, conditions or provisions of (x) the Certificate of
Incorporation or By-laws of Biokeys, (y) any laws or orders of any governmental
or regulatory authority applicable to Biokeys or any of its assets or
properties, or (z) any contracts to which Biokeys is a party or by which Biokeys
or any of its assets or properties is bound, excluding from the foregoing
clauses (y) and (z) conflicts, violations, breaches, defaults, terminations,
modifications, accelerations and creations and impositions of liens, which
individually or in the aggregate, would not be reasonably expected to have a
Material Adverse Effect on Biokeys or on its ability to consummate the
transactions contemplated by this Agreement.
(b) Except (x) for the filing of a Certificate of Merger and other
appropriate merger documents required by the DGCL with the Secretary of State of
Delaware and appropriate documents with the relevant authorities of other states
in which Biokeys is qualified to do business, and (y) as disclosed in SCHEDULE
3.07(B) hereto, no consent, approval, or action of, filing with or notice to any
governmental or regulatory authority or other public or private third party is
necessary
7
or required under any of the terms, conditions or provisions of any law or order
of any governmental or regulatory authority or any contract to which Biokeys is
a party or by which Biokeys or any of its assets or properties is bound for the
execution and delivery of this Agreement by Biokeys, the performance by Biokeys
of its obligations hereunder or the consummation of the transactions
contemplated hereby, except for such consents, approvals or actions of, filing
with or notices to any governmental or regulatory authority or other public or
private third party the failure of which to make or obtain could not reasonably
be expected to have a Material Adverse Effect on Biokeys or on Biokeys' ability
to consummate the transactions contemplated by this Agreement.
3.08. FINANCIAL STATEMENTS. To the best knowledge of Biokeys, the
Biokeys financial statements attached as SCHEDULE 3.08 fairly present the
financial condition, assets, liabilities, stockholders equity and results of
operations of Biokeys for the periods indicated on such statements.
3.09. ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters reflected
or reserved against in Biokeys Balance Sheets included in Biokeys Financial
Statements, Biokeys did not have at such date and has not incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent,
fixed or otherwise, or whether due or to become due) of any nature, except
liabilities or obligations which were incurred in connection with this Agreement
and the transactions contemplated hereby or in the ordinary course of business
consistent with past practice.
3.10. ABSENCE OF SALES AND CUSTOMERS. Biokeys is a development stage
company engaged in biopharmaceutical research and development and has no sales
or customers.
3.11. CONTRACTS. Except as set forth in SCHEDULE 3.11, (a) Biokeys has
made available for examination by BioQuest copies of all material contracts,
agreements and other instruments of Biokeys;
(b) All such contracts, agreements and other instruments are valid,
binding and enforceable in accordance with their terms and are in full force and
effect;
(c) To the best of its knowledge after reasonable inquiry, Biokeys is
not in default, and no condition or event exists or has occurred that, with
notice or lapse of time or both, would become a default under any such contract,
agreement or instrument;
(d) Biokeys has not made or entered into any warranties or guarantees
with respect to products manufactured or sold by Biokeys, except warranties
implied by law;
(e) Biokeys has received no notice of any default or alleged default
under any such contract, agreement or instrument which has not heretofore been
cured or which notice has heretofore been withdrawn and does not know of any
material default thereunder by any other party thereto or by any other person
bound thereunder; and
(f) Biokeys is not a party to, nor bound by, nor are any of its
properties subject to, any
8
agreement, contract or commitment which involves $1,000 or more and is not
cancelable without penalty within 30 days, or any agreement, contract or
commitment which might reasonably be expected to have a material adverse effect
on its business.
3.12. NO MATERIAL RESTRICTIONS. Except as set forth in SCHEDULE 3.12,
Biokeys is not party or subject to any charter provision, by-law, mortgage,
lien, lease, license, permit, agreement, contract, instrument, law, rule,
ordinance, regulation, order, judgment or decree, or any other restriction of
any kind or character, which (a) is reasonably expected to have a Material
Adverse Effect, or (b) would prevent consummation of the transactions
contemplated by this Agreement or the continued operation of its business after
the Closing Date on substantially the same basis as heretofore operated, or (c)
would materially restrict the ability of to conduct the business of Biokeys in
substantially the same manner as it is currently conducted.
3.13. TITLE TO ASSETS. Except as set forth in SCHEDULE 3.13, Biokeys
holds good and marketable title to its assets, free and clear of all adverse
claims, liens, mortgages, charges, security interests, shared ownership,
encumbrances or restrictions. There are no outstanding options, calls,
commitments, or other plans or agreements of any character providing for the
purchase, sale or other disposition of any of such assets, other than as
contemplated by this Agreement.
3.14. RELATED PARTY TRANSACTIONS. Except as set forth in SCHEDULE 3.14,
Biokeys has not made any loans to any officer, director, shareholder or employee
outstanding on the date of this Agreement, nor entered into any agreement or
arrangement with any such person, or with a parent, child, spouse or sibling of
such person, in which such person or any of such relatives has a material direct
or indirect economic interest in such arrangement or agreement, other than
compensation arrangements in keeping with the usual and customary practices of
Biokeys.
3.15 COMPENSATION OF EMPLOYEES. Set forth in SCHEDULE 3.15 is an
accurate and complete list showing the names of all persons employed by Biokeys
in any capacity, their respective titles, job descriptions and dates of hire,
and setting forth the present compensation (including salary and bonus and
fringe benefits) of each such person. Biokeys has no employees other than those
set forth in SCHEDULE 3.15.
3.16 EMPLOYEE RELATIONS. (a) Biokeys is in compliance, in all material
respects, with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and has not
and is not engaged in any unfair labor practice;
(b) No unfair labor practice complaint against Biokeys is pending
before the National Labor Relations Board or any other judicial or
administrative body;
(c) Biokeys has not experienced any material labor difficulty
during the last three years; and
(d) No claim of discrimination or harassment is pending or
threatened before the Equal
9
Employment Opportunity Commission or any other judicial or administrative body.
3.17. LEGAL PROCEEDINGS. There are no actions, suits, arbitrations, or
proceedings pending, nor to the knowledge of Biokeys, threatened against,
relating to or affecting, Biokeys or any of its assets and properties which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Biokeys or on the ability of Biokeys to consummate
the transactions contemplated by this Agreement. Biokeys is not subject to any
judgment, decree, court order or writ of any governmental or regulatory
authority.
3.18. ENVIRONMENTAL COMPLIANCE. To the best of its knowledge after
reasonable inquiry, Biokeys has at all times complied with and not violated any
federal, state or local environmental laws, and the Biokeys facilities have not
been used to receive, handle, store, treat, ship or otherwise dispose of
hazardous material except in compliance with all applicable environmental,
health or safety statutes, ordinances, orders, rules, regulations or
requirements. There are no proceedings pending against Biokeys with respect to
the enforcement of any such laws, and, to the knowledge of Biokeys after
reasonable inquiry, no hazardous material has been released into the environment
or deposited, discharged, placed or disposed of at, on or near Biokeys'
facilities, nor has Biokeys used its facilities been used at any time by any
person as a landfill or a waste disposal site. Biokeys knows of no fact or
circumstance that would reasonably be expected to give rise to any future civil,
criminal or administrative proceedings against them under any environmental
laws.
3.19. INSURANCE. Set forth in SCHEDULE 3.19 is a true, correct and
complete listing of all insurance policies or binders of insurance which relate
to Biokeys' business and assets. Except as set forth in such Schedule:
(a) the coverage under each such policy and binder is in full
force and effect, and no notice of cancellation or non-renewal with respect to,
or disallowance of any claim under, any such policy or binder has been received;
(b) there are no programs of self-insurance relating to
Biokeys' business;
(c) there are no pending or unpaid claims under any such
insurance policy; and
(d) no event has occurred which reasonably might form the
basis of any claim against Biokeys covered by any of the policies or binders set
forth in the Schedule or which would reasonably be expected to increase
materially the insurance premiums payable under any such policy or binder.
3.20. INTELLECTUAL PROPERTY. (a) SCHEDULE 3.20(A) contains a complete
and accurate list of all Intellectual Property (as defined below) owned by,
licensed to or otherwise used by Biokeys. Biokeys owns, or possesses valid
licenses to use, all Intellectual Property necessary for the operation of its
business as it is operated as of the date of this Agreement. Except as otherwise
set forth in such Schedule, each item of Intellectual Property (i) has been
maintained and used in accordance with
10
applicable law, (ii) is transferable to BioQuest through the Merger in
accordance with the terms of this Agreement, (iii) has not been infringed by any
other person, (iv) is not subject to any lien or encumbrance and (v) each
license agreement is valid and binding and is not considered in default. Except
as set forth in SCHEDULE 3.20(A), neither any Intellectual Property nor any
right therein has been assigned to a third party.
(b) Except as otherwise indicated in SCHEDULE 3.20(B), each item of
Intellectual Property, to the extent practicable, has been duly registered or
recorded with, or is protected by applications filed with the appropriate
governmental agency, to the extent required, and each such registration,
recording, and filing remains in full force and effect.
(c) Except as set forth in SCHEDULE 3.20(C), no claim adverse to the
interests of Biokeys in the Intellectual Property rights or agreements listed in
such Schedule which is reasonably expected to have a material adverse effect on
its business has been made or threatened. To the knowledge of Biokeys, no person
has infringed or otherwise violated Biokeys right in any of the Intellectual
Property or agreements listed in SCHEDULE 3.20(C). Except as set forth on
SCHEDULE 3.20(C), no litigation is pending wherein Biokeys is accused of
infringing or otherwise violating the Intellectual Property right of another, or
of breaching a contract conveying rights under Intellectual Property, and, to
the knowledge of Biokeys, no such claim has been asserted or threatened against
Biokeys nor are there any facts that would give rise to such a claim.
(d) Each current and former employee of Biokeys has assigned to Biokeys
all of such employee's rights to, and benefits to be derived from, each item of
Intellectual Property developed by such employee while employed by Biokeys.
(e) Except as set forth in SCHEDULE 3.20(E), the Intellectual Property
is free from known material defects and substantially conforms to the applicable
specifications and documentation of such Intellectual Property.
(f) SCHEDULE 3.20(F) sets forth a list of all Internet domain names
used by Biokeys in its business (collectively, the "Domain Names"). Biokeys has,
and after the Closing the Surviving Corporation will have, a valid registration
and all material rights (free of any material restriction) in and to the Domain
Names, including, without limitation, all rights necessary to continue to
conduct Biokeys' business as it is currently conducted, subject only to a
successful challenge to the Biokeys' registration of a Domain Name by the third
party owner of the registered United States trademark that corresponds to the
Domain Name.
(g) To the knowledge of Biokeys, none of Biokeys' officers, employees,
consultants, distributors, agents or representatives have on their own behalf
entered into any agreement regarding know-how, trade secrets, assignment of
rights in inventions, or prohibition or restriction of competition or
solicitation of customers, or any other similar restrictive agreement or
covenant, whether written or oral, with any Person other than Biokeys during the
period in which such officer, employee, consultant, agent or representative was
employed with or engaged by Biokeys.
