SHARE PURCHASE AGREEMENT
Among
INCYTE PHARMACEUTICALS, INC.,
HEXAGEN LIMITED
and
THE SHAREHOLDERS OF HEXAGEN LIMITED
21st September, 1998
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE.............................................. 1
1.1 Purchase and Sale of the Company Shares........................ 1
1.2 Shareholders' Warranty and Waiver.............................. 2
1.3 Purchase Price................................................. 2
1.4 Adjustments.................................................... 2
1.5 Escrow Shares.................................................. 2
1.6 Agreement of Shareholders...................................... 2
1.7 Shareholders' Representative................................... 3
ARTICLE II CLOSING........................................................ 5
2.1 Closing........................................ ............... 5
2.2 Actions at the Closing......................................... 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH OF THE
SHAREHOLDERS................................................... 7
3.1 Authority...................................................... 7
3.2 No Conflict with Other Instruments............................. 7
3.3 Ownership of Securities........................................ 8
3.4 Sale Entirely for Own Account.................................. 8
3.5 Reliance Upon the Shareholder's Representations................ 8
3.6 Receipt of Information; Investment Experience.................. 8
3.7 Restricted Securities.......................................... 9
3.8 Legends........................................................ 9
3.9 Brokers or Finders............................................. 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 9
4.1 Organization and Qualification................................. 10
4.2 Capital Structure.............................................. 11
4.3 Subsidiaries; Equity Investments............................... 12
4.4 Authority...................................................... 12
4.5 No Conflict with Other Instruments............................. 12
4.6 Governmental Consents.......................................... 13
4.7 The Accounts................................................... 13
4.8 The Management Accounts........................................ 13
4.9 Accounting and Other Records................................... 14
4.10 Absence of Changes............................................. 14
4.11 Real Property.................................................. 16
4.12 Environmental Matters.......................................... 20
4.13 Taxes.......................................................... 20
4.14 Employees...................................................... 25
4.15 Compliance with Law............................................ 28
4.16 Litigation..................................................... 30
4.17 Contracts...................................................... 30
4.18 No Default..................................................... 31
4.19 Proprietary Rights............................................. 31
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4.20 Computer System and Software................................... 33
4.21 Insurance...................................................... 34
4.22 Brokers or Finders............................................. 34
4.23 Related Parties................................................ 35
4.24 Certain Advances............................................... 35
4.25 Underlying Documents........................................... 35
4.26 Banking Facilities............................................. 35
4.27 Insolvency..................................................... 36
4.28 No Misleading Statements....................................... 37
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER.................... 37
5.1 Organization................................................... 37
5.2 Authority...................................................... 37
5.3 No Conflict with Other Instruments............................. 37
5.4 Governmental Consents.......................................... 37
5.5 SEC Documents.................................................. 38
5.6 Financial Statements........................................... 38
5.7 Litigation..................................................... 38
5.8 Shares of Purchaser Common..................................... 38
5.9 No Misleading Statements....................................... 39
5.10 Brokers or Finders............................................. 39
5.11 Acquisition for Investment..................................... 39
ARTICLE VI ADDITIONAL AGREEMENTS............... .......................... 39
6.1 Stock Options.................................................. 39
6.2 Expenses....................................................... 40
6.3 Public Disclosure.............................................. 40
6.4 Reasonable Efforts............................................. 41
6.5 Conduct; Notification of Certain Matters....................... 41
6.6 Registration Rights............................................ 41
6.7 Additional Documents and Further Assurances.................... 41
6.8 Blue Sky Laws.................................................. 41
6.9 Nasdaq Listing................................................. 42
6.10 Indemnification................................................ 42
6.11 Tax Returns.................................................... 42
ARTICLE VII CONDITIONS TO THE CLOSING...................................... 43
7.1 Conditions to Obligations of Each Party to Effect the Closing.. 43
7.2 Additional Conditions to Obligations of the Shareholders....... 44
7.3 Additional Conditions to the Obligations of Purchaser.......... 44
ARTICLE VIII INDEMNIFICATION AND ESCROW..................................... 46
8.1 Survival of Representations and Warranties, Etc................ 46
8.2 Indemnification and Escrow Arrangements........................ 46
8.3 Claims Resulting From Breaches of Certain Representations and
Warranties..................................................... 51
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.............................. 52
9.1 Termination.................................................... 52
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9.2 Effect of Termination.......................................... 53
9.3 Amendment or Supplement........................................ 53
9.4 Extension of Time, Waiver...................................... 53
ARTICLE X GENERAL........................................................ 54
10.1 Notices........................................................ 54
10.2 Headings....................................................... 56
10.3 Counterparts................................................... 56
10.4 Entire Agreement; Assignment................................... 56
10.5 Severability................................................... 56
10.6 Other Remedies................................................. 56
10.7 Interpretation................................................. 56
10.8 Governing Law.................................................. 56
10.9 Appointment of Agent........................................... 57
10.10 Absence of Third-Party Beneficiary Rights...................... 57
10.11 Restrictive Trade Practices Act................................ 57
Exhibit A Form of Irrevocable Undertaking
Exhibit B Form of Escrow Agreement
Exhibit C Registration Rights
Exhibit D-1 Form of Amendments to Hexagen plc Unapproved Share Option
Plan 1996 (effective prior to Closing)
Exhibit D-2 Form of Amendments to Hexagen plc Unapproved Share Option
Plan 1996 (effective upon Closing)
Exhibit D-3 Form of Option Exchange Agreement
Exhibit D-4 Form of Replacement Option Certificate
Exhibit D-5 Form of Option Release Deed
Exhibit E Form of Restrictive Covenants Agreement
Schedule I Schedule of Consideration
Schedule II Schedule of Options to be Converted
Schedule III Computation of Purchaser Shares and Option Exchange Ratio
Schedule 2.2 Post-Closing Directors and Officers of the Company; Resignations
Schedule 7.3 Schedule of Shareholders and Employees to be Parties to
Restrictive Covenants Agreement and Employment Agreements
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") dated as of the 21st
day of September, 1998, by and among INCYTE PHARMACEUTICALS, INC., a Delaware
corporation ("Purchaser"), HEXAGEN LIMITED, a company incorporated in England
and Wales (the "Company"), and the persons and entities listed on Schedule I
hereto (the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders collectively own all of the issued and
outstanding share capital of the Company (collectively, the "Company Shares");
WHEREAS, the Company owns all of the issued and outstanding share
capital of Hexagen Technology Limited, a company incorporated in England and
Wales (the "Subsidiary");
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, Purchaser wishes to purchase, and the Shareholders wish to sell, the
Company Shares for the consideration set forth below; and
WHEREAS, on August 14, 1998 (the "Announcement Date"), Purchaser and the
Company entered into an Agreement (the "Master Agreement") governing certain
actions to be taken prior to the Closing (as defined below) under this
Agreement;
WHEREAS, as of the Announcement Date, Shareholders holding at least 90%
of the Company Shares have entered into agreements in favor of Purchaser in the
form attached hereto as Exhibit A ("Irrevocables") pursuant to which, among
other things, such Shareholders have agreed to execute this Agreement following
the completion of certain events:
N o w, T h e r e f o r e, in consideration of the premises and of the
mutual agreements, provisions and covenants herein contained, Purchaser, the
Company and the Shareholders hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
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1.1 Purchase and Sale of the Company Shares. Upon and subject to the
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terms and conditions of this Agreement, Purchaser hereby offers to purchase from
each Shareholder, and each Shareholder hereby undertakes to sell or procure the
sale of and transfer to Purchaser, all legal and beneficial interest in that
number of Company Shares as is set out against such Shareholder's name in
Schedule I hereto free from all liens, charges, encumbrances and equities of any
description together with all rights now or hereafter attaching thereto with
full title guarantee (as construed under English law). At the closing of the
transactions contemplated by this Agreement (the "Closing"), each Shareholder
shall deliver or procure delivery to Purchaser of certificates evidencing the
Company Shares accompanied by duly executed transfers of all the Company Shares
in favor of Purchaser.
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1.2 Shareholders' Warranty and Waiver. Each of the Shareholders warrants
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to Purchaser that such Shareholder is entitled to sell and transfer to Purchaser
the full legal and beneficial ownership of the Company Shares held by such
Shareholder and that such shares are free and clear of any and all Encumbrances
(as defined in Section 3.1 below). Each of the Shareholders hereby waives and
undertakes to procure the waiver of all pre-emption and similar rights over the
Company Shares or any of them to which such Shareholder or any other person
controlled by such Shareholder may be entitled under the Articles of Association
of the Company, the Subscription and Shareholders' Agreement relating to Hexagen
plc dated 11 July 1996, as amended by the 1996 Supplemental Agreement to the
Subscription and Shareholders' Agreement dated 4 September 1996 and the Second
Supplemental Agreement to the Subscription and Shareholders' Agreement dated 19
November 1996 (collectively, the "Shareholders' Agreement"), or otherwise in
relation to the sale and purchase of the same hereunder. Nothing in this
Agreement shall oblige Purchaser to buy any of the Company Shares or otherwise
complete this Agreement unless the sale and purchase of all the Company Shares
is completed simultaneously.