11
(h) For purposes of this Agreement, the term "Intellectual Property"
shall mean (i) all research practice and protocols, products, tools, computer
programs, specifications, source code, object code, graphics, devices,
techniques, algorithms, methods, processes, procedures, packaging, formulae,
drawings, designs, improvements, discoveries, concepts, user interfaces, the
"look and feel" of any software or web sites, software, software development and
other tools, content, data inventions (whether or not patentable or
copyrightable and whether or not reduced to practice), designs, logos, themes,
know-how, and other technology that are now or are currently proposed to be
developed, produced, used, marketed or sold by Biokeys; and (ii) all proprietary
rights in this provision (h)(i), including, without limitation, all: (1) domain
names; (2) trade names, trademarks, service marks, logos, brand names and other
identifiers, with respect only to the goods and services on which they are
currently used by Biokeys; (3) trade secrets,(4) copyrights and (5) domestic and
foreign letters patent, and the registrations, applications, renewals,
extensions and continuations (in whole or in part) thereof, together with all
goodwill associated with the Intellectual Property.
3.21. BANK ACCOUNTS AND POWERS OF ATTORNEY. SCHEDULE 3.21 lists the
name of each bank, savings and loan, or other financial institution, in which
Biokeys has an account, including cash contribution accounts or safe deposit
boxes, the names of all persons authorized to draw thereon or to have access
thereto, and the names of any persons holding powers of attorney with respect to
its business of Biokeys.
3.22. CORPORATE AND FICTITIOUS NAMES. Except as disclosed in SCHEDULE
3.22, (i) Biokeys has not been known by or used any other corporate or
fictitious name and (ii) Biokeys has full right to the use of its name, free
from any claim of infringement by any person.
3.23. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
SCHEDULE 3.23, since February 18, 2000, the date of the Letter of Intent (the
"Letter of Intent") between BioQuest and Biokeys, Biokeys has conducted its
operations and business only in the ordinary course and has not:
(a) suffered either any Material Adverse Effect with respect to its
financial condition, results of operations or business or any other event or
condition of any character that might reasonably be expected to have a
Material Adverse Effect on its business or prospects, including any
liability, loss, damage or expense outside the ordinary course of business;
(b) suffered any loss or prospective loss of one or more dealers,
suppliers or customers, or altered any contractual arrangement with any one
or more of its dealers, suppliers or customers, the loss or alteration of
which, either individually or in the aggregate, would have a Material Adverse
Effect;
(c) made any capital expenditure or commitments for the acquisition or
construction of any single item of property, plant or equipment in excess of
$1,000;
(d) amended or terminated any lease, contract or material commitment to
which Biokeys is a party;
12
(e) entered into any transaction not in the ordinary course of
business or otherwise inconsistent in any respect with the past practices or
conduct of its business of Biokeys;
(f) sold any accounts receivable, disposed of any inventories other
than in the ordinary course of business or accrued any liabilities not in
the ordinary course of business;
(g) changed any material accounting principle, material procedure or
material practice followed by Biokeys;
(h) incurred any indebtedness for borrowed money;
(i) created, assumed or permitted to exist any lien, pledge, security
interest, encumbrance or mortgage of any kind on any of the assets;
(j) acquired the securities or substantially all of its assets of any
other entity;
(k) merged or consolidated with any entity;
(l) established or agreed to establish any pension, retirement,
profit-sharing, deferred compensation or other employee benefit or welfare plan
for the employees of Biokeys;
(m) entered into any employment or similar contract with any officer or
employee, or granted any bonuses or salary increases to any officer or employee
except for normal cost-of- living escalations related to increases in the
Consumer Price Index;
(n) amended in any material respect or terminated any plan or agreement
concerning employee benefits or compensation or made awards or distributions
under any such plan or agreement;
(o) entered into any material contract (including but not limited to
assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders, sales
orders, mortgages and security agreements) which (A) contain a grant or other
transfer, whether present, retroactive, prospective, or contingent, by it of
any rights in any Intellectual Property, or (B) contain a promise made by or
to it to pay any lump sum or royalty or other payment or consideration with
respect to the acquisition, practice or use of any Intellectual Property.
3.24. COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed on SCHEDULE
3.24, to the best of its knowledge after reasonable inquiry, Biokeys holds all
permits, licenses, variances, exemptions, orders and approvals of all
governmental and regulatory authorities necessary for the lawful conduct of its
business (the "Biokeys Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which, individually or in
the aggregate, do not and are not reasonably expected to have a Material Adverse
Effect on Biokeys. Biokeys is in
13
compliance with the terms of Biokeys Permits, except failures so to comply
which, individually or in the aggregate, do not have and are not reasonably
expected to have a Material Adverse Effect on Biokeys. Biokeys is not in
violation of, or in default under, any law or order of any governmental or
regulatory authority except for violations which, individually or in the
aggregate, do not and are not reasonably expected to have a Material Adverse
Effect on Biokeys.
3.25. COMPLIANCE WITH AGREEMENTS; CERTAIN AGREEMENTS. Except as set
forth on SCHEDULE 3.25, neither Biokeys, nor to the knowledge of Biokeys, any
other party thereto, is in breach or violation of, or in default in the
performance or observance of any term or provision of and no event has occurred
which, with notice or lapse of time or both, is reasonably expected to result in
a default under, (x) the Certificate of Incorporation or By-laws of Biokeys or
(y) any material contract to which Biokeys is a party or by which Biokeys or any
of its assets or properties is bound, except in the case of clause (y) for
breaches, violations and defaults which, individually or in the aggregate, do
not and are not reasonably expected to have a Material Adverse Effect on
Biokeys.
3.26. EMPLOYEE BENEFIT PLANS. Biokeys does not have or contribute to
any pension, profit- sharing, option, other incentive plan, or any other type of
employee benefit plan, or have any obligation to or customary arrangement with
employees for bonuses, incentive compensation, vacations, severance pay, sick
pay, sick leave, insurance, service award, relocation, disability, tuition
refund or other benefits, whether oral or written.
3.27. BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Biokeys and its
affiliates directly with Biokeys, without the intervention of any person on
behalf of Biokeys in such manner as to give rise to any valid claim by any
person against Biokeys, BioQuest or Merger Sub for a finder's fee, brokerage
commission or similar payment, except as specifically set forth in SCHEDULE
3.27.
3.28. CONSENTS WITHOUT ANY CONDITION. Biokeys has not made any
agreement or reached any understanding not approved by BioQuest as a condition
for obtaining any consent, authorization, approval, order, license, certificate
or permit required for the consummation of the transactions contemplated by this
Agreement.
3.29. TAX MATTERS. (a) Except as set forth in SCHEDULE 3.29, Biokeys
has filed all tax returns to be filed by applicable law prior to the Closing.
All tax returns were (and, as to tax returns not filed as of the date hereof,
will be) true, complete and correct and filed on a timely basis. Biokeys (x) has
paid all taxes due, or claimed or asserted in writing by any taxing authority to
be due, for the periods covered by such tax returns or (y) has duly and fully
provided reserves (in accordance with GAAP) adequate to reflect all such taxes.
(b) Biokeys has established (and until the Closing will maintain) on
its books and records reserves adequate to reflect all material taxes not yet
due and payable. Biokeys shall make available to BioQuest complete and
accurate copies of all work papers associated with the calculation of
Biokeys' tax reserves.
14
(c) There are no tax liens upon the assets of Biokeys.
(d) Biokeys has not requested (and no request has been made on its
behalf) any extension of time within which to file any material tax return.
(e) (A) No income tax returns have been examined by any taxing
authorities for any periods; and (B) no deficiency for any material taxes has
been suggested, proposed, asserted, or assessed against Biokeys that has not
been resolved and paid in full.
(f) No audits or other administrative proceedings or court proceedings
are presently pending with regard to any taxes or tax returns of Biokeys.
(g) To the extent requested by Biokeys, Biokeys has made available to
Biokeys (or, in the case of tax returns to be filed on or before the Closing,
will make available) complete and accurate copies of all tax returns and
associated work papers filed by or on behalf of Biokeys for all taxable years
ending on or prior to the Closing.
(h) No agreements relating to allocating or sharing of any taxes have
been entered into by Biokeys.
(i) Biokeys has not entered into any transactions that could give rise
to an understatement of Federal Income Tax.
3.30. OSHA. Except as disclosed in SCHEDULE 3.30, during the five years
immediately prior to the date of this Agreement, Biokeys has not been cited for
any violations of the Occupational Safety and Health Act of 1970, as amended,
nor are there any citations pending as a result of inspections or for
noncompliance with such Act. Except as otherwise provided in such Schedule, each
of the conditions which resulted in the issuance of a citation has been abated
or otherwise corrected to the satisfaction of the Occupational Safety and Health
Administration as of the date of this Agreement.
3.31. IMMIGRATION MATTERS. Except as set forth in SCHEDULE 3.31,
Biokeys has properly completed and maintained Forms I-9 on all persons who
became employed by Biokeys for the past three years, and any alien employee of
Biokeys is employed pursuant to a valid temporary work authorization. The
Schedule lists the names of any alien employees who are required to have
temporary work authorizations, the date of their employment and their job titles
and responsibilities, and attached to such Schedule is the Form I-9 for each
such person.
3.32. INFORMATION SUPPLIED. (a) Nothing in this Agreement or any
Schedule, annex, certificate, document or statement in writing which has been
supplied by or on behalf of Biokeys, in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact, or omits
any statement of a material fact required to be stated or necessary in order to
make the statements contained herein or therein not misleading. There is no fact
known to Biokeys which
15
materially and adversely affects Biokeys, which has not been set forth in this
Agreement or in the Schedules, exhibits, annexes, certificates, documents or
statements in writing furnished by Biokeys in connection with the transactions
contemplated by this Agreement.
(b) In furtherance of the foregoing, from the execution of this
Agreement until the Closing, Biokeys may attach, update and/or amend any Biokeys
Schedules or Exhibits referenced to herein, provided that such Schedules or
Exhibits have been agreed to in writing by all of the parties in accordance with
Section 10.07.
IV. REPRESENTATIONS AND WARRANTIES
OF BIOQUEST AND MERGER SUB
BioQuest and Merger Sub jointly and severally represent and warrant to
Biokeys, and Biokeys is relying materially thereon in entering into this
Agreement, as follows:
4.01. ORGANIZATION AND QUALIFICATION. BioQuest and Merger Sub are both
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and both have full power and authority to conduct
its business as and to the extent now conducted and to own, use and lease their
assets and properties, except for such failures to have such power and authority
which, individually or in the aggregate, do not and are not reasonably expected
to have a Material Adverse Effect on BioQuest and Merger Sub, as the case may
be. BioQuest and Merger Sub are duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use or leasing of its assets and properties, or the conduct or nature of its
business makes such qualification, licensing or admission necessary, except for
such failures to be so qualified, licensed or admitted and in good standing
which, individually or in the aggregate, do not and are not reasonably expected
to have a Material Adverse Effect on BioQuest and Merger Sub.
4.02. CORPORATE RECORDS. The copies of the Certificate of Incorporation
and By-laws of BioQuest and Merger Sub, as amended to date and annexed hereto as
SCHEDULE 4.02, are true and complete copies of such documents as now in effect.
The minute books of BioQuest and Merger Sub as presented for inspection by
Biokeys are accurate and complete in all material respects.
4.03. CAPITALIZATION. (a) The authorized capital stock of BioQuest
consists of 1,000,000 shares of Preferred Stock, none of which are outstanding
and 30,000,000 shares of Common Stock, $0.001 par value, of which 12,361,666
shares are issued and outstanding as of the date hereof. Except as set forth in
SCHEDULE 4.03(A), there is no other authorized class, series or unit of
securities of any kind (whether or not convertible into Common Stock), and there
are no options, warrants or rights of any kind, evidencing a proprietary
interest (or permitting a third party to obtain a proprietary interest) in
BioQuest. None of the shares of BioQuest have been issued in a manner giving
rise to claims for violation of the securities laws of any jurisdiction.
16
(b) The authorized capital stock of Merger Sub consists of 2,000,000
shares of Common Stock, $0.01 par value, of which 100 shares are issued and
outstanding as of the date hereof. Except as set forth in SCHEDULE 4.03(B),
there is no other authorized class, series or unit of securities of any kind
(whether or not convertible into Common Stock), and there are no options,
warrants or rights of any kind, evidencing a proprietary interest (or permitting
a third party to obtain a proprietary interest) in Merger Sub. None of the
shares of Merger Sub have been issued in a manner giving rise to claims for
violation of the securities laws of any jurisdiction.
(c) Except as contemplated hereby, there are no outstanding contractual
obligations of BioQuest and Merger Sub to repurchase, redeem or otherwise
acquire any shares of BioQuest and Merger Sub or to grant, extend or enter into
any option with respect thereto.
(d) There are no debt obligations of BioQuest and Merger Sub of any
nature whatsoever, and as of the Closing Date, BioQuest and Merger Sub will not
have any debt, liabilities, obligations or contingent liabilities of any nature
whatsoever, except as set forth on SCHEDULE 4.03(D).
(e) All of BioQuest's and Merger Sub's shares are fully paid, duly and
validly issued and owned of record and beneficially by the stockholders; and in
the amounts listed in SCHEDULE 4.03(E).
4.04. BOOKS AND RECORDS. The books and records of BioQuest and Merger
Sub are true, accurate and complete in all material respects.
4.05. SUBSIDIARIES AND INVESTMENTS. Except as set forth in SCHEDULE
4.05, BioQuest and Merger Sub do not own, directly or indirectly, any capital
stock or other equity or ownership or proprietary interest in any other
corporation, partnership, association, trust, joint venture or other entities.
4.06. AUTHORITY RELATIVE TO THIS AGREEMENT. BioQuest and Merger Sub
have full corporate power and authority to enter into this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by BioQuest and Merger Sub and the consummation by BioQuest and Merger Sub of
the Merger and the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of BioQuest and Merger Sub. No other
corporate proceedings on the part of BioQuest and Merger Sub, other than
stockholder approval as set forth in this Agreement, are necessary to authorize
the execution, delivery and performance of this Agreement by BioQuest and Merger
Sub and the consummation by BioQuest and Merger Sub of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by BioQuest and Merger Sub, and constitutes a legal, valid and binding
obligation of BioQuest and Merger Sub enforceable against BioQuest and Merger
Sub in accordance with its terms.
4.07. NON-CONTRAVENTION; APPROVALS AND CONSENTS. (a) The execution and
delivery of this Agreement by BioQuest and Merger Sub does not, and the
performance by BioQuest and Merger Sub of its obligations hereunder and the
consummation of the transactions contemplated
17
hereby will not, conflict with, result in a violation or breach of, constitute
(with or without notice or lapse of time or both) a default under, result in, or
give to any person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the creation or
imposition of any lien on any of the assets or properties of BioQuest and Merger
Sub under any of the terms, conditions or provisions of (x) the Certificate of
Incorporation or By-laws of BioQuest and Merger Sub, (y) any laws or orders of
any governmental or regulatory authority applicable to BioQuest and Merger Sub
or any of its assets or properties, or (z) any contracts to which BioQuest and
Merger Sub is a party or by which BioQuest and Merger Sub or any of its assets
or properties is bound, excluding from the foregoing clauses (y) and (z)
conflicts, violations, breaches, defaults, terminations, modifications,
accelerations and creations and impositions of liens, which individually or in
the aggregate, would not be reasonably expected to have a Material Adverse
Effect on BioQuest and Merger Sub or on its ability to consummate the
transactions contemplated by this Agreement.
(b) Except (x) for the filing of a Certificate of Merger and other
appropriate merger documents required by the DGCL with the Secretary of State of
Delaware and appropriate documents with the relevant authorities of other states
in which the BioQuest and Biokeys are qualified to do business, and (y) as
disclosed in SCHEDULE 4.07(B) hereto, no consent, approval, or action of, filing
with or notice to any governmental or regulatory authority or other public or
private third party is necessary or required under any of the terms, conditions
or provisions of any law or order of any governmental or regulatory authority or
any contract to which BioQuest and Merger Sub is a party or by which BioQuest
and Merger Sub or any of its assets or properties is bound for the execution and
delivery of this Agreement by BioQuest and Merger Sub, the performance by
BioQuest and Merger Sub of its obligations hereunder or the consummation of the
transactions contemplated hereby, except for such consents, approvals or actions
of, filing with or notices to any governmental or regulatory authority or other
public or private third party the failure of which to make or obtain could not
reasonably be expected to have a Material Adverse Effect on BioQuest and Merger
Sub or on BioQuest and Merger Sub's ability to consummate the transactions
contemplated by this Agreement.
4.08. FINANCIAL STATEMENTS. All financial statements of BioQuest
delivered, and to be delivered under this Agreement to Biokeys, constituting an
unaudited balance sheet, unaudited statement of income and expense, unaudited
statements of cash flow and unaudited statement of shareholder's equity of
BioQuest as of and for the periods ended December 31, 1999 and March 31, 2000
("BioQuest Financial Statements"), shall conform in so far as possible to GAAP.
BioQuest Financial Statements fairly present the financial condition, assets,
liabilities, stockholders equity and results of operations of BioQuest for the
periods indicated.
4.09. ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters reflected
or reserved against in BioQuest and Merger Sub Balance Sheets included in
BioQuest and Merger Sub Financial Statements, BioQuest and Merger Sub did not
have at such date and have not incurred since that date, any liabilities or
obligations (whether absolute, accrued, contingent, fixed or otherwise, or
whether due or to become due) of any nature, except liabilities or obligations
which were incurred in connection with this Agreement and the transactions
contemplated hereby or in the ordinary
18
course of business consistent with past practice.
4.10. ABSENCE OF SALES AND CUSTOMERS. BioQuest is a development stage
company engaged in biopharmaceutical research and development and has no sales
or customers.
4.11. CONTRACTS. Except as set forth in SCHEDULE 4.11, (a) BioQuest and
Merger Sub have made available for examination by Biokeys copies of all material
contracts, agreements and other instruments of BioQuest and Merger Sub; (b) all
such contracts, agreements and other instruments are valid, binding and
enforceable in accordance with their terms and are in full force and effect; (c)
to the best of their knowledge after reasonable inquiry, BioQuest and Merger Sub
are not in default, and no condition or event exists or has occurred that, with
notice or lapse of time or both, would become a default under any such contract,
agreement or instrument; (d) BioQuest and Merger Sub have not made or entered
into any warranties or guarantees with respect to products manufactured or sold
by BioQuest and Merger Sub, except warranties implied by law; (e) BioQuest and
Merger Sub have received no notice of any default or alleged default under any
such contract, agreement or instrument which has not heretofore been cured or
which notice has heretofore been withdrawn and does not know of any material
default thereunder by any other party thereto or by any other person bound
thereunder; and (f) BioQuest and Merger Sub are not a party to, nor bound by,
nor are any of its properties subject to, any agreement, contract or commitment
which involves $1,000 or more and is not cancellable without penalty within 30
days, or any agreement, contract or commitment which might reasonably be
expected to have a material adverse effect on its business.
4.12. NO MATERIAL RESTRICTIONS. Except as set forth in SCHEDULE 4.12,
BioQuest and Merger Sub are not party or subject to any charter provision,
by-law, mortgage, lien, lease, license, permit, agreement, contract, instrument,
law, rule, ordinance, regulation, order, judgment or decree, or any other
restriction of any kind or character, which (a) is reasonably expected to have a
Material Adverse Effect, or (b) would prevent consummation of the transactions
contemplated by this Agreement or the continued operation of the its business
after the Closing Date on substantially the same basis as heretofore operated,
or (c) would materially restrict the ability of to conduct the business of
BioQuest and Merger Sub in substantially the same manner as it is currently
conducted.
4.13. TITLE TO ASSETS. Except as set forth in SCHEDULE 4.13, BioQuest
and Merger Sub hold good and marketable title to its assets, free and clear of
all adverse claims, liens, mortgages, charges, security interests, shared
ownership, encumbrances or restrictions. There are no outstanding options,
calls, commitments, or other plans or agreements of any character providing for
the purchase, sale or other disposition of any of such assets, other than as
contemplated by this Agreement.
4.14. RELATED PARTY TRANSACTIONS. Except as set forth in SCHEDULE 4.14,
BioQuest and Merger Sub have not made any loans to any officer, director,
shareholder or employee outstanding on the date of this Agreement, nor entered
into any agreement or arrangement with any such person, or with a parent, child,
spouse or sibling of such person, in which such person or any of such relatives
has a material direct or indirect economic interest in such arrangement or
agreement, other than compensation arrangements in keeping with the usual and
customary practices of BioQuest and
19
Merger Sub.
4.15 COMPENSATION OF EMPLOYEES. Set forth in SCHEDULE 4.15 is an
accurate and complete list showing the names of all persons employed by BioQuest
and Merger Sub in any capacity, their respective titles, job descriptions and
dates of hire, and setting forth the present compensation (including salary and
bonus and fringe benefits) of each such person. BioQuest and Merger Sub has no
employees other than those set forth in SCHEDULE 4.15.
4.16 EMPLOYEE RELATIONS. (a) BioQuest and Merger Sub are in compliance,
in all material respects, with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and has not and is not engaged in any unfair labor practice;
(b) No unfair labor practice complaint against BioQuest and Merger Sub
is pending before the National Labor Relations Board or any other judicial or
administrative body;
(c) BioQuest and Merger Sub have not experienced any material labor
difficulty during the last three years; and
(d) No claim of discrimination or harassment is pending or threatened
before the Equal Employment Opportunity Commission or any other judicial or
administrative body.