1.3 Purchase Price. The aggregate purchase price (the "Consideration")
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to be paid by Purchaser for the Company Shares shall be (i) $5,000,000 in cash
plus such amount of cash to be paid in lieu of fractional Purchaser Shares (the
"Cash Payment") and (ii) the number of shares (the "Purchaser Shares") of common
stock, $.001 par value, of Purchaser ("Purchaser Common") calculated as set
forth in Schedule III attached hereto. Cash to be paid in lieu of fractional
shares shall be calculated based on the average closing price of the Purchaser
Common on the Nasdaq National Market for the 30 consecutive trading day period
ending on the trading day immediately preceding the Announcement Date (the
"Purchaser Common Average Price").
1.4 Adjustments. If at any time during the period between the
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Announcement Date and the Closing, any change in the outstanding shares of
capital stock of Purchaser shall occur, including by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date during
such period, the number of shares of Purchaser Common constituting all or part
of the Consideration shall be appropriately adjusted.
1.5 Escrow Shares. A portion of the Purchaser Shares issued as a portion
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of the Consideration (the "Escrow Shares") shall be placed in escrow as
collateral for the indemnification obligations of the Shareholders pursuant to
Article VIII of this Agreement. The aggregate number of Escrow Shares shall be
as set forth on Schedule I hereto and shall be based upon the following formula:
the number of shares of Purchaser Common equal to the quotient of (a) $9,000,000
divided by (b) the Purchaser Common Average Price, rounded to the nearest whole
share.
1.6 Agreement of Shareholders. Each of the Shareholders hereby consents
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and agrees with the other Shareholders and Purchaser to the allocation of the
Consideration among the Shareholders in the manner set forth on Schedule I
hereto. Each of the Shareholders shall receive, or shall receive evidence of an
irrevocable instruction to Purchaser's Transfer Agent to issue, at the Closing
such number of Purchaser Shares that are not to be delivered to the Escrow Agent
(as defined in Section 8.2(a) below) pursuant to the provisions of Section 1.5
and Article VIII (the "Initial Shares") set forth opposite such Shareholder's
name on Schedule I hereto. The number of Escrow Shares to be delivered to the
Escrow Agent pursuant to the provisions of Section 1.5 and Article VIII on
behalf of each Shareholder is set forth opposite such Shareholder's name on
Schedule I hereto. The Initial Shares and the Escrow Shares together constitute
the Purchaser Shares.
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1.7 Shareholders' Representative.
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(a) In order to administer efficiently the transactions contemplated
hereby, including (i) the waiver of any condition to the obligations of the
Shareholders to consummate the transactions contemplated hereby, (ii) the
defense and/or settlement of any claims that may be made by Purchaser following
the Closing against the Escrow Fund (as defined in Section 8.2(a) below), and
(iii) the preparation of all documentation and conduct of all matters relating
to the Tax Returns (as defined in Section 4.13 below) and computations of the
Company and the Subsidiary pursuant to the provisions of Section 6.11 below, the
Shareholders hereby designate Stephen Bunting as their representative (the
"Shareholders' Representative").
(b) Each Shareholder irrevocably agrees that such Shareholder grants the
Shareholders' Representative full power and authority to act as agent and
attorney-in-fact for each Shareholder, for and on behalf of the Shareholders,
(i) to take all action necessary in connection with the waiver of any condition
to the obligations of the Shareholders to consummate the transactions
contemplated hereby, or the defense and/or settlement of any claims that may be
made by Purchaser following the Closing against the Escrow Fund, (ii) to give
and receive all notices required to be given or received by the Shareholders
under this Agreement or the Escrow Agreement, (iii) to authorize delivery to
Purchaser of shares of Purchaser Common from the Escrow Fund in satisfaction of
claims by Purchaser, to object to such deliveries, to agree to negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and (iv)
to take any and all additional action necessary or appropriate in the judgment
of the Shareholders' Representative for the accomplishment of the foregoing or
as is contemplated to be taken by or on behalf of the Shareholders by the terms
of this Agreement and the Escrow Agreement.
(c) The agency of the Shareholders' Representative may be changed by the
Shareholders from time to time upon not less than 30 days' prior written notice
to Purchaser; provided that the Shareholders' Representative may not be removed
unless holders of at least two-thirds in interest of the Escrow Fund agree to
such removal and to the identity of the substituted agent. In the event that the
Shareholders' Representative dies, becomes unable to perform his or her
responsibilities hereunder or resigns from such position, the Shareholders
holding, prior to Closing, a majority in interest of the Escrow Fund shall
select another representative to fill such vacancy and such substituted
representative shall be deemed to be the Shareholders' Representative for all
purposes of this Agreement and the documents delivered pursuant hereto. No bond
shall be required of the Shareholders' Representative, and the Shareholders'
Representative shall not receive compensation for his or her services. No
provision of this Agreement shall restrict in any way the ability or right of
the Shareholders' Representative to voluntarily resign from such position at any
time, and any such resignation shall be done without any liability to the
Shareholders' Representative.
(d) All decisions and actions by the Shareholders' Representative,
including without limitation any agreement between the Shareholders'
Representative and Purchaser relating to the defense and/or settlement of any
claims that may be made by Purchaser following the Closing against the Escrow
Fund, shall be binding upon all of the Shareholders and no Shareholder shall
have the right to object, dissent, protest or otherwise contest the same.
(e) By such Shareholder's execution of this Agreement, each Shareholder
agrees that:
(i) Purchaser shall be able to rely conclusively on the
instructions and decisions of the Shareholders' Representative as to
the settlement of any claims for indemnification of Purchaser
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and/or the Company pursuant to the Escrow Agreement or Article VIII
below or any other actions required or permitted to be taken by the
Shareholders' Representative hereunder, and no party hereunder shall
have any cause of action against Purchaser to the extent that Purchaser
has relied upon the instructions or decisions of the Shareholders'
Representative;
(ii) all actions, decisions and instructions of the Shareholders'
Representative shall be conclusive and binding upon all of the
Shareholders and no Shareholder shall have any cause of action against
the Shareholders' Representative for any action taken, decision made or
instruction given by the Shareholders' Representative under this
Agreement, except for fraud or willful breach of this Agreement by the
Shareholders' Representative;
(iii) notices or communications to or from the Shareholders'
Representative shall constitute notice to or from each of the
Shareholders for purposes of this Agreement and the Escrow Agreement;
(iv) the provisions of this Section 1.7 are independent and
severable, are irrevocable and coupled with an interest and shall be
enforceable notwithstanding any rights or remedies that any Shareholder
may have in connection with the transactions contemplated by this
Agreement;
(v) remedies available at law for any breach of the provisions of
this Section 1.7 are inadequate; therefore, Purchaser and the Company
shall be entitled to temporary and permanent injunctive relief without
the necessity of proving damages if either Purchaser or the Company
brings an action to enforce the provisions of this Section 1.7.
(vi) as between such Shareholder and the other Shareholders, the
Shareholders' Representative shall have full power to determine all
questions and doubts arising in relation to any of the provisions of
this Agreement and every such determination made in good faith shall be
conclusive and binding on the Shareholders and the Shareholders'
Representative may act on the opinion or advice of or information
obtained from any solicitor, attorney, banker, broker, accountant or
other expert and shall not be responsible for any loss occasioned by so
acting;
(vii) such Shareholder shall, together with all of the other
Shareholders, jointly and severally indemnify the Shareholders'
Representative from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Shareholders' Representative by
Purchaser, the Company, other Shareholders, or any other person in
connection with this Agreement and in suing for and recovering any sum
due to the Shareholders or any of them under this Agreement;
(viii) in performing the functions specified in this Agreement
and the Escrow Agreement, the Shareholders' Representative shall not be
liable to any Shareholder in the absence of willful misconduct on the
part of the Shareholders' Representative; and
(ix) the provisions of this Section 1.7 shall be binding upon the
executors, heirs, legal representatives, personal representatives,
successor trustees, and successors of each Shareholder, and any
references in this Agreement to a Shareholder or the Shareholders shall
mean and include the successors to the Shareholder's rights hereunder,
whether pursuant to testamentary disposition, the laws of descent and
distribution or otherwise.
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(f) All fees and expenses incurred by the Shareholders' Representative
shall be paid out of amounts remaining in the Escrow Fund after satisfaction of
all claims of Purchaser against such fund. Upon application by the Shareholders'
Representative to the Escrow Agent and Purchaser prior to the satisfaction of
all claims of Purchaser against the Escrow Fund, Purchaser may in its sole and
absolute discretion authorize the Escrow Agent to release a portion of the
Escrow Fund to the Shareholders' Representative in reimbursement of fees and
expenses incurred prior to such time. In making such payment, any shares of
Purchaser Common to be distributed from the Escrow Fund shall be valued at the
closing price of the Purchaser Common on the Nasdaq National Market on the day
of distribution. Nothing in this Section 1.7(f) shall limit the obligations of
the Shareholders under Section 1.7(e)(vii). In carrying out his functions under
this Agreement, the Shareholders' Representative shall be permitted, in his
discretion, to solicit from each of the Shareholders an advancement of funds in
an amount sufficient to cover the anticipated expense associated with any
necessary or appropriate act hereunder, and each Shareholder, consistent with
such Shareholder's obligations pursuant to Section 1.7(e)(vii) above, shall
comply with such request.
ARTICLE II
CLOSING
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2.1 Closing. The Closing shall take place at the offices of Taylor
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Joynson Garrett, Carmelite, 50 Victoria Embankment, Blackfriars, London, England
as soon as practicable following satisfaction or waiver of all of the conditions
to the obligations of the parties to consummate the transactions contemplated
hereby in accordance with this Agreement or at such other time, place and date
as is mutually agreed to by the parties hereto. The date of the Closing is
referred to in this Agreement as the "Closing Date."
2.2 Actions at the Closing. At the Closing:
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(a) the Shareholders and/or the Company, as the case may be, shall
deliver to Purchaser the various certificates, instruments and documents
referred to in Section 7.3 below;
(b) Purchaser shall deliver to the Shareholders and/or the Company
the various certificates, instruments and documents referred to in Section 7.2
below;
(c) each Shareholder shall deliver or procure delivery to Purchaser of
certificates ("Certificates") evidencing the Company Shares accompanied by duly
executed transfers of all the Company Shares in favor of Purchaser (or its
nominee(s)), and, in connection therewith, each Shareholder hereby irrevocably
appoints, as of the time of Closing, any corporate officer of Purchaser and any
Executive Director of the Company as such Shareholder's attorney and irrevocably
instructs the attorney to execute all or any form(s) of transfer, surrender
and/or other document(s) at the attorney's direction in relation to the Company
Shares in favor of Purchaser or such other person or persons as Purchaser may
direct and to do all such acts and things as may in the opinion of such attorney
be reasonably necessary or reasonably expedient for the purposes of, or in
connection with, the acceptance of the offer made in Section 1.1 and to
surrender or vest in Purchaser or its nominee(s) the Company Shares, provided
that the terms of this clause shall not apply to any Shareholder who, by virtue
of his, her or its constitution, is expressly prohibited from granting a power
of attorney in such terms;
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(d) Purchaser shall deliver to each Shareholder or their respective
nominees a certificate for, or evidence of an irrevocable instruction to
Purchaser's Transfer Agent to issue, the number of Initial Shares set forth
opposite such Shareholders' name on Schedule I hereto and shall deliver to each
Shareholder a check, payable in Dollars, in the amount of the portion of the
Cash Payment set forth opposite such Shareholder's name on Schedule I hereto;
(e) Purchaser, the Shareholders' Representative and the Escrow Agent
shall execute and deliver the Escrow Agreement attached hereto as Exhibit B (the
"Escrow Agreement") and Purchaser shall deliver to the Escrow Agent a
certificate for, or an irrevocable instruction to Purchaser's Transfer Agent to
issue, the number of Escrow Shares being placed in escrow on the Closing Date
pursuant to Section 1.5 and Article VIII;
(f) the Shareholders shall procure that a board meeting of the Company
shall be held at which (i) such persons as Purchaser may nominate will be
appointed directors of the Company; (ii) there shall be submitted and accepted
the resignations referred to in Section 7.3(f); (iii) subject only to their
being duly stamped (where applicable), the transfers of the Company Shares
contemplated by this Agreement shall be approved and Purchaser and/or its
nominee(s) shall be registered as the holders of the Company Shares and new
share certificates shall be executed and issued accordingly; (iv) all existing
instructions to banks shall be cancelled and new instructions given in such form
as Purchaser may require; (v) the registered office of the Company will be
changed to Carmelite, 50 Victoria Embankment, Blackfriars, London EC4Y 0DX; and
(vi) the persons set forth on Schedule 2.2 hereto will be appointed officers of
the Company;
(g) Purchaser shall deliver to the Shareholders' Representative for the
benefit of the Shareholders:
(i) (A) the Certificate of Incorporation of Purchaser, certified
as of a recent date by the Secretary of State of the State of Delaware,
and (B) a certificate of said Secretary dated as of a recent date as to
the due incorporation and good standing of Purchaser and listing all
documents on file with said Secretary;
(ii) certificate of the Secretary or an Assistant Secretary of
Purchaser dated the Closing Date and certifying (A) that the Certificate
of Incorporation of Purchaser has not been amended since the date of the
last amendment referred to in the certificate delivered pursuant to
clause (i)(B) above, (B) that attached thereto is a true and correct
copy of the Bylaws of Purchaser as in effect on the Closing Date, (C)
that attached thereto is a true and correct copy of all resolutions
adopted by the Board of Directors of Purchaser authorizing the
execution, delivery and performance of this Agreement and the ancillary
agreements and transactions contemplated hereby and that such
resolutions have not been amended or modified and are in full force and
effect in the form adopted, and (D) to the incumbency and specimen
signature of each officer of Purchaser executing this Agreement and each
ancillary agreement to be executed by Purchaser pursuant to this
Agreement and any certificate or instrument furnished pursuant hereto;
and
(h) the Company and/or the Shareholders shall procure that the auditors
of the Company and the auditors of the Subsidiary shall deliver their written
resignation to Purchaser together with a statement in accordance with section
394 of the Companies Act 1985 (the "Companies Act") that there are no
circumstances connected with such resignation which they consider should be
brought to the attention of the Shareholders or creditors of the Company or the
Subsidiary, as the case may be, and that there are no fees or other payments due
to them from the Company or the Subsidiary.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
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OF EACH OF THE SHAREHOLDERS
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Each Shareholder severally and not jointly represents and warrants to
Purchaser that as to such Shareholder:
3.1 Authority. Such Shareholder has all power to execute and deliver
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this Agreement and to carry out and perform such Shareholder's respective
obligations under the terms of this Agreement and the related agreements
required to be entered into as conditions of Closing under Article VII hereof.
Such Shareholder has the full power to exchange, assign, transfer and deliver
his, her or its Company Shares hereunder, free and clear of all covenants,
conditions, voting trust arrangements, liens, encumbrances, equities, security
interests, restrictions, claims, charges, and other claims or rights of third
parties ("Encumbrances"). This Agreement, when executed and delivered by such
Shareholder, will constitute the valid and legally binding obligation of such
Shareholder, legally enforceable against such Shareholder in accordance with the
terms of this Agreement, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting the
rights of creditors generally, limitations imposed by English, U.S. federal or
state law or equitable principles upon the specific enforceability of any of the
remedies, covenants or other provisions of this Agreement, and upon the
availability of injunctive relief or other equitable remedies.
3.2 No Conflict with Other Instruments. The execution and delivery of,
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and the performance by such Shareholder of, its obligations under this Agreement
(including the Exhibits hereto), the related agreements required to be entered
into as conditions of Closing under Article VII hereof, and the transactions
contemplated hereby (i) will not result in any violation of, conflict with,
constitute a breach, violation or default (with or without notice or lapse of
time, or both) under (x) any provision of the Memorandum and Articles of
Association or other charter or governing document of such Shareholder (in the
event the Shareholder is not an individual) or (y) any agreement, arrangement,
order, judgment or decree of any court or any governmental agency, contract,
understanding, note, mortgage, indenture, lease, franchise, license, permit or
other instrument to which such Shareholder is a party or by which such
Shareholder or any of his or its properties or assets is bound, (ii) will not
conflict with, or result in any breach or violation of, any statute, judgment,
decree, order, rule or governmental regulation applicable to such Shareholder or
his or its properties or assets, or (iii) will not result in the imposition of
any Encumbrance upon the Company Shares owned by such Shareholder.
3.3 Ownership of Securities. In respect of the number of the Company
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Shares set out against each Shareholders' name in Schedule I hereto, such
Shareholder will sell such Company Shares pursuant to this Agreement with full
title guarantee (as construed under English law) and, upon consummation of the
purchase contemplated by this Agreement, Purchaser will acquire such Company
Shares free and clear of all Encumbrances with full title guarantee and with the
benefit of all other rights and advantages belonging to or accruing on such
Company Shares. Except for the Shareholders' Agreement, such Shareholder is not
a party to any voting trust, proxy, or other agreement or understanding between
or among any persons that affects or relates to the voting or giving of written
consent with respect to any outstanding security of the Company. Each
Shareholder hereby agrees to waive any rights which such Shareholder has, or
might have at any time in the future, against the Company or the Subsidiary
arising from the Shareholders' Agreement. Each Shareholder also confirms that
neither the Company nor the Subsidiary shall have any obligation to such
Shareholders under the Shareholders' Agreement.
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3.4 Sale Entirely for Own Account. This Agreement is made with such
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Shareholder in reliance upon such Shareholder's representation to Purchaser,
which by the execution of this Agreement such Shareholder hereby confirms, that
the Purchaser Shares to be received by each Shareholder will be acquired for
investment for the Shareholder's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that such
Shareholder has no present intention of selling, granting any participation in,
or otherwise distributing the same other than in each case pursuant to the
Registration Statement contemplated by the Registration Rights set forth in
Exhibit C hereto or pursuant to an appropriate exemption from registration under
applicable law. By executing this Agreement, such Shareholder further represents
that he, she or it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Purchaser Shares.
3.5 Reliance Upon the Shareholder's Representations. Such Shareholder
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understands that the Purchaser Shares are not registered under the United States
Securities Act of 1933 (the "Securities Act") on the ground that the sale
provided for in this Agreement and the issuance of securities hereunder is
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof and/or Regulation S promulgated thereunder, and that Purchaser's
reliance on such exemption is based on such Shareholder's representations set
forth herein. Such Shareholder realizes that the basis for the exemption may not
be present if, notwithstanding such representations, such Shareholder has in
mind merely acquiring the Purchaser Shares for a fixed or determinable period in
the future, or for a market rise, or for sale if the market does not rise. Such
Shareholder has no such intention.