4.17. LEGAL PROCEEDINGS. Except as disclosed in SCHEDULE 4.17, there
are no actions, suits, arbitrations, or proceedings pending, nor to the
knowledge of BioQuest and Merger Sub, threatened against, relating to or
affecting, BioQuest and Merger Sub or any of its assets and properties which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on BioQuest and Merger Sub or on the ability of BioQuest
and Merger Sub to consummate the transactions contemplated by this Agreement.
BioQuest and Merger Sub are not subject to any judgment, decree, court order or
writ of any governmental or regulatory authority.
4.18. ENVIRONMENTAL COMPLIANCE. Except as set forth in SCHEDULE 4.18,
BioQuest and Merger Sub have at all times complied with and not violated any
federal, state or local environmental laws, and BioQuest and Merger Sub
facilities have not been used to receive, handle, store, treat, ship or
otherwise dispose of hazardous material except in compliance with all applicable
environmental, health or safety statutes, ordinances, orders, rules, regulations
or requirements. There are no proceedings pending against BioQuest and Merger
Sub with respect to the enforcement of any such laws, and, to the knowledge of
BioQuest and Merger Sub after reasonable inquiry, no hazardous material have
been released into the environment or deposited, discharged, placed or disposed
of at, on or near BioQuest's facilities, nor has BioQuest used its facilities
been used at any time by any person as a landfill or a waste disposal site.
BioQuest and Merger Sub knows of no fact or circumstance that would reasonably
be expected to give rise to any future civil, criminal or administrative
proceedings against them under any environmental laws.
20
4.19. INSURANCE. Set forth in SCHEDULE 4.19 is a true, correct and
complete listing of all insurance policies or binders of insurance which relate
to BioQuest and Merger Sub's business and assets. Except as set forth in such
Schedule:
(a) the coverage under each such policy and binder is in full force and
effect, and no notice of cancellation or non-renewal with respect to, or
disallowance of any claim under, any such policy or binder has been received;
(b) there are no programs of self-insurance relating to BioQuest and
Merger Sub's business;
(c) there are no pending or unpaid claims under any such insurance
policy; and
(d) no event has occurred which reasonably might form the basis of any
claim against BioQuest and Merger Sub covered by any of the policies or
binders set forth in the Schedule or which would reasonably be expected to
increase materially the insurance premiums payable under any such policy or
binder.
4.20. INTELLECTUAL PROPERTY. (a) SCHEDULE 4.20(A) contains a complete
and accurate list of all Intellectual Property (as defined below) owned by,
licensed to or otherwise used by BioQuest. BioQuest owns, or possesses valid
licenses to use, all Intellectual Property necessary for the operation of its
business as it is operated as of the date of this Agreement. Except as otherwise
set forth in such Schedule, each item of Intellectual Property (i) has been
maintained and used in accordance with applicable law, (ii) is transferable to
Biokeys through the Merger in accordance with the terms of this Agreement, (iii)
has not been infringed by any other person, (iv) is not subject to any lien or
encumbrance and (v) each license agreement is valid and binding and is not
considered in default. Except as set forth in SCHEDULE 4.20(A), neither any
Intellectual Property nor any right therein has been assigned to a third party.
(b) Except as otherwise indicated in SCHEDULE 4.20(B), each item of
Intellectual Property, to the extent practicable, has been duly registered or
recorded with, or is protected by applications filed with the appropriate
governmental agency, to the extent required, and each such registration,
recording, and filing remains in full force and effect.
(c) Except as set forth in SCHEDULE 4.20(C), no claim adverse to the
interests of BioQuest in the Intellectual Property rights or agreements listed
in such Schedule which is reasonably expected to have a material adverse effect
on its business has been made or threatened. To the knowledge of BioQuest, no
person has infringed or otherwise violated BioQuest's right in any of the
Intellectual Property or agreements listed in SCHEDULE 4.20(C). Except as set
forth on SCHEDULE 4.20(C), no litigation is pending wherein BioQuest is accused
of infringing or otherwise violating the Intellectual Property right of another,
or of breaching a contract conveying rights under Intellectual Property, and, to
the knowledge of BioQuest, no such claim has been asserted or threatened against
BioQuest nor are there any facts that would give rise to such a claim.
21
(d) Each current and former employee or consultant of BioQuest has
assigned to BioQuest all of such employee's rights to, and benefits to be
derived from, each item of Intellectual Property developed by such employee or
consultant while employed or engaged by BioQuest relating to Intellectual
Property of BioQuest.
(e) Except as set forth in SCHEDULE 4.20(E), the Intellectual Property
is free from known material defects and substantially conforms to the applicable
specifications and documentation of such Intellectual Property.
(f) Except as set forth in SCHEDULE 4.20(F), to the knowledge of
BioQuest after reasonable inquiry, none of BioQuest's officers, employees,
consultants, distributors, agents or representatives have on their own behalf
entered into any agreement regarding know-how, trade secrets, assignment of
rights in inventions, or prohibition or restriction of competition or
solicitation of customers, or any other similar restrictive agreement or
covenant, whether written or oral, with any person other than BioQuest during
the period in which such officer, employee, consultant, agent or representative
was employed with or engaged by BioQuest.
(h) For purposes of this Agreement, the term "Intellectual Property"
shall mean (i) all research practice or protocols, products, tools, computer
programs, specifications, source code, object code, graphics, devices,
techniques, algorithms, methods, processes, procedures, packaging, formulae,
drawings, designs, improvements, discoveries, concepts, user interfaces, the
"look and feel" of any software or web sites, software, software development and
other tools, content, data inventions (whether or not patentable or
copyrightable and whether or not reduced to practice), designs, logos, themes,
know-how, and other technology that are now or are currently proposed to be
developed, produced, used, marketed or sold by BioQuest; and (ii) all
proprietary rights in provision (h)(i), including, without limitation, all: (1)
domain names; (2) trade names, trademarks, service marks, logos, brand names and
other identifiers, with respect only to the goods and services on which they are
currently used by BioQuest; (3) trade secrets,(4) copyrights and (5) domestic
and foreign letters patent, and the registrations, applications, renewals,
extensions and continuations (in whole or in part) thereof, together with all
goodwill associated with the Intellectual Property.
4.21. BANK ACCOUNTS AND POWERS OF ATTORNEY. SCHEDULE 4.21 lists the
name of each bank, savings and loan, or other financial institution, in which
BioQuest and Merger Sub have an account, including cash contribution accounts or
safe deposit boxes, the names of all persons authorized to draw thereon or to
have access thereto, and the names of any persons holding powers of attorney
with respect to its business of BioQuest and Merger Sub.
4.22. CORPORATE AND FICTITIOUS NAMES. Except as disclosed in SCHEDULE
4.22, (i) BioQuest and Merger Sub have not been known by or used any other
corporate or fictitious name and (ii) BioQuest and Merger Sub have full right to
the use of its name, free from any claim of infringement by any person.
4.23. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
SCHEDULE 4.23, since
22
the Letter of Intent, BioQuest and Merger Sub have conducted its operations and
business only in the ordinary course and have not:
(a) suffered either any Material Adverse Effect with respect to its
financial condition, results of operations or business or any other event or
condition of any character that might reasonably be expected to have a
Material Adverse Effect on its business or prospects, including any
liability, loss, damage or expense outside the ordinary course of business;
(b) suffered any loss or prospective loss of one or more dealers,
suppliers or customers, or altered any contractual arrangement with any one
or more of its dealers, suppliers or customers, the loss or alteration of
which, either individually or in the aggregate, would have a Material Adverse
Effect;
(c) made any capital expenditure or commitments for the acquisition or
construction of any single item of property, plant or equipment in excess of
$1,000;
(d) amended or terminated any lease, contract or material commitment to
which BioQuest and Merger Sub is a party;
(e) entered into any transaction not in the ordinary course of business
or otherwise inconsistent in any respect with the past practices or conduct of
its business of BioQuest and Merger Sub;
(f) sold any accounts receivable, disposed of any inventories other
than in the ordinary course of business or accrued any liabilities not in
the ordinary course of business;
(g) changed any material accounting principle, material procedure or
material practice followed by BioQuest and Merger Sub;
(h) incurred any indebtedness for borrowed money;
(i) created, assumed or permitted to exist any lien, pledge, security
interest, encumbrance or mortgage of any kind on any of the assets;
(j) acquired the securities or substantially all of its assets of any
other entity;
(k) merged or consolidated with any entity;
(l) established or agreed to establish any pension, retirement,
profit-sharing, deferred compensation or other employee benefit or welfare
plan for the employees of BioQuest and Merger Sub;
(m) since December 31, 1999, entered into any employment or similar
contract with any
23
officer or employee, or granted any bonuses or salary increases to any officer
or employee except for normal cost-of- living escalations related to increases
in the Consumer Price Index;
(n) amended in any material respect or terminated any plan or agreement
concerning employee benefits or compensation or made awards or distributions
under any such plan or agreement;
(o) entered into any material contract (including but not limited to
assignments, licenses, transfers of exclusive rights, "work for hire"
agreements, special commissions, employment contracts, purchase orders, sales
orders, mortgages and security agreements) which (A) contain a grant or other
transfer, whether present, retroactive, prospective, or contingent, by it of
any rights in any Intellectual Property, or (B) contain a promise made by or
to it to pay any lump sum or royalty or other payment or consideration with
respect to the acquisition, practice or use of any Intellectual Property.
4.24. COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed on SCHEDULE
4.24, to the best of their knowledge after reasonable inquiry, BioQuest and
Merger Sub hold all permits, licenses, variances, exemptions, orders and
approvals of all governmental and regulatory authorities necessary for the
lawful conduct of its business (the "BioQuest and Merger Sub Permits"), except
for failures to hold such permits, licenses, variances, exemptions, orders and
approvals which, individually or in the aggregate, do not and are not reasonably
expected to have a Material Adverse Effect on BioQuest and Merger Sub. BioQuest
and Merger Sub are in compliance with the terms of BioQuest and Merger Sub
Permits, except failures so to comply which, individually or in the aggregate,
do not have and are not reasonably expected to have a Material Adverse Effect on
BioQuest and Merger Sub. BioQuest and Merger Sub are not in violation of, or in
default under, any law or order of any governmental or regulatory authority
except for violations which, individually or in the aggregate, do not and are
not reasonably expected to have a Material Adverse Effect on BioQuest and Merger
Sub.
4.25. COMPLIANCE WITH AGREEMENTS; CERTAIN AGREEMENTS. Except as set
forth on SCHEDULE 4.25, neither BioQuest and Merger Sub, nor to the knowledge of
BioQuest and Merger Sub, any other party thereto, is in breach or violation of,
or in default in the performance or observance of any term or provision of and
no event has occurred which, with notice or lapse of time or both, is reasonably
expected to result in a default under, (x) the Certificate of Incorporation or
By- laws of BioQuest and Merger Sub or (y) any material contract to which
BioQuest and Merger Sub is a party or by which BioQuest and Merger Sub or any of
its assets or properties is bound, except in the case of clause (y) for
breaches, violations and defaults which, individually or in the aggregate, do
not and are not reasonably expected to have a Material Adverse Effect on
BioQuest and Merger Sub.
4.26. EMPLOYEE BENEFIT PLANS. BioQuest and Merger Sub do not have or
contribute to any pension, profit-sharing, option, other incentive plan, or any
other type of employee benefit plan, or have any obligation to or customary
arrangement with employees for bonuses, incentive
24
compensation, vacations, severance pay, sick pay, sick leave, insurance, service
award, relocation, disability, tuition refund or other benefits, whether oral or
written.
4.27. BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by BioQuest and Merger
Sub and its affiliates directly with BioQuest and Merger Sub, without the
intervention of any person on behalf of BioQuest and Merger Sub in such manner
as to give rise to any valid claim by any person against BioQuest and Merger
Sub, BioQuest or Merger Sub for a finder's fee, brokerage commission or similar
payment, except as specifically set forth in SCHEDULE 4.27.
4.28. CONSENTS WITHOUT ANY CONDITION. BioQuest and Merger Sub has not
made any agreement or reached any understanding not approved by BioQuest as a
condition for obtaining any consent, authorization, approval, order, license,
certificate or permit required for the consummation of the transactions
contemplated by this Agreement.
4.29. TAX MATTERS.
(a) Except as set forth in SCHEDULE 4.29, BioQuest and Merger Sub have
filed all tax returns to be filed by applicable law prior to the Closing. All
tax returns were (and, as to tax returns not filed as of the date hereof,
will be) true, complete and correct and filed on a timely basis. BioQuest and
Merger Sub (x) have paid all taxes due, or claimed or asserted in writing by
any taxing authority to be due, for the periods covered by such tax returns
or (y) has duly and fully provided reserves (in accordance with GAAP)
adequate to reflect all such taxes.
(b) BioQuest and Merger Sub have established (and until the Closing
will maintain) on its books and records reserves adequate to reflect all
material taxes not yet due and payable. BioQuest and Merger Sub have made
available to BioQuest and Merger Sub complete and accurate copies of all work
papers associated with the calculation of BioQuest and Merger Sub's tax
reserves.
(c) There are no tax liens upon the assets of BioQuest and Merger Sub.
(d) BioQuest and Merger Sub has not requested (and no request has been
made on its behalf) any extension of time within which to file any material tax
return.
(e) (A) No income tax returns have been examined by any taxing
authorities for any periods; and (B) no deficiency for any material taxes has
been suggested, proposed, asserted, or assessed against BioQuest and Merger Sub
that have not been resolved and paid in full.
(f) No audits or other administrative proceedings or court proceedings
are presently pending with regard to any taxes or tax returns of BioQuest and
Merger Sub.
(g) To the extent requested by BioQuest and Merger Sub, BioQuest and
Merger Sub have made available to BioQuest and Merger Sub (or, in the case of
tax returns to be filed on or before
25
the Closing, will make available) complete and accurate copies of all tax
returns and associated work papers filed by or on behalf of BioQuest and Merger
Sub for all taxable years ending on or prior to the Closing.
(h) No agreements relating to allocating or sharing of any taxes have
been entered into by BioQuest and Merger Sub.
(i) BioQuest and Merger Sub has not entered into any transactions that
could give rise to an understatement of Federal Income Tax.
4.30. OSHA. Except as disclosed in SCHEDULE 4.30, during the five years
immediately prior to the date of this Agreement, BioQuest and Merger Sub have
not been cited for any violations of the Occupational Safety and Health Act of
1970, as amended, nor are there any citations pending as a result of inspections
or for noncompliance with such Act. Except as otherwise provided in such
Schedule, each of the conditions which resulted in the issuance of a citation
has been abated or otherwise corrected to the satisfaction of the Occupational
Safety and Health Administration as of the date of this Agreement.
4.31. IMMIGRATION MATTERS. Except as set forth in SCHEDULE 4.31,
BioQuest and Merger Sub have properly completed and maintained Forms I-9 on all
persons who became employed by BioQuest and Merger Sub for the past three years,
and any alien employee of BioQuest and Merger Sub is employed pursuant to a
valid temporary work authorization. The Schedule lists the names of any alien
employees who are required to have temporary work authorizations, the date of
their employment and their job titles and responsibilities, and attached to such
Schedule is the Form I-9 for each such person.
4.32. INFORMATION SUPPLIED. (a) Nothing in this Agreement or any
Schedule, annex, certificate, document or statement in writing which has been
supplied by or on behalf of BioQuest and Merger Sub, in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact, or omits any statement of a material fact required to be stated or
necessary in order to make the statements contained herein or therein not
misleading. There is no fact known to BioQuest and Merger Sub which materially
and adversely affects BioQuest and Merger Sub, which has not been set forth in
this Agreement or in the Schedules, exhibits, annexes, certificates, documents
or statements in writing furnished by BioQuest and Merger Sub in connection with
the transactions contemplated by this Agreement.
(b) In furtherance of the foregoing, from the execution of this
Agreement until the Closing, BioQuest may attach, update and/or amend any
BioQuest Schedules or Exhibits referenced to herein, provided that such
Schedules or Exhibits have been agreed to in writing by all of the parties in
accordance with Section 10.07.
26
V. COVENANTS
5.01. INFORMATION STATEMENT. BioQuest and Biokeys shall each distribute
its own information statement, proxy statement or other disclosure statement for
its respective stockholders to approve this Agreement and the transactions
contemplated hereby and thereby (the "Information Statement"). Each of BioQuest
and Biokeys agree to provide promptly to the other such information concerning
its business and financial statements and affairs as, in the reasonable judgment
of the providing party or its counsel, may be required or appropriate for
inclusion in the Information Statement, or in any amendments or supplements
thereto, and to cause its counsel and auditors to cooperate with the other's
counsel and auditors in the preparation of the Information Statement. BioQuest
will promptly advise Biokeys, and Biokeys will promptly advise BioQuest, in
writing if at any time prior to the Effective Time either BioQuest or Biokeys
shall obtain knowledge of any facts that might make it necessary or appropriate
to amend or supplement the Information Statement in order to make the statements
contained or incorporated by reference therein not misleading or to comply with
applicable law. Anything to the contrary contained herein notwithstanding,
neither BioQuest nor Biokeys shall include in an Information Statement any
information with respect to the others, the form and content of which
information shall not have been approved by the other prior to such inclusion.
5.02. STOCKHOLDER APPROVAL. BioQuest and Biokeys shall each promptly
after the date hereof take all action necessary in accordance with DGCL and
their respective Certificates of Incorporation and Bylaws to hold, as promptly
as possible, special meetings of their respective stockholders, for the purpose
of seeking approval of this Agreement and all transactions contemplated
thereunder. In lieu of such meeting, either party may obtain written consents
from its stockholders holding a majority of its outstanding shares for the
purpose of seeking approval of this Agreement, provided that such consents
comply with and are permitted under the applicable provisions of the DCGL.
5.03. ACCESS TO INFORMATION. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice, BioQuest and Biokeys shall, during normal business hours, (i)
give each other and their respective officers, employees, accountants, counsel,
financing sources and other agents and representatives full access to their
buildings, offices, and other facilities and to all their books and records,
whether located on their premises or at another location; (ii) permit the other
party to make such inspections as they may require; (iii) cause its officers to
furnish the other party such financial, operating, technical and product data
and other information with respect to the business and assets and properties of
BioQuest and Biokeys as they from time to time may request, including financial
statements and Schedules; (iv) allow each other the opportunity to interview
their employees and other personnel with their prior written consent, which
consent shall not be unreasonably withheld or delayed; and (v) assist and
cooperate with BioQuest, Merger Sub and Biokeys in implementation by the parties
of the Merger; provided, however, that no investigation pursuant to this Section
5.03 shall affect or be deemed to modify any representation or warranty made by
BioQuest and Biokeys herein. Materials furnished to BioQuest and Biokeys
pursuant to this Section 5.03 may be used by each party for
27
strategic and integration planning purposes relating to accomplishing the
transactions contemplated hereby.
5.04. PUBLIC DISCLOSURE. Unless otherwise required by law (including
federal and state securities laws) prior to the Effective Time (in which case
BioQuest and Biokeys shall have a prior opportunity to review and comment on the
proposed disclosure), no disclosure (whether or not in response to any inquiry)
of the existence of any subject matter of, or the terms and conditions of, this
Agreement shall be made by any party hereto unless approved by BioQuest and
Biokeys prior to release; provided, however, that such approval shall not be
unreasonably withheld or delayed.
5.05. APPROVALS. Each of BioQuest and Biokeys shall use all
commercially reasonable efforts required to obtain all approvals from
governmental or regulatory authorities or under any of the contracts or other
agreements as may be required for each of BioQuest and Biokeys, respectively, to
participate in the Merger so as to preserve all rights of, and benefits to, each
party, and each party shall provide the other with such assistance and
information as is reasonably required to obtain such approvals.
5.06. NOTIFICATION OF CERTAIN MATTERS. Biokeys shall give prompt notice
to BioQuest, and BioQuest shall give prompt notice to Biokeys, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of Biokeys, BioQuest or
Merger Sub, respectively, contained in this Agreement to be untrue or inaccurate
in any material respect at or prior to the Closing Date and (ii) any failure of
Biokeys, BioQuest or Merger Sub, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice, or failure to do
so, pursuant to this Section 5.06 shall not limit or otherwise affect any
remedies available to the party receiving such notice.
5.07. ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto,
at the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things (including, but not
limited to, all action reasonably necessary to seek and obtain any and all
consents and approvals of any government or regulatory authority or person
required in connection with the Merger; provided, however, that no party shall
be obligated to consent to any divestitures or operational limitations or
activities in connection therewith and no party shall be obligated to make a
payment of money as a condition to obtaining any such condition or approval) as
may be necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.08. MAINTENANCE OF BUSINESS. From the date hereof until the Closing,
BioQuest and Biokeys shall each use its diligent, good faith efforts, to cause
each of BioQuest and Biokeys to carry on and preserve its respective business,
goodwill and relationships with suppliers, employees, agents and others in
substantially the same manner as it had been prior to the date hereof.