3.6 Receipt of Information; Investment Experience. Such Shareholder,
---------------------------------------------
either alone or with such Shareholder's purchaser representative (within the
meaning of Rule 501(h) promulgated under the Securities Act), believes it has
received all the information it considers necessary or appropriate for deciding
whether to acquire the Purchaser Shares. Such Shareholder further represents
that such Shareholder (or such Shareholder's purchaser representative) has had
adequate opportunity to obtain from representatives of Purchaser such
information, in addition to the representations set forth in this Agreement, as
is necessary to evaluate the merits and risks of such Shareholder's investment
in the Purchaser Shares. Such Shareholder, either alone or with such
Shareholder's purchaser representative, has sufficient experience in business,
financial and investment matters to be able to evaluate the risks involved in
the acquisition of the Purchaser Shares to be issued to such Shareholder
pursuant to the terms of this Agreement and to make an informed investment
decision with respect to such investment.
3.7 Restricted Securities. Such Shareholder understands that the
---------------------
Purchaser Shares may not be sold, transferred or otherwise disposed of without
registration under the Securities Act or an exemption therefrom, and that in the
absence of an effective registration statement covering the Purchaser Shares or
an available exemption from registration under the Securities Act, the Purchaser
Shares must be held indefinitely. In particular, such Shareholder is aware that
the Purchaser Shares may not be sold pursuant to Rule 144 promulgated under the
Securities Act unless all of the conditions of that Rule are met. In this
connection, such Shareholder represents that such Shareholder understands that
under Rule 144, the Purchaser Shares must be held for at least one year after
purchase thereof from Purchaser prior to resale (two years in the absence of
public current information about Purchaser) and that, under certain
circumstances, the conditions for use of Rule 144 include the availability of
public current information about Purchaser, that sales be effected through a
"broker's transaction" or in transactions with a "market maker," and that the
number of shares being sold not exceed specified limitations. Such public
current information about Purchaser for purposes of Rule 144 is now available,
but may not be in the future.
-8-
<PAGE>
3.8 Legends. It is understood that the certificates evidencing the
-------
Purchaser Shares may bear one or all of the following legends:
(a) "The shares represented by this certificate have not been registered
under the United States Securities Act of 1933. They may not be sold, offered
for sale, pledged, hypothecated or otherwise transferred in the absence of a
registration statement in effect with respect to such shares under such Act or
an opinion of counsel or other evidence satisfactory to Incyte Pharmaceuticals,
Inc. and its counsel that such registration is not required."
(b) Any legend required by any other jurisdiction.
3.9 Brokers or Finders. Such Shareholder has not dealt with any broker
------------------
or finder in connection with the transactions contemplated by this Agreement.
Such Shareholder has not incurred, and shall not incur, directly or indirectly,
any liability for any brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Except as otherwise specifically set forth in the disclosure schedule
delivered by the Company to Purchaser at the time of execution of the Master
Agreement and signed by the Executive Directors of the Company in their
capacities as such (the "Original Disclosure Schedule"), as updated to reflect
events that occurred following the date of the Master Agreement (such Original
Disclosure Schedule, as so amended to the date hereof, the "Disclosure
Schedule") the Company represents and warrants to Purchaser as follows (where
any paragraph of this Article IV or any provision or disclosure made or referred
to in the Disclosure Schedule is qualified by the expression "to the knowledge
of the Company" or "the Company is not aware" or any similar expression, then
that expression shall be deemed to refer to the actual knowledge of Mark Bodmer,
Andrew Sandham, and Lynda Connon after reasonable inquiry):
4.1 Organization and Qualification.
------------------------------
(a) The Company is a private company limited by shares incorporated
under the laws of England and Wales. The Company has all requisite power and
authority to own, lease and operate its respective properties and to carry on
its business as now being conducted.
(b) Each of the Company and the Subsidiary (as defined in Section 4.3)
is qualified to conduct business in its jurisdiction of incorporation.
(c) True, complete and accurate copies, with respect to the Company and
the Subsidiary, of the respective Memoranda and Articles of Association, as
amended to the date hereof are annexed to the Disclosure Schedule. True,
complete and accurate copies, with respect to the Company and the Subsidiary, of
the respective minutes of all of directors' and shareholders' meetings, complete
and accurate as of the date hereof have been delivered to Purchaser and a list
of all such minutes setting forth the meeting, meeting date and number of pages
thereof is set forth in the Disclosure Schedule. The Memoranda and Articles of
Association are in full force and effect. Such documents contain full details of
the rights and restrictions attached to the share capital of both the Company
and the
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<PAGE>
Subsidiary, and all resolutions have been properly passed as resolutions of the
Company or the Subsidiary, as appropriate.
(d) The register of members and statutory books of both the Company and
the Subsidiary contain complete, true and accurate records of the members of
each of the Company and the Subsidiary, as appropriate and all the other
information which they are required to contain under the Companies Act, up to
the date of this Agreement, and comply with all the requirements of the
Companies Act and all returns, particulars, resolutions and other documents
required to be delivered by the Company and the Subsidiary to the Registrar of
Companies have been duly delivered within the required time limits and no fines
or penalties are outstanding or known to be due, except in each case where such
non-compliance would not have an Adverse Effect. As used in this Agreement, the
term "Adverse Effect" means an adverse effect on the Company and the Subsidiary,
taken as a whole, or on the conduct of the business of the Company and the
Subsidiary as conducted as of the date of this Agreement.
(e) Neither the Company nor the Subsidiary has received any notice of
any application or intended application for the rectification of its register of
members.
(f) The only directors of the Company and the Subsidiary are the persons
whose names are listed in Section 4.1(f) of the Disclosure Schedule and neither
the Company nor the Subsidiary has any alternate or shadow directors.
(g) Neither the Company nor the Subsidiary has provided any financial
assistance within section 151 of the Companies Act or otherwise directly or
indirectly for the purchase or the proposed purchase of its shares.
(h) Neither the Company nor the Subsidiary has purchased any of its
own shares.
(i) Neither the Company nor the Subsidiary has assets outside the United
Kingdom nor does either company have a branch, agency or place of business or
any permanent establishment (as that expression is defined in the relevant
double taxation relief orders current at the date of this agreement) outside the
United Kingdom and are not required to be qualified to do business outside the
United Kingdom.
4.2 Capital Structure.
-----------------
(a) The authorized share capital of the Company consists of 23,355,672
cumulative convertible preferred ordinary shares of 5p nominal value per share
("Preferred Ordinary Shares"), 5,000,000 'A' ordinary shares of 5p nominal value
per share ("'A'" Ordinary Shares"), and 3,339,668 ordinary shares of 5p nominal
value per share ("Ordinary Shares"). As of the Announcement Date, there were in
issue 22,355,331 Preferred Ordinary Shares, 5,000,000 'A' Ordinary Shares, and
366,210 Ordinary Shares. Between the Announcement Date and the date of this
Agreement, no shares of the Company were issued other than Ordinary Shares
issued upon the exercise of outstanding Company Options referred to in Section
4.2(b) below. Each Preferred Ordinary Share and each 'A' Ordinary Share is
convertible into one Ordinary Share in accordance with the Company's Articles of
Association. The Preferred Ordinary Shares, 'A' Ordinary Shares and Ordinary
Shares are referred to herein collectively as the "Company Shares." The rights,
preferences and privileges of the Company Shares are as set forth in the
Company's Memorandum and Articles of Association.
-10-
<PAGE>
(b) As of the Announcement Date, there were outstanding Company Options
to acquire 3,133,540 Ordinary Shares.
(c) Other than as described in paragraphs (a) and (b) above, there are
no other shares or other equity securities of the Company and no other options,
warrants, calls, conversion rights, commitments or agreements of any character
to which the Company is a party or by which the Company may be bound that do or
may obligate the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares in the Company's share capital or
securities convertible into or exchangeable for the Company's share capital or
that do or may obligate the Company to grant, extend or enter into any such
option, warrant, call, conversion right, commitment or agreement.
(d) All issued Company Shares are, and any of the Company Shares issued
upon exercise of the Company Options (subject to receipt of the exercise prices
as provided therein) will be, validly issued and fully paid and not subject to
any rights of pre-emption (other than those set forth in the Company's Articles
of Association). All outstanding securities of the Company have been issued in
compliance with applicable laws and regulations.
(e) Schedule 4.2 contains complete and accurate lists of the holders of
outstanding Company Shares, the number of shares owned of record by each such
holder, and the number of shares subject to and the holders of outstanding
Company Options, including in each case (other than in the case of Company
Options held by employees of the Company) the addresses of such holders as
extracted from the register of members of the Company. Schedule 4.2 is true,
complete and accurate on the date hereof and, if required, an updated Schedule
4.2 to be attached hereto will be true, complete and accurate as of the Closing
Date. Such Schedule 4.2 identifies the vesting schedule, applicable legends, and
repurchase rights or other risks of forfeiture of any outstanding security of
the Company.
(f) Schedule 4.2 contains a true, complete and accurate list of each
stock option plan, stock appreciation rights or other equity-related stock
incentive plan of the Company.
(g) Of the issued and outstanding Company Shares, no shares are subject
to redemption and, except as described in Schedule 4.2, no shares are subject to
repurchase. There is no right of first refusal, co-sale right, right of
participation, right of first offer, option or other restriction on transfer
applicable to any Company Shares.
(h) Except for the Shareholders' Agreement, the Company is not a party
to or subject to any agreement or understanding, and, to the knowledge of the
Company, there is no voting trust, proxy, or other agreement or understanding
between or among any persons that affects or relates to the voting or giving of
written consent with respect to any outstanding security of the Company, the
election of directors, the appointment of officers or other actions of the board
of directors of the Company (the "Company Board") or the management of the
Company.
4.3 Subsidiaries; Equity Investments. Other than the Subsidiary, the
Company does not have and has never had any other subsidiaries or companies
controlled by the Company and does not own and has never owned any equity
interest in, or controlled, directly or indirectly, any other corporation,
partnership, joint venture, trust, firm or other entity. The Subsidiary is a
private company limited by shares incorporated under the laws of England and
Wales. The Company owns all of the issued share capital of the Subsidiary, free
and clear of any claims, liens or encumbrances, and no options, warrants or
other rights to acquire shares of the Subsidiary are outstanding.
-11-
<PAGE>
4.4 Authority. The Company has all requisite corporate power and
---------
authority to enter into this Agreement and, subject only to the requisite
approval of this Agreement by the Company's shareholders in accordance with the
Shareholders' Agreement, to perform its obligations hereunder and consummate the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance by the Company of its obligations hereunder and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of the Company, including approval of
the Company Board, subject only to the requisite approval of this Agreement by
the Company's shareholders in accordance with the Shareholders' Agreement. This
Agreement is a valid and binding obligation of the Company.
4.5 No Conflict with Other Instruments. The execution, delivery and
----------------------------------
performance of this Agreement and the transactions contemplated hereby (a) will
not result in any violation of, conflict with, constitute a breach, violation or
default (with or without notice or lapse of time, or both) under, give rise to a
right of termination, cancellation, forfeiture or acceleration of any obligation
or loss of any benefit under, or result in the creation or encumbrance on any of
the properties or assets of the Company or the Subsidiary pursuant to (i) any
provision of the Company's or the Subsidiary's Memorandum and Articles of
Association or (ii) any agreement, contract, understanding, note, mortgage,
indenture, lease, franchise, license, permit or other instrument to which the
Company or the Subsidiary is a party or by which the properties or assets of the
Company or the Subsidiary is bound, or (b) to the knowledge of the Company,
conflict with or result in any breach or violation of any statute, judgment,
decree, order, rule or governmental regulation applicable to the Company or the
Subsidiary or their respective properties or assets, except, in the case of
clauses (a)(ii) and (b) for any of the foregoing that could reasonably be
expected not to, individually or in the aggregate, have a material adverse
effect on the Company and the Subsidiary, taken as a whole, or that could
reasonably be expected not to result in the creation of any material lien,
charge or encumbrance upon any assets of the Company or the Subsidiary or that
could not prevent, materially delay or materially burden the transactions
contemplated by this Agreement. As used in this Agreement, any reference to any
event, change or effect being "material" or "materially adverse" or having a
"material adverse effect" on or with respect to an entity (or group of entities,
taken as a whole) means such event, change or effect is material or materially
adverse, as the case may be, to the business, condition (financial or
otherwise), properties, assets, liabilities, or results of operations of such
entity (or, if with respect thereto, of such group of entities taken as a
whole).
4.6 Governmental Consents. No consent, approval, order or authorization
---------------------
of, or registration, declaration of, or qualification or filing with, any court,
administrative agency, commission, regulatory authority or other governmental or
administrative body or instrumentality, whether domestic or foreign, is required
by or with respect to the Company or the Subsidiary in connection with the
execution, delivery and performance of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, except for
such consents, approvals, orders, authorizations, registrations, declarations,
qualifications or filings as may be required under federal or state securities
laws in connection with the transactions contemplated hereby.
-12-
<PAGE>
4.7 The Accounts.
------------
(a) A true, complete and accurate copy of the Accounts is annexed to the
Disclosure Schedule. The Accounts were prepared under the historical cost
convention, and complied with and were prepared in accordance with all
applicable Accounting Requirements. For the purposes of this Agreement
"Accounts" means the audited accounts of the Company and the Subsidiary for the
financial year ending on the Accounts Date including the auditors' and
directors' reports, the audited balance sheets as at the Accounts Date, the
audited profit and loss accounts for such period and the notes thereto,
"Accounts Date" means 31 December 1997 and "Accounting Requirements" means the
accounting requirements of the Companies Act, SAAPs, FRSs, abstracts of the
Urgent Issues Task Force, any other requirement of a United Kingdom accounting
body having mandatory effect and other generally accepted accounting principles
and practices in the United Kingdom.
(b) The Accounts:
(i) make proper provision for, reserve for or disclose, as
appropriate, all liabilities, whether actual, contingent, unquantified
or disputed, all capital commitments, whether actual or contingent, and
all bad or doubtful debts of the Company and the Subsidiary as at the
Accounts Date in each case, in accordance with, and to the extent
required by, applicable Accounting Requirements; and
(ii) make proper provision for or reserve for deferred Taxation
in accordance with, and to the extent required by, applicable Accounting
Requirements.
4.8 The Management Accounts. A true, complete and accurate copy of the
-----------------------
Management Accounts is annexed to the Disclosure Schedule. The Management
Accounts fairly presented the financial condition of the Company and the
Subsidiary as of the Management Accounts Date and the results of operations of
the Company and the Subsidiary for the six-month period then ended, except that
such financial statements are subject to normal and recurring year-end
adjustments. No changes in accounting policies or practices have been made in
the Management Accounts compared with the Accounts. For the purposes of this
Agreement "Management Accounts" means the management accounts of the Company and
the Subsidiary comprising the balance sheets as at the Management Accounts Date
and the profit and loss accounts for the months commencing on the day
immediately following the Accounts Date and ending on the Management Accounts
Date and "Management Accounts Date" means 30 June 1998.
4.9 Accounting and Other Records. All the accounts, books, ledgers and
----------------------------
financial and other records of whatsoever kind of each of the Company and the
Subsidiary (including all invoices) have been kept in accordance with sections
221 and 222 of the Companies Act and are in the possession of the relevant
company or under its control. Neither the Company nor the Subsidiary has any of
its records, systems, controls, data or information, recorded, stored,
maintained, operated or otherwise wholly or partly dependent on or held by any
means (including any electronic, mechanical or photographic process whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of either the Company
or the Subsidiary, as the case may be.