5.09. CONDUCT OF BUSINESS; RESTRICTIONS. (a) From the date hereof until
the Effective
28
Time, except as expressly permitted hereby, neither BioQuest nor Biokeys shall
without the prior express written consent of the other (except as set forth in
SCHEDULE 5.09):
(i) incur any additional indebtedness, or guarantee any indebtedness or
obligation of any other party, except in the ordinary course of
business;
(ii) issue, redeem, pledge, sell or repurchase any of is capital stock
or securities convertible into its capital stock or grant or issue any
options, warrants or rights to subscribe for its capital stock or
securities convertible into its capital stock or commit to do any of
the foregoing;
(iii) enter into or terminate or amend any material agreement or
arrangement, including, without limitation, any agreement concerning
Intellectual Property;
(iv) increase the compensation or bonuses payable or to become payable
to any of its officers, employees or agents or adopt or amend any
employee benefit plan or arrangement;
(v) enter into any employment contract or agreement with any existing
or prospective employee which is not terminable at will;
(vi) pay any obligation or liability, fixed or contingent, other than
current liabilities or except as such payment becomes due;
(vii) cancel, without full payment, any note, loan or other obligation
owing to it, or waive any rights of material value;
(viii) acquire or dispose of any properties, assets or business except
in the ordinary course of its business;
(ix) create or suffer to be imposed any lien, mortgage, security
interest or other charge on or against its properties or assets other
than in the ordinary course of business consistent with its past
practices;
(x) make or adopt any change in its Certificate of Incorporation or
Bylaws as in force and effect on the date hereof;
(xi) declare or pay any dividends on or make any other distributions in
respect of any shares of its capital stock; or
(xii) pay, agree to pay or make any accrual or arrangement for payment
of any pension, retirement allowance or other employee benefit pursuant
to any plan, agreement or arrangement to any officer, director or
employee.
29
(b) From the date hereof until the Effective Time, except as expressly
permitted hereby, each of BioQuest and Biokeys shall, unless otherwise expressly
consented to in writing by the other:
(i) maintain its existing insurance policies, unless comparable
insurance is substituted therefor, and shall not take any action to
terminate or modify those insurance policies;
(ii) accurately maintain its books and records consistent with past
practices and policies;
(iii) maintain in good condition, ordinary wear and tear excepted, and
in compliance in all material respects with all applicable laws,
regulations and agreements, all assets owned, leased, licensed or
operated, as the case may be, by it;
(iv) observe and perform, and remain in compliance with, all
obligations in agreements and contracts the breach or violation of
which would have, individually or in the aggregate, a Material Adverse
Effect, and not enter into any agreements or contracts which would
require payments of more than Five Thousand Dollars ($5,000) over any
period of twelve (12) months; and
(v) maintain compliance with the terms and conditions of all material
contracts or licenses held by it or under which it operates or conducts
its business and use its best efforts to maintain all such material
contracts and licenses in full force and effect.
5.10. CONFIDENTIALITY. Each party will cause its directors, affiliates,
officers, employees or authorized representatives to hold in strict confidence,
and not disclose to any third party, without prior written consent of the other
party, all confidential information received by it in connection with the
transactions contemplated hereby, except as may be required by applicable law or
as otherwise contemplated herein.
5.11. DIRECTORS' AND OFFICERS' INSURANCE. BioQuest shall, as soon as
possible, after the Effective Time, apply for, use its best efforts to obtain,
and maintain in effect, directors and officers liability insurance in a face
amount of at least $3,000,000. BioQuest acknowledges that the directors and
officers of Biokeys and the directors and officers of BioQuest prior to the
Effective Time have a right to indemnification under the respective Certificates
of Incorporation and By-laws of each corporation and under the DCGL, and
BioQuest shall not limit or interfere with such rights, and BioQuest shall take
such actions, to indemnify each director and officer of Biokeys and its
subsidiaries, against all losses, claims, damages, costs and expenses (including
reasonable attorneys' fees), liabilities, judgements, and settlement amounts
that are paid or incurred in connection with any claim, action, suit, proceeding
or investigation (whether civil, criminal, administrative or investigative)
arising out of or pertaining to matters existing or occurring at or prior to the
Effective Time (whether asserted or claimed prior to, at or after the Effective
Time), to the same extent, the same time and on the same bases that BioQuest is
obligated to indemnify, or actually indemnifies, the directors and officers of
BioQuest, subject to the applicable terms of the DGCL.
30
5.12. NECESSARY ACTIONS. BioQuest, Merger Sub and Biokeys shall use all
commercially reasonable efforts to promptly take all actions and make all
filings required by the Internal Revenue Code or otherwise, in order to cause
the Merger to be treated as a "tax-free" reorganization under the Internal
Revenue Code.
5.13. AGREEMENT AMONG STOCKHOLDERS. At the Closing, the parties will
cause the stockholders listed in SCHEDULE 5.13 to enter into a shareholder's
agreement providing that, until the earlier of (a) the first anniversary of the
Effective Time and (b) the consummation of a public or private offering by
BioQuest in a gross amount of at least $5,000,000, each such shareholder, in any
and all elections of directors of BioQuest (whether at a meeting or by written
consent in lieu of a meeting), shall vote or cause to be voted all shares owned
by him or it, or over which he or it has voting control, and otherwise use his
or its respective best efforts, to cause the election as directors of BioQuest
of the persons described in Section 2.03(c).
5.14. INTERIM FINANCING. From the date of this Agreement until the
Effective Time, the parties shall cooperate in the undertaking of, and Biokeys
shall assist BioQuest in conducting, a private placement offering to a limited
number of accredited investors, for the purpose of providing interim financing
in an aggregate amount of $840,000. Such financing shall take the form of an
issuance and sale by BioQuest of its subordinated promissory notes, convertible
into shares of BioQuest Common Stock. The parties intend that 50% of the
proceeds of such financing shall be derived from sources originated by BioQuest
and 50% from sources originated by Biokeys and, on such assumption, 50% of the
total proceeds of such financing shall be loaned by BioQuest to Biokeys, such
loan to be evidenced by a promissory note to be issued to BioQuest by Biokeys in
the form annexed as SCHEDULED 5.14.
VI. CONDITIONS PRECEDENT TO OBLIGATIONS OF
BIOQUEST AND MERGER SUB
The obligations of BioQuest and Merger Sub to consummate the Merger,
perform and observe the covenants, agreements and conditions hereof to be
performed and observed by them at or before the Closing shall be subject to the
satisfaction of the following conditions, which may be expressly waived only in
writing signed by BioQuest:
6.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Biokeys contained herein (including applicable Exhibits or
Schedules to the Agreement) shall have been true and correct in all material
respects when made and, except (a) for changes contemplated by this Agreement
and (b) to the extent that such representations and warranties speak as of an
earlier date, shall be true and correct in all material respects as of the
Closing Date as though made on that date.
6.02. PERFORMANCE OF AGREEMENTS. Biokeys shall have performed in all
material respects all obligations and agreements and complied with all covenants
contained in this Agreement or any
31
other agreements to be performed and complied with by them at or prior to the
Closing.
6.03. OPINION OF COUNSEL FOR BIOKEYS. BioQuest shall have received the
opinion of Camhy Xxxxxxxxx & Xxxxx, LLP, counsel for Biokeys, dated the Closing
Date, substantially in the form of Exhibit A, to be attached hereto as set forth
in Section 3.32.
6.04. COMPLIANCE CERTIFICATE. BioQuest shall have received a
certificate of the President and the Chief Financial Officer of Biokeys, dated
the Closing Date, in form and substance satisfactory to BioQuest, certifying
that the conditions to the obligations of BioQuest in Sections 6.01, 6.02, 6.05
and 6.06 have been fulfilled.
6.05. MATERIAL ADVERSE CHANGE. Since the date of this Agreement and
through the Closing, there shall not have occurred any Material Adverse Effect
on Biokeys.
6.06. APPROVALS AND CONSENTS. All transfers of permits or licenses and
all approvals of or notices to public agencies, federal, state, local or
foreign, the granting or delivery of which is necessary for the consummation of
the transactions contemplated hereby, or for the continued operation of Biokeys,
shall have been obtained, and all waiting periods specified by law shall have
passed. All other consents, approvals and notices referred to in this Agreement
shall have been obtained or delivered.
6.07. PROCEEDINGS AND DOCUMENTS; SECRETARY'S CERTIFICATE. All corporate
and other proceedings in connection with the transactions contemplated hereby
and by any other agreement, and all documents and instruments incident to such
transactions, shall have been approved by BioQuest's counsel. BioQuest shall
have received a certificate of the Secretary of Biokeys, in form and substance
satisfactory to BioQuest, as to the authenticity and effectiveness of the
actions of the Board of Directors and shareholders of Biokeys authorizing the
Merger, the transactions contemplated by this Agreement and the other
agreements, and copies of Biokeys' Articles of Incorporation, certified by the
Delaware Secretary of State, and Bylaws, certified by the Secretary of Biokeys,
shall be attached to such certificate.
6.08. COMPLIANCE WITH LAWS. The consummation of other transactions
contemplated by this Agreement and any other agreements shall be legally
permitted by all laws and regulations to which BioQuest or Biokeys is subject.
6.09. SHAREHOLDER APPROVAL. The principal terms of this Agreement and
the transactions contemplated therein shall have been approved by the holders of
not less than a majority (or such higher percentage as required by Biokeys'
Articles of Incorporation) of each class of Biokeys capital stock.
6.10. LEGAL PROCEEDINGS. No order of any court or administrative agency
shall be in effect which enjoins, restrains, conditions or prohibits
consummation of this Agreement, and no litigation, investigation or
administrative proceeding shall be pending or threatened which would enjoin,
32
restrain, condition or prevent consummation of this Agreement.
6.11. EMPLOYMENT ARRANGEMENTS. At or prior to the Closing, BioQuest
shall enter into an employment agreement with Xxxxxxxx Xxx Xxxxx, as President
and Chief Executive Officer, which shall be effective as of the Effective Time
and shall be satisfactory in form and substance to the parties thereto.
6.12. CONSENTS TO THE MERGER. SCHEDULE 3.07 lists certain agreements,
leases, notes or other documents identified that by their terms require consent.
Unless otherwise set forth in SCHEDULE 3.07, Biokeys shall have received and
shall have delivered to BioQuest or its counsel written consents to the Merger
from each of the parties (other than Biokeys) to such agreements, leases, notes
or other documents, which consents shall be reasonably satisfactory in all
respects to BioQuest.
6.13. DELIVERY OF FINANCIAL STATEMENTS. Biokeys shall deliver to
BioQuest the Biokeys Financial Statements not later than five business days
prior to Closing.
6.14. SATISFACTORY DUE DILIGENCE. All due diligence matters concerning
Biokeys, including, without limitation, the form and substance of material
agreements, organization documents, by-laws, financial statements, technology
licenses, and other documents, and the nature and extent of indebtedness
(whether or not funded) and capitalization, shall be satisfactory in form and
substance to BioQuest and its counsel.
6.15. OPINION OF TAX COUNSEL. BioQuest and Biokeys shall have received
an opinion from tax counsel acceptable to all parties, dated as of the Closing
Date, in form and substance reasonably satisfactory to all parties,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, for federal income tax purposes, the
Merger will constitute a tax-free "reorganization" within the meaning of Section
368(a) of the Code. In rendering such opinion, chosen tax counsel may receive
and rely upon representations including those contained in this Agreement or in
certificates of officers of the parties or others; provided, however, that the
cost of obtaining such tax opinion shall be reasonable and shall be borne by
BioQuest.
VII. CONDITIONS PRECEDENT TO OBLIGATIONS OF
BIOKEYS
The obligations of Biokeys to perform and observe the covenants,
agreements and conditions hereof to be performed and observed by them at or
before the Closing shall be subject to the satisfaction of the following
conditions, which may be expressly waived only in writing signed by Biokeys.