4.10 Absence of Changes. Since the Management Accounts Date, except as
------------------
otherwise contemplated by this Agreement or set forth in the Disclosure
Schedule, the Company and the Subsidiary have conducted their respective
businesses only in the ordinary and usual course without any interruption
-13-
<PAGE>
in the nature, scope or manner of the respective businesses, thereby maintaining
the same as going concerns and, without limiting the generality of the
foregoing:
(a) There have been no changes in the condition (financial or
otherwise), business, net worth, assets, properties, employees, operations,
obligations or liabilities of the Company and the Subsidiary, taken as a whole,
which, in the aggregate, have had or may be reasonably expected to have a
material adverse effect on the Company and the Subsidiary, taken as a whole;
(b) Neither the Company nor the Subsidiary has issued, or authorized for
issuance, or entered into any commitment to issue, any equity security, bond,
note or other security;
(c) Neither the Company nor the Subsidiary has incurred additional debt
for borrowed money, or incurred any obligation or liability, except in the
ordinary course of business consistent with past practice and, in any event, not
in excess of (pound)10,000;
(d) Neither the Company nor the Subsidiary has discharged any obligation
or liability, or discharged, settled or satisfied any claim, lien or
encumbrance, except for current liabilities in the ordinary course of business
consistent with past practice and, in any event, not in excess of (pound)12,500
for any single occurrence or (pound)30,000 in the aggregate;
(e) The Company has not declared or made any dividend, payment or other
distribution (within the meaning of that expression as contained in section 209
or 210 or 418 of the Income and Corporation Taxes Act 1988 ("ICTA"));
(f) The Company has not purchased, redeemed or otherwise acquired or
committed itself to acquire, directly or indirectly, any of its shares;
(g) Neither the Company nor the Subsidiary has conveyed or disposed of,
or agreed to convey or dispose of, by sale, assignment, lease, license or
otherwise, or mortgaged, pledged or otherwise encumbered, any of its intangible
assets or properties, including without limitation its Proprietary Rights (as
defined in Section 4.19);
(h) Neither the Company nor the Subsidiary has mortgaged, pledged,
or otherwise encumbered any of its tangible assets or properties;
(i) Neither the Company nor the Subsidiary has disposed of, or agreed to
dispose of, by sale, lease, license or otherwise, any tangible asset or
property, except in the ordinary course of business consistent with past
practice;
(j) Neither the Company nor the Subsidiary has written off any debts, no
debt has been released by the Company or the Subsidiary on terms that the debtor
pays less than the book value of its debt, and no debt owing to either the
Company or the Subsidiary has proved to any extent to be irrecoverable;
(k) Neither the Company nor the Subsidiary has purchased or agreed to
purchase or otherwise acquire any securities of any corporation, partnership,
joint venture, firm or other entity;
(l) Neither the Company nor the Subsidiary has made any expenditure or
commitment for the purchase, acquisition, construction or improvement of a
capital asset, except in the ordinary course of
<PAGE>
business consistent with past practice and, in any event, not in excess of
(pound)6,000 for any single item or (pound)15,000 in the aggregate;
(m) Neither the Company nor the Subsidiary has entered into any contract
or commitment (whether in respect of capital expenditure or otherwise) on terms
which will allow for less than full recovery by the Company or the Subsidiary of
costs and overheads or which is of a long-term nature, or which involves or
could involve an obligation in excess of (pound)10,000; and for this purpose a
long-term contract or commitment is one which will not be performed in
accordance with its terms within three months after the date it was entered into
or undertaken or which is incapable of termination by the Company or the
Subsidiary, as the case may be, on three months' notice or less;
(n) Neither the Company nor the Subsidiary has adopted or amended any
bonus, incentive, profit-sharing, stock option, stock purchase, pension,
retirement, deferred-compensation, severance, life insurance, medical or other
benefit plan, agreement, trust, fund or arrangement for the benefit of employees
of any kind whatsoever, nor entered into or amended any agreement relating to
employment, services as an independent contractor or consultant, or severance or
termination pay, nor agreed to do any of the foregoing;
(o) Neither the Company nor the Subsidiary has effected or agreed to
effect any change in its directors, officers or any of those Company employees
listed in Section 4.10 of the Disclosure Schedule;
(p) Neither the Company nor the Subsidiary has effected or committed
itself to effect any amendment or modification to its Memorandum or Articles of
Association;
(q) Neither the Company nor the Subsidiary has made any disposal or
deemed disposal which might give rise to a liability for corporation tax on
chargeable gains;
(r) The businesses of the Company and the Subsidiary have not been
materially or adversely affected by the loss of any source of supply which (i)
in the financial year immediately preceding the Accounts Date accounted for five
percent (5%) or more of aggregate amount paid by the Company or the Subsidiary
in such period in relation to the goods, services or equipment supplied to the
Company or the Subsidiary as appropriate, or (ii) was a supplier of goods,
services or equipment to the Company or the Subsidiary in respect of which there
is no other readily available source of supply by five percent (5%) or more or
(iii) is otherwise material to the business of the Company or the Subsidiary;
(s) Neither the Company nor the Subsidiary has disposed of or agreed to
dispose of any asset for a consideration payable by installments where any
installment remains unpaid;
(t) All cash and payments of any kind received by the Company or the
Subsidiary have been credited to the relevant company's accounts with its
bankers;
(u) Each of the Company and the Subsidiary has paid its creditors in
accordance with the same policy as that adopted throughout the financial year
ended on the Accounts Date;
(v) None of the assets of the Company or the Subsidiary has been
diminished by the wrongful act of any person; and
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<PAGE>
(w) There has not been any material change in the working capital
requirements of either the Company or the Subsidiary.
Except as set forth in Section 4.10 of the Disclosure Schedule (relating to cash
expended for the operations of the Company) and except for the effect of any
transactions or actions taken with the prior written consent of Purchaser, the
value of the net tangible assets of the Company and the Subsidiary as at Closing
(as set forth in the Company's and the Subsidiary's accounting records) will not
(subject to any adjustments shown in the Management Accounts) be less than as at
the Accounts Date.
4.11 Real Property.
-------------
(a) The Property
------------
(i) The Leasehold Property (the "Property") known as Unit 214
Cambridge Science Park, Milton Road, Cambridge is held pursuant to a
Lease ("the Lease") dated 8th May 1992 and made between Equitable Life
Assurance Society (the "Landlord") (1) and Computer Centre
(Peterborough) Limited (2) for a term of 15 years from 25th March 1992
at an initial yearly rent of (pound)180,000, and a current yearly rent
of the same amount, and subject to rent reviews at the end of the fifth
and tenth years of the term it comprises the only real property in which
the Company or the Subsidiary has an interest and which is used in
connection with their business.
(ii) The Property is occupied or used under the Lease and the
terms of that lease permit occupation or use for a purpose appropriate
to a Science Park in one or more of the following uses:
(A) Scientific research with associated offices, restaurant, and
support facilities and buildings ancillary to such purposes.
(B) Scientific research associated with industrial production.
(C) Light industrial production of a kind which is dependent on
regular consultation with either or both of the following:
(1) The tenant's own research development and design
staff established in the Cambridge Study Area,
(2) The scientific staff or facilities of Cambridge
University or of local scientific institutions.
(D) Ancillary buildings and works appropriate to the use of the
demised premises as an integral part of a Science Park.
(iii) The Subsidiary is the legal and beneficial owner of the
Property.
(b) Encumbrances
------------
(i) The Property is free from any mortgage, debenture, charge, or
other encumbrance securing the repayment of monies or other obligation
or liability of the Company or the Subsidiary and so far as the Company
is aware of any other person.
-16-
<PAGE>
(ii) The Subsidiary has not created any further subtenancy or
license of its interest in the Property and there are no persons other
than the Company and the Subsidiary in occupation of the Property.
(iii) So far as the Company is aware the Property is not subject
to any outgoings other than the usual general rates and water rates and
insurance premiums, rent and service charges reserved by the Lease.
(iv) The Company is not aware that the Property is subject to any
restrictive covenants, stipulations, easements, profits, or wayleaves,
licenses, grants, restrictions, overriding interests or other rights
vested in third parties, and has not entered into any agreement or
commitment to give or create any of the foregoing.
(v) So far as the Company is aware where any such matters as are
referred to in the last four Warranties have been disclosed in the
Disclosure Schedule, the obligations and liabilities imposed and arising
under them on the Company and/or the Subsidiary have been fully observed
and performed, and any payments in respect of them due and payable by
the Company and/or the Subsidiary have been duly paid.
(vi) The Property is not subject to any option, right of
pre-emption or right of first refusal.
(vii) No notice restricting the use and enjoyment of the Property
by the Subsidiary has been received by the Subsidiary.
(viii) So far as the Company is aware, there are no outstanding
actions, disputes, claims or demands between the Subsidiary and any
third party affecting the Property, or any boundary walls and fences, or
with respect to any of the rights appurtenant to the Property as set out
in the Lease.
(c) Planning Matters
----------------
(i) The Property is not being or intended or required by the
Company and the Subsidiary to be used other than for the permitted user
thereof as defined in the Lease for the purposes of the Town and Country
Planning Act 1990, the Planning (Listed Buildings and Conservation
Areas) Act 1990 and the Planning (Consequential Provisions) Act 1990,
the orders and regulations made thereunder and all legislation of a like
nature (the "Planning Acts").
(ii) So far as the Company is aware, planning permission has been
obtained, or is deemed to have been granted, for the purposes of the
Planning Acts with respect to all existing development on the Property.
(iii) Building regulation consents have been obtained where
necessary with respect to all development, alterations and improvements
to the Property carried out by the Subsidiary.
(iv) Insofar as it relates to the Property compliance is being
made with the Agreement made under section 52 of the Town and Country
Planning Act 1971 dated 26 June 1984 between South Cambridgeshire
District Council (1) and the Master Fellows & Scholars of Trinity
College (2) with respect to the Property.
-17-
<PAGE>
(v) So far as the Company is aware and except as described in the
Disclosure Schedule the Company has satisfied any development charges,
monetary claims and liabilities on the Company and/or the Subsidiary
affecting the Property under the Planning Acts or any other such
legislation.
(d) Statutory Obligations
---------------------
(i) The Company and the Subsidiary have received no notice of any
breach of any statutory or bye-law obligations in relation to the
Property nor notice of any breach of any European Community regulations
or directives in relation to the Property.
(ii) The Company and the Subsidiary have received no notice of
any outstanding and unobserved or unperformed obligation with respect to
the Property necessary to comply with the requirements (whether formal
or informal) of any competent authority exercising statutory or
delegated powers.
(e) Condition of the Property
-------------------------
(i) The Company and the Subsidiary have received no notice of any
breach of the covenants on its behalf contained in the Lease relating to
the repair and maintenance of the Property.
(ii) The Property has the benefit of the fire certificate which
is listed in the Disclosure Schedule and the Company and the Subsidiary
have received no notice of any breach of any of the conditions attached
thereto.
(f) Leasehold Property
------------------
(i) The Subsidiary has paid all rent and service charges demanded
and has received no notice from the Landlord of any breaches of the
covenants on its part and the conditions contained in the Lease and the
last demand (or receipt for rent if issued) was unqualified and the
Company and the Subsidiary have not received notice that the Landlord
has any intention of forfeiting the Lease.
(ii) All licenses, consents and approvals required of the
Subsidiary from the Landlord and any superior landlord under the Lease
where required have been obtained, and the covenants on the part of the
tenant contained in such licenses, consents and approvals have been duly
performed and observed by the Subsidiary.
(iii) There are no rent reviews currently in progress under of
the Lease, but the rent review due in 1997 has never been activated.
(iv) The Company is not aware of any outstanding, unobserved or
unperformed obligations necessary to comply with any notice or other
requirement given by or on behalf of the Landlord under the Lease.
(v) The Subsidiary has not served any notice on the Landlord
claiming any breach by the Landlord of its obligations under the Lease,
nor so far as the Company is aware is there any current dispute with the
Landlord regarding the observance of obligations under the Lease
(whether by the Landlord or the Company and/or the Subsidiary).
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(g) Guarantees
----------
There are no actual or contingent liabilities on the part of the
Company or on the part of the Subsidiary arising directly or indirectly
out of any agreement, lease, underlease, tenancy, sub- tenancy,
conveyance, transfer, license or any other deed or document, including
(but without limitation) any actual or contingent liability arising
directly or indirectly out of:
(i) any estate or interest held by the Company as original
lessee or underlessee; or
(ii) any guarantee given by the Company in relation to a lease
or underlease; or
(iii) any other covenant made by the Company in favor of any
lessor or head lessor.
4.12 Environmental Matters.
---------------------
(a) To the knowledge of the Company and to the extent applicable to the
Company's and the Subsidiary's operations and activities, the Company and the
Subsidiary are, and at all times have been, in compliance with all applicable
national or local statutes, orders, rules, ordinances, regulations, codes and
policies and all judicial or administrative interpretations thereof
(collectively, "Environmental Laws") relating to pollution or protection of the
environment or occupational health and safety, including, without limitation,
Environmental Laws relating to exposures, emissions, discharges, releases or
threatened releases of Hazardous Substances (as defined below) into or on land,
ambient air, surface water, groundwater, personal property or structures
(including the protection, cleanup, removal, remediation or damage thereof), or
otherwise related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, discharge or handling of Hazardous Substances, or
related to health and safety of employees and other persons, except where such
non-compliance would not have an Adverse Effect. Neither the Company nor the
Subsidiary has received any notice of any investigation, claim or proceeding
against the Company or the Subsidiary relating to any violation or alleged
violation on the part of the Company or the Subsidiary under any Environmental
Law, and the Company is not aware of any fact or circumstance that could involve
the Company or the Subsidiary as a party in any litigation, proceeding,
investigation or claim under any Environmental Law. As used in this Agreement,
"Hazardous Substances" means any pollutant, contaminant, material, substance,
waste, chemical or compound that is regulated, restricted or prohibited by any
Environmental Law or designated by any governmental agency to be hazardous,
toxic, radioactive, biohazardous or otherwise a danger to health or the
environment.
(b) Neither the Company nor the Subsidiary has disposed of any Hazardous
Substances on or about any properties at any time owned, leased or occupied by
the Company or the Subsidiary in a manner that would give rise to liability of
the Company or the Subsidiary under any Environmental Law. Neither the Company
nor the Subsidiary has itself disposed of any materials at any site being
investigated or remediated for contamination or possible contamination of the
environment.
(c) To the knowledge of the Company, the Company and the Subsidiary have
all permits, licenses and approvals required by Environmental Laws for their use
and occupancy of, and for all their operations and activities conducted on, the
Properties, and to the knowledge of the Company each of the Company and the
Subsidiary is in full compliance with all such permits, licenses and approvals,
except where such non-compliance would not have an Adverse Effect.
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4.13 Taxes.
-----
(a) Each of the Company and the Subsidiary has filed all Tax Returns (as
defined below) that it was required to file within the requisite time limits and
so far as the Company and the Subsidiary are aware all such Tax Returns were
correct and complete in all material respects and were properly made. Each of
the Company and the Subsidiary has paid all Taxes (as defined below) that are
shown to be due on any such Tax Returns within the time limits set out by law
and the provisions and reserves for Taxes set forth in the Accounts are
sufficient to pay all unpaid Taxes of the Company or the Subsidiary attributable
to all periods ended on or before the Accounts Date, and all Taxes attributable
to the period from and after the Accounts Date and continuing through the
Closing Date are attributable to the operation of the Company and the Subsidiary
in the ordinary course of business of the Company and the Subsidiary. The amount
of the provision for deferred Tax in respect of the Company and the Subsidiary
contained in the Accounts was calculated in accordance with the accountancy
practices generally accepted in the United Kingdom and commonly adopted by
companies carrying on businesses similar to those carried on by the Company and
the Subsidiary. All Taxes that the Company or the Subsidiary is or was required
by law to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper Taxation Authority.
(b) For purposes of this Agreement, "Taxes" means all taxes, charges,
fees, levies, duties, imposts or other similar assessments or liabilities,
including without limitation income, corporation, PAYE, capital gains, value
added taxes, and customs duties and excise duties (but excluding stamp duty)
imposed by the United Kingdom, Germany or any jurisdiction elsewhere in the
world, and any interest, fines or penalties resulting from, attributable to or
incurred in connection with any tax or any contest or dispute thereof and
"Taxation" shall be construed accordingly. For purposes of this Agreement, "Tax
Returns" means all returns, declarations, notices, clearances, or other
information required to be supplied to a Taxation Authority in connection with
Taxes, and "Taxation Authority" means the Inland Revenue, HM Customs and Excise
and any other governmental, state, federal or other fiscal, revenue customs or
excise authority, department, agency, body or office whether in the United
Kingdom or elsewhere in the world having authority or jurisdiction to impose or
assess in relation to the Company or the Subsidiary for any Taxes.
(c) The Company and the Subsidiary have delivered to Purchaser correct
and complete copies of all income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company and the
Subsidiary, and Section 4.13 of the Disclosure Schedule contains a list
identifying all such copies so delivered. No investigation or other inquiry of
any Tax Returns of the Company or the Subsidiary by any Taxation Authority is
currently in progress or, to the knowledge of the Company, threatened or
contemplated. There are no matters likely to affect the liability of the Company
or the Subsidiary (whether accrued, contingent or future) to taxation of any
nature whatsoever or to other sums imposed, charged, assessed, levied or payable
or withdrawal of any relief are disputed with the relevant tax authorities.
Neither the Company nor the Subsidiary is under any liability to pay any fine,
penalty or interest charge by virtue of the provisions of the Taxes Management
Act 1970 or Value Added Tax Act 1994 or similar provisions in other countries.
(d) The amount of tax chargeable to the Company and the Subsidiary
during any accounting period ending before the Accounts Date was not dependent
on any concession, agreement or other formal arrangement with any Taxation
Authority where such concessions, agreements, or arrangements are in writing.
(e) Since the Accounts Date and before the Closing:
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(i) no accounting period of the Company or the Subsidiary has
ended;
(ii) to the knowledge of the Company, no disposal has taken place
or other event occurred which will or may have the effect of
crystallizing a liability to Taxation which should have been included in
the provision for deferred Taxation contained in the Accounts if such
disposal or other event had been planned or predicted at the Accounts
Date; and
(iii) neither the Company nor the Subsidiary has been a party to
any transaction for which any tax clearance provided for by statute has
been obtained or was available.
(f) Each of the Company and the Subsidiary is a registered and taxable
person for the purposes of value added tax, has complied with the requirements
of the Value Added Tax Act 1994 and all applicable regulations or notices made
or issued thereunder, is not in arrears with any payments or returns due, has
maintained in all material respects full, complete, correct and up to date
records, invoices and other documents (as the case may be) appropriate or
requisite for the purposes thereof, and has not been required by the
Commissioners of Customs and Excise to give security.
(g) Neither the Company nor the Subsidiary is, and neither has at any
time been or been treated as, a member of a group of companies or consortium or
associated with any company other than the Company or the Subsidiary for the
purposes of Section 43 of the Value Added Tax Act 1994 and no application for it
to be so treated has at any time been made.
(h) Each of the Company and the Subsidiary has properly operated the Pay
As You Earn System and has deducted tax as required by law from all payments
from which it is required to deduct tax whether made to its employees or
ex-employees or any persons required to be treated as such and accounted to the
Inland Revenue therefor and for all tax chargeable on benefits provided for
officers and employees.
(i) All National Insurance contributions (both employer's and
employee's) in respect of employees, officers of the Company and the Subsidiary
and any person(s) who should have been treated as such for these purposes have
been duly paid.
(j) Save as disclosed in the Tax Returns, since the Accounts Date,
neither the Company nor the Subsidiary has made and neither the Company nor the
Subsidiary is under a contractual obligation or future liability to make or
provide any individual payment or consideration in excess of (pound)2,500 which
could be disallowed as a deduction in computing the profits of the Company or
the Subsidiary or as a charge on the Company's or the Subsidiary's income for
taxation purposes.
(k) To the knowledge of the Company, neither the Company nor the
Subsidiary has made any borrowings in a foreign currency such that on repayment
a charge to corporation tax might arise on any profit or gain accruing in
relation or by reference to any such repayment.
(l) On a sale of any fixed asset (including, without limitation,
machinery and plant) at the value thereof shown in the Accounts no balancing
charge for the purposes of the Capital Allowances Act 1990 will be incurred
which has not been taken into account for deferred tax purposes in accordance
with the accountancy practices generally accepted in the United Kingdom and
commonly adopted by companies carrying on businesses similar to those carried on
by the Company or Subsidiary. Since the Accounts Date, neither the Company nor
the Subsidiary have entered into any transactions in respect of which capital
allowances may be restricted or disallowed.