7.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of BioQuest and Merger Sub contained herein shall have been true
and correct in all material
33
respects when made and, except for (a) changes contemplated by this Agreement
and (b) to the extent that such representations and warranties speak as of an
earlier date, shall be true and correct as of the Closing Date as though made on
that date.
7.02. PERFORMANCE OF AGREEMENTS. BioQuest and Merger Sub shall have
performed all obligations and agreements and complied with all covenants
contained in this Agreement to be performed and complied with by them at or
prior to the Closing.
7.03. OPINION OF COUNSEL. Biokeys shall have received the opinion of
Xxxxxxx Xxxxxxx & Xxxxxxxx, LLP, counsel for BioQuest and Merger Sub, dated the
Closing Date, substantially in the form of Exhibit C, to be attached hereto as
set forth in Section 4.32.
7.04. COMPLIANCE CERTIFICATE. Biokeys shall have received a certificate
of an officer of BioQuest, dated the Closing Date, substantially in form and
substance satisfactory to Biokeys, certifying that the conditions to the
obligations of Biokeys in Section 7.01, 7.02, 7.05 and 7.06 have been fulfilled.
7.05. LEGAL PROCEEDINGS. No order of any court or administrative agency
shall be in effect which enjoins, restrains, conditions or prohibits
consummation of this Agreement, and no litigation, investigation or
administrative proceeding shall be pending or threatened which would enjoin,
restrain, condition or prevent consummation of this Agreement.
7.06. MATERIAL ADVERSE CHANGE. Since the date of this Agreement and
through the Closing, there shall not have occurred any Material Adverse Effect
on BioQuest. Changes in the trading prices of BioQuest Common Stock shall not be
deemed to have a BioQuest Material Adverse Effect under this Agreement.
7.07. APPROVALS AND CONSENTS. All transfers of permits or licenses and
all approvals of or notices to public agencies, federal, state, local or
foreign, the granting or delivery of which is necessary for the consummation of
the transactions contemplated hereby or for the continued operation of Biokeys,
shall have been obtained, and all waiting periods specified by law shall have
passed. All other consents, approvals and notices referred to in this Agreement
shall have been obtained or delivered.
7.08. COMPLIANCE WITH LAWS. The consummation of other transactions
contemplated by this Agreement shall be legally permitted by all laws and
regulations to which BioQuest or Biokeys are subject.
7.09. SHAREHOLDER APPROVAL. The principal terms of this Agreement and
the transactions contemplated therein shall have been approved by the holders of
not less than a majority (or such higher percentage as required by BioQuest's
Certificate of Incorporation) of each class of BioQuest capital stock.
34
7.10. EMPLOYMENT ARRANGEMENTS. BioQuest shall enter into an employment
agreement with Xxxxxx X. Xxx ("Xx. Xxx"), as Vice President, Finance and Chief
Financial Officer, on terms substantially similar to the terms of Xx. Xxx'x
present employment agreement with BioQuest in the forms attached hereto as
Exhibit D.
7.11. SATISFACTORY DUE DILIGENCE. All due diligence matters concerning
BioQuest, including, without limitation, the form and substance of material
agreements, organization documents, by-laws, financial statements, technology
licenses, and other documents, and the nature and extent of indebtedness
(whether or not funded) and capitalization, shall be satisfactory in form and
substance to Biokeys and its counsel.
7.12. PROCEEDINGS AND DOCUMENTS; SECRETARY'S CERTIFICATE. All corporate
and other proceedings in connection with the transactions contemplated hereby
and by any other agreement, and all documents and instruments incident to such
transactions, shall have been approved by Biokeys' counsel. Biokeys shall have
received a certificate of the Secretary of BioQuest, in form and substance
satisfactory to Biokeys, as to the authenticity and effectiveness of the actions
of the Board of Directors and shareholders of BioQuest authorizing the Merger,
the transactions contemplated by this Agreement and the other agreements, and
copies of BioQuest's Articles of Incorporation, certified by the Delaware
Secretary of State, and Bylaws, certified by the Secretary of BioQuest, shall be
attached to such certificate.
7.13. CONSENTS TO THE MERGER. SCHEDULE 4.07 lists certain agreements,
leases, notes or other documents identified that by their terms require consent.
Unless otherwise set forth in SCHEDULE 4.07, BioQuest shall have received and
shall have delivered to Biokeys or its counsel written consents to the Merger
from each of the parties (other than BioQuest) to such agreements, leases, notes
or other documents, which consents shall be reasonably satisfactory in all
respects to Biokeys.
7.14. DELIVERY OF FINANCIAL STATEMENTS. BioQuest shall deliver to
Biokeys the BioQuest Financial Statements not later than five business days
prior to Closing.
7.15. OPINION OF TAX COUNSEL. BioQuest and Biokeys shall have received
an opinion from tax counsel acceptable to all parties, dated as of the Closing
Date, in form and substance reasonably satisfactory to all parties,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, for federal income tax purposes, the
Merger will constitute a tax-free "reorganization" within the meaning of Section
368(a) of the Code. In rendering such opinion, chosen tax counsel may receive
and rely upon representations including those contained in this Agreement or in
certificates of officers of the parties or others; provided, however, that the
cost of obtaining such tax opinion shall be reasonable and shall be borne by
BioQuest.
XIII. TERMINATION, AMENDMENT AND WAIVER
35
8.01. TERMINATION. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the shareholders of Biokeys or BioQuest):
(a) by mutual written consent;
(b) by either Biokeys or BioQuest, if the Merger has not been
consummated by July 5, 2000; provided, however, that the right to terminate this
Agreement under this subsection (b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date;
(c) by either Biokeys or BioQuest, if there shall be any law or
regulation that makes consummation of the Merger illegal or if any judgment,
injunction, order or decree enjoining BioQuest, Merger Sub or Biokeys from
consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable; provided, however, that the party
seeking to terminate this Agreement pursuant to this subsection (c) shall have
used all reasonable efforts to remove such judgment, injunction, order or
decree;
(d) by Biokeys, in the event of a material breach by BioQuest of any
representation, warranty or agreement contained herein which has not been cured
or is not curable by July 5, 2000;
(e) by BioQuest, in the event of a material breach by Biokeys of any
representation, warranty or agreement contained herein which has not been cured
or is not curable by July 5, 2000; or
(f) the failure to obtain the stockholder approval of either Biokeys'
stockholders or BioQuest's stockholders as set forth in Section 5.02 by July 5,
2000.
8.02. EFFECT OF TERMINATION. If this Agreement is validly terminated by
Biokeys, BioQuest or Merger Sub pursuant to Section 8.01, this Agreement shall
forthwith become null and void and there shall be no liability or obligation on
the part of either BioQuest, Merger Sub or Biokeys (or any of their respective
officers, directors, representatives, or affiliates), except that nothing
contained herein shall relieve BioQuest, Merger Sub or Biokeys from liability
for willful or intentional breach of their respective obligations contained in
the Agreement or for fraud.
8.03. AMENDMENT. This Agreement may be amended by the parties hereto at
any time before or after approval of Biokeys' shareholders; but after such
approval, however, no amendment will be made which by applicable law requires
the further approval of Biokeys' shareholders without obtaining such further
approval.
8.04. WAIVER. At any time prior to the Effective Time, any party hereto
may (a) extend the time for the performance of any obligation or other act of
any other party hereto, (b) waive any
36
inaccuracy in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (c) waive compliance with any agreement
or condition contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party or parties to be
bound thereby.
IX. SURVIVAL AND INDEMNIFICATION
9.01. SURVIVAL. All representations and warranties contained in this
Agreement or in any certificate delivered pursuant hereto or thereto shall
survive the Closing for a period of 18 months after the Effective Time (the
"Survival Period"), and shall not be deemed waived or otherwise affected by any
investigation made or any knowledge acquired with respect thereto, or by any
notice delivered pursuant to Section 10.02 hereof; provided, however, that any
claim based on Section 3.29 and 4.29 shall survive until the end of the
applicable statute of limitations. The covenants and agreements contained in
this Agreement shall survive the Closing and shall continue until all
obligations with respect thereto shall have been performed or satisfied or shall
have been terminated in accordance with their terms.
9.02. INDEMNIFICATION BY BIOKEYS. Biokeys shall indemnify and hold
harmless BioQuest and Merger Sub, and their respective officers, directors,
employees, successors and assigns in respect of any and all claims, actions,
suits or other proceedings and any and all losses, costs, expenses, liabilities,
fines, penalties, interest, and damages, whether or not arising out of any
claim, action, suit or other proceeding (and including reasonable counsel and
accountants' fees and expenses and all other reasonable costs and expenses of
investigation, defense or settlement of claims and amounts paid in settlement)
incurred by, imposed on or borne by BioQuest and Merger Sub or such other
persons (collectively "Damages") resulting from the breach of any of the
representations, warranties or agreements made by Biokeys in this Agreement.
9.03 INDEMNIFICATION BY BIOKEYS PRINCIPALS. By their separate
signatures to this Agreement, Xx. Xxxxxxx X'Xxxxxxx, Xx., M.D., Xxxxxx
XxXxxxxxxx and Xxxxxxxx Xxx Xxxxx (the "Biokeys Principals") agree, jointly and
severally, to indemnify and hold harmless BioQuest and Merger Sub, and their
respective officers, directors, employees, successors and assigns, from and
against any and all Damages arising out of any inaccuracy or breach of any
representation, warranty or covenant by Biokeys relating to (i) any funded or
unfunded indebtedness of Biokeys or (ii) any contractual obligation of Biokeys.
9.04. INDEMNIFICATION BY BIOQUEST AND MERGER SUB. Each of BioQuest and
Merger Sub, jointly and severally, shall indemnify and hold harmless Biokeys and
its officers, directors and employees, in respect of any and all claims,
actions, suits or other proceedings and any and all losses, costs, expenses,
liabilities, fines, penalties, interest, and damages, whether or not arising out
of any claim, action, suit or other proceeding (and including reasonable counsel
and accountants' fees and expenses and all other reasonable costs and expenses
of investigation, defense or settlement of claims and amounts paid in
settlement) incurred by, imposed on or borne by Biokeys or such other
37
persons (collectively, "Damages") resulting from the breach of any of the
representations, warranties or agreements made by BioQuest and Merger Sub in
this Agreement.
9.05 INDEMNIFICATION BY BIOQUEST PRINCIPALS. (a) By their separate
signatures to this Agreement, Xxxxx X. Xxxx and Xxxxxx X. Xxx (the "BioQuest
Principals") agree jointly and severally, to indemnify and hold harmless
Biokeys, and its officers, directors and employees, from and against any and all
Damages arising out of any inaccuracy or breach of any representation, warranty
or covenant by BioQuest or Merger Sub relating to (i) any funded or unfunded
indebtedness of BioQuest or Merger Sub or (ii) any contractual obligation of
BioQuest or Merger Sub in this Agreement.
9.06 LIMITATIONS ON INDEMNIFICATION.
Notwithstanding anything to the contrary contained in this Agreement,
the following limitations shall apply to any claim for indemnification asserted
by any party to this Agreement or by any other person or entity under the
provisions of this Article IX:
(a) No right of indemnification shall arise in respect of any Damages
based on a transaction, event or incident occurring more than one year prior to
the date of this Agreement.
(b) No right of indemnification shall arise in respect of any Damages
based on any claim, action, suit or other proceeding initiated more than one
year after the Effective Time.
(c) The maximum liability of Biokeys or any Biokeys Principals, or of
BioQuest or Merger Sub or any BioQuest Principals, for Damages under any
indemnification provision of this Agreement shall not exceed the amounts
available and proceeds generated (whether in cash or in securities) from an
Indemnification Fund as defined and to be established and administered as set
forth in Section 9.07 below.
9.07 INDEMNITY FUND; ESCROW.
In order to secure the indemnification obligations set forth in this
Article IX, the parties agree that an indemnification fund (the "Indemnification
Fund") shall be established and administered, consisting initially of shares of
BioQuest Common Stock to be deposited in escrow by the Biokeys Principals and
the BioQuest Principals, respectively, as follows:
(a) Upon consummation of the Merger, two Biokeys Principals, Xx.
Xxxxxxx X'Xxxxxxx, Xx. and Xxxxxx XxXxxxxxxx, will jointly deposit in escrow for
the benefit of BioQuest and Merger Sub and their respective officers, directors
and employees (the "Escrowed Biokeys Shares"), an aggregate of 250,000 shares
out of the total number of shares of BioQuest Common Stock to be received by
such Biokeys Principals as a result of the Merger. The Escrowed Biokeys Shares
will be held as security for the performance of indemnification obligations in
favor of BioQuest and Merger Sub and their respective officers, directors,
employees and successors and assigns as set forth
38
in Sections 9.02 and 9.03 above, and shall be administered, applied, disbursed
and distributed, as set forth in a separate escrow agreement ("the Biokeys
Escrow Agreement"), to be executed and delivered at the Closing by the parties
and by counsel to BioQuest and counsel to Biokeys as joint escrow agents, in the
form annexed to this Agreement as Exhibit C.
(b) Upon consummation of the Merger, the BioQuest Principals will
jointly deposit in escrow, for the benefit of Biokeys and its officers,
directors and employees (the "Escrowed BioQuest Shares"), an aggregate of
250,000 shares out of the total number of shares of BioQuest Common Stock to be
retained and held by such BioQuest Principals immediately prior to the Effective
Time. The Escrowed BioQuest Shares will be held as security for the performance
of indemnification obligations in favor of Biokeys and its officers, directors
and employees as set forth in Sections 9.04 and 9.05 above, and shall be
administered, applied, disbursed and distributed, as set forth in a separate
escrow agreement ("the BioQuest Escrow Agreement"), to be executed and delivered
at the Closing by the parties and by counsel to BioQuest and counsel to Biokeys
as joint escrow agents, in the form annexed to this Agreement as Exhibit D.
(c) At the termination of the Biokeys Escrow Agreement, any Escrowed
Biokeys Shares not previously applied or required to be applied to satisfy
indemnification obligations under the provisions of Sections 9.02 or 9.03 above
shall be returned to the Biokeys Principals contributing such Shares in the same
proportion in which such Shares were contributed by each such Biokeys Principal
at the Closing. At the termination of the BioQuest Escrow Agreement, any
Escrowed BioQuest Shares not previously applied or required to be applied to
satisfy indemnification obligations under the provisions of Sections 9.04 or
9.05 above shall be returned to the BioQuest Principals contributing such Shares
in the same proportion in which such Shares were contributed by each such
BioQuest Principal at the Closing.
9.08 INDEMNIFICATION PROCEDURE FOR CLAIMS. Whenever any claim shall
arise for indemnification hereunder, the party entitled to indemnification (the
"indemnified party") shall promptly notify in writing the other party or parties
(the "indemnifying party") of the claim and, when known, the facts constituting
the basis for such claim; provided, that the indemnified party's failure to give
such written notice shall not affect any rights or remedies of an indemnified
party hereunder with respect to indemnification for damages except to the extent
that the indemnifying party is materially prejudiced thereby. In the event of
any claim for indemnification hereunder resulting from or in connection with any
claim or legal proceedings by a third party, the written notice to the
indemnifying party shall specify, if known, the amount or an estimate of the
amount of the liability arising therefrom. The indemnified party shall not
settle or compromise any claim by a third party for which it is entitled to
indemnification hereunder, without the prior written consent of the indemnifying
party (which shall not be unreasonably withheld), unless suit shall have been
instituted against it and the indemnifying party shall not have taken control of
and conducted in a diligent manner the defense of such suit after notification
thereof as provided in this Agreement.
9.09 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim giving
rise to an indemnification right hereunder or resulting from or arising out of
any claim or legal proceeding by
39
a person who is not a party to this Agreement, the indemnifying party at its
sole cost and expense may, upon written notice to the indemnified party, assume
the defense of any such claim or legal proceeding if it acknowledges to the
indemnified party in writing its obligations to indemnify the indemnified party
with respect to all elements of such claim, and thereafter diligently conducts
the defense thereof with counsel reasonably acceptable to the indemnified party.
If the indemnifying party acknowledges in writing as specified above that it
shall assume the defense of any such action, then the indemnifying party shall
keep the indemnified party informed with respect to the defense of such action
and the indemnified party shall be entitled to participate in (but not control)
the defense of such action, with its counsel and at its own expense. If (A) the
indemnifying party does not acknowledge in writing as specified above that it
shall assume or fails to conduct in a diligent manner the defense of any such
claim or litigation resulting therefrom, or (B) the indemnified party shall have
reasonably concluded that there may be one or more legal defenses available to
it which are different from, or, additional to those available to the
indemnifying party or other indemnified parties with respect to such claim or
litigation, then, (i) the indemnified party may defend against such claim or
litigation, in such manner as it may deem appropriate, including, without
limitation, settling such claim or litigation, after giving notice of the same
to the indemnifying party, on such terms as the indemnified party may deem
appropriate, and (ii) the indemnifying party shall be entitled to participate in
(but not control) the defense of such action, with its counsel and at its own
expense. If the indemnifying party thereafter seeks to question the manner in
which the indemnified party defended such third party claim or the amount or
nature of any such settlement, the indemnifying party shall have the burden to
prove by a preponderance of the evidence that the indemnified party did not
defend or settle such third party claim in a reasonably prudent manner. Each
party agrees to cooperate fully with the other, such cooperation to include,
without limitation, attendance at depositions and the provisions of relevant
documents as may be reasonably requested by the indemnifying party; provided,
that the indemnifying party will hold the indemnified party harmless from all of
its expenses, including reasonable attorneys' fees, incurred in connection with
such cooperation by the indemnified party.
X. MISCELLANEOUS.
10.01. EXPENSES. Regardless of whether the transactions contemplated by
this Agreement are consummated, each party shall pay its own respective fees and
expenses incident to the negotiation, preparation and execution of this
Agreement (including legal and accounting fees and expenses).
10.02. NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be delivered in person or
mailed by certified mail, return receipt requested or sent by Federal Express,
express mail or similar overnight delivery or courier service or delivered, or
delivered by telecopy, and confirmed by another notification method permitted
hereunder, at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 10.02) with copies (which
copies shall not constitute notice) as follows:
40
If to Biokeys: Biokeys, Inc.
0000 Xxxxxxx Xx.
Xxxxx 000
Xxx Xxxxx, XX 00000
Attn: Xxxxxxxx Xxx Xxxxx
With a copy to: Camhy Xxxxxxxxx & Xxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
If to BioQuest or
Merger Sub: BioQuest, Inc.
000 X. Xxx Xxxxxxx Xxxxxxx,
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxx, President
With a copy to: Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx, Esq.
Any notice or other communication given by certified mail shall be deemed given
three business days after certification thereof, except for a notice changing a
party's address which will be deemed given at the time of receipt thereof. Any
notice given by other means permitted by this Section 10.02 shall be deemed
given at the time of receipt hereof.
10.03. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES) EXCEPT TO THE EXTENT
MANDATORILY GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. BIOQUEST AND BIOKEYS
AND ALL OTHER SIGNATORIES HERETO EACH HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN NEW YORK COUNTY, NEW YORK,
IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. ALL
DISPUTES ARISING UNDER THIS AGREEMENT SHALL BE HEARD AND DETERMINED IN SUCH
STATE COURT OR SUCH FEDERAL COURT. THE SIGNATORIES HERETO EACH HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM OR IMPROPER VENUE TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING.
10.04. SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or
41
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner to
the fullest extent permitted by applicable law in order that the Merger may be
consummated as originally contemplated to the fullest extent possible.
10.05. ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties hereto. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, expressed or implied, is intended to confer on any person other
than the signatories hereto or their respective successors and permitted assigns
any rights or remedies under or by reason of this Agreement.
10.06. HEADINGS. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
10.07. ENTIRE AGREEMENT. This Agreement (including all Exhibits and
Schedules) constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all prior agreements and understandings
among the parties with respect thereto. No addition to or modification of any
provision of this Agreement shall be binding upon any party hereto unless made
in writing and signed by all parties hereto.
10.08. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement. Execution and delivery of
this Agreement by exchange of facsimile copies bearing the facsimile signature
of a party hereto shall constitute a valid and binding execution and delivery of
this Agreement by such party.
10.09. WAIVERS. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provisions, whether
or not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the waiver.
42
IN WITNESS WHEREOF, this Agreement has been executed on behalf
of each of the parties hereto as of the date first above written.
BIOQUEST, INC.
By: /s/ XXXXX X. XXXX
-----------------------------------
Xxxxx X. Xxxx
Chief Executive Officer
BIOQUEST ACQUISITION CORP.
By: /s/ XXXX X. XXXX
----------------------------------
Xxxxx X. Xxxx
Chief Executive Officer
BIOKEYS, INC.
By: /s/ XXXXXXXX XXX XXXXX
-----------------------------------
Xxxxxxxx Xxx Xxxxx
President
Agreed as to Sections 9.05 and 9.07:
BioQuest Principals:
/s/ XXXXX X. XXXX
---------------------------------------------------
Xxxxx X. Xxxx
/s/ XXXXXX X. XXX
-------------------------------------------------
Xxxxxx X. Xxx
Agreed as to Sections 9.03 and 9.07:
Biokeys Principals:
/s/ XXXXXXXX XXXX XXXXX
-------------------------------------------------
Xxxxxxxx Xxx Xxxxx
/s/ XX. XXXXXXX X'XXXXXXX, XX., M.D.
-------------------------------------------------
Xx. Xxxxxxx X'Xxxxxxx, Xx., M.D.
/s/ XXXXXX XXXXXXXXXX
-------------------------------------------------
Xxxxxx XxXxxxxxxx
43