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<PAGE>
(m) Except to the extent there is a deferred tax provision the book
value of each of the chargeable assets for capital gains purposes of the Company
and the Subsidiary in, or adopted for the purpose of, the Accounts does not
exceed the amount deductible pursuant to Section 38 of the Taxation of
Chargeable Gains Act 1992 ("TCGA") and is such that on the disposal or deemed
disposal of the assets (or any of them) at that value no chargeable gain would
arise, accrue or crystallize in accordance with the accountancy practices
generally accepted in the United Kingdom and commonly adopted by companies
carrying on businesses similar to those carried on by the Company and the
Subsidiary.
(n) To the knowledge of the Company, neither the Company nor the
Subsidiary has made any disposal which has required or would or might require
any computation under Section 42 of the TCGA.
(o) Neither the Company nor the Subsidiary has to the knowledge of the
Company disposed of or acquired (whether or not to the knowledge of the Company)
any asset such that Section 17 or Section 18 of the TCGA might apply in
determining the consideration given or received on such disposal or acquisition.
(p) Neither the Company nor the Subsidiary has been a party to or
involved in any scheme effected or arrangement made whereby on a disposal of an
asset by the Company or the Subsidiary Sections 29 and 30 of the TCGA may be
applicable. Neither the Company nor the Subsidiary have, and will not on Closing
have, any distributable profits which would be chargeable profits as defined in
Section 31 of the TCGA if a disposal within Section 30 of the TCGA were to take
place on or after Closing.
(q) Neither the Company nor the Subsidiary has made any claim under the
provisions of any of Sections 152(1) or 153 of the TCGA or Section 165 of the
TCGA or Section 175 of the TCGA.
(r) Neither the Company nor the Subsidiary has been a party to or a
member of a group of companies which has undertaken any share for share
exchange, any scheme of amalgamation or reconstruction such as are mentioned in
Sections 135 or 136 of the TCGA or Section 139 of the TCGA or Section 343 of the
ICTA, or exempt distribution as defined in Section 214(4) of the ICTA.
(s) No asset of either the Company or the Subsidiary shall be deemed
under Section 179 of the TCGA 1992 to have been disposed of and reacquired by
virtue of or in consequence of the entry into or performance of this Agreement
or any other event since the Accounts Date.
(t) To the knowledge of the Company, neither the Company nor the
Subsidiary has received any asset by way of gift as mentioned in Section 282 of
the TCGA.
(u) To the knowledge of the Company, no distribution within the meaning
of any of Sections 209, 210, 211 and 418 of the Taxes Act 1988 has been made or
will be deemed to have been made by the Company or the Subsidiary (except for
dividends and interest shown in the Accounts and the previous audited accounts
of the Company or the Subsidiary) nor has the Company or the Subsidiary issued
any securities within the meaning of Part VI of the Taxes Act 1988 which remain
in issue and where the interest payable thereon falls to be treated as a
distribution.
(v) Neither the Company nor the Subsidiary has at any time:
(i) reduced its share capital or repurchased, repaid or redeemed
shares of any class of its share capital or capitalized any profits or
reserves or share premium account in the form of,
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<PAGE>
or in paying up any amounts unpaid on, any shares, debentures or other
securities or agreed or resolved to do any of the foregoing; or
(ii) provided capital to any company on terms whereby the company
so capitalized has in consideration thereof issued shares, loan stock or
other securities where the terms of any such capitalization were
otherwise than by way of a bargain made at arms' length or where the
shares, loan stock or other securities acquired are shown in the
Accounts at a value in excess of their market value at the time of
acquisition; or
(iii) issued any share capital to which the provisions of Section
249 ICTA could apply nor owns any such share capital.
(w) To the knowledge of the Company, neither the Company nor the
Subsidiary has entered into any transaction which has given or will or may give
rise to a charge to taxation under the provisions of the Inheritance Tax Act
1984.
(x) All documents in the possession of the Company and the Subsidiary to
which the Company or the Subsidiary, as appropriate, is a party which are
necessary to prove the title of the Company or the Subsidiary to its assets or
by virtue of which the Company or the Subsidiary has any right have been
properly stamped and for the avoidance of doubt this includes adjudication if
appropriate and no such documents which are outside the United Kingdom would
attract stamp duty if they were brought into the United Kingdom and all
transactions to which the Company and the Subsidiary are/were a party and
relating to chargeable securities of the Company or the Subsidiary have been
completed by duly stamped documents of transfer within the meaning of Section
87(5) of the Finance Act 1986 and neither the Company nor the Subsidiary is
liable to stamp duty reserve tax.
(y) Neither the Company nor the Subsidiary is under any present or
future liability to make and has not since the Accounts Date made or received or
surrendered or purported to receive or surrender any amount by way of group
relief (under any of the provisions of Sections 402, 403 and 407 to 413
(inclusive) of the ICTA or by way of advance corporation tax (under Section 240
of the ICTA) nor made any payment for such surrender nor made any election under
Section 247 of the ICTA. All claims by the Company and the Subsidiary for group
relief were valid when made and are now, to the knowledge of the Company, valid.
There is no arrangement or agreement in existence which, whether or not taken
together of the entry into of this Agreement or the Closing, would or may result
in the provisions of Section 410 or Section 240(11) of the ICTA applying to
either the Company or Subsidiary. Neither the Company or Subsidiary have
received any payment in respect of group relief or the surrender of Advance
Corporation Tax which, whether or not as a result of the entry into of this
Agreement or the Closing, is or may be liable to be refunded in whole or in
part.
(z) Neither the Company nor the Subsidiary is under any actual liability
to taxation in respect of any other company (other than the Company or the
Subsidiary) which at any time has been a member of the same group or consortium
as the Company and the Subsidiary or any associated company of the Company and
the Subsidiary for taxation purposes. No Taxation is or may become payable by
the Company or the Subsidiary pursuant to Section 189 of the TCGA in respect of
any transaction or event occurring on or prior to Completion.
(aa) To the knowledge of the Company no consideration due to the Company
or the Subsidiary have become irrecoverable with the meaning of Section 48 of
the TCGA so as to entitle either the Company or the Subsidiary to an adjustment.
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<PAGE>
(ab) There are no disputes or negotiations with H.M. Treasury or the
Inland Revenue present or pending in connection with Sections 739 to 742
(inclusive) of the ICTA or Section 770 of the ICTA and neither the Company nor
the Subsidiary has transferred part or all of any trade carried on outside the
United Kingdom to a company not resident in the United Kingdom.
(ac) Neither the Company nor the Subsidiary is a party to any
transaction or arrangement under which it may be required to pay for any asset
or any services or facilities of any kind or amount which is in excess of the
market value of that asset or services or facilities or will receive any payment
for an asset or any services or facilities of any kind that it has supplied or
provided or is liable to supply or provide which is less than the market value
of that asset or services or facilities.
(ad) Each of the Company and the Subsidiary has at all times been
resident for taxation purposes in the United Kingdom, is not chargeable to tax
or similar duties or imposts in any jurisdiction other than the United Kingdom
and has not made and is not entitled to make any claim under Part XVIII of the
ICTA and has never had any permanent establishment in any other country.
(ae) To the knowledge of the Company, neither the Company nor the
Subsidiary has entered into or been a party to any scheme or arrangement
containing pre-ordained steps and designed wholly for the purposes of avoiding
or deferring taxation within the principle of Furniss v. Dawson and no scheme or
transaction of any nature has been carried out by or proposed in relation to the
Company or the Subsidiary which has given rise to a charge to taxation under
Part XVII of the ICTA.
(af) Neither the Company nor the Subsidiary is, nor has been at any time
since incorporation, a close company for taxation purposes.
4.14 Employees.
---------
(a) A complete and accurate list setting forth all employees, scientific
advisors, contractors and consultants of the Company and the Subsidiary as of
the date hereof, together with their titles or positions, dates of hire, regular
work location and current compensation, current salary and benefits, age, notice
period, confidentiality obligations and all other terms and conditions of
employment or engagement, including any additional terms and conditions of
employment or engagement, whether contained in a Company or staff handbook or
otherwise, is included in Section 4.14(a) of the Disclosure Schedule.
(b) Section 4.14(b) of the Disclosure Schedule sets forth all employment
contracts or other agreements between the Company or the Subsidiary and any
officer or, employee or any other scientific advisor, contractor, consultant or
person relating to the performance of services, and copies of all such
agreements have been delivered to Purchaser.
(c) There are no outstanding offers of employment or engagement made to
any person by the Company or the Subsidiary and there is no one who has accepted
an offer of employment or engagement made by the Company or the Subsidiary who
has not yet taken up that employment or engagement.
(d) No director, employee, scientific advisor, contractor or
consultant of the Company or the Subsidiary:
(i) has given or received notice terminating his or her
employment or engagement or altering its terms, and no such person will
be entitled as a result of the entering into of this
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Agreement and the sale of the Company Shares to Purchaser to give notice
of termination or to claim for any payment or benefit or to treat
himself as being released from any obligation and, to the actual
knowledge of the Company, no such person is planning to terminate his or
her employment as of or shortly after the Closing; or
(ii) is currently on sick leave which (as of the date of this
Agreement) has been for more than 14 consecutive days; or
(iii) is currently on maternity leave.
(e) As of the Management Accounts Date, there were no outstanding
arrears of salary, wages, holiday pay or other remuneration due to any director,
consultant, employee, contractor or scientific advisor of the Company or the
Subsidiary other than as set forth in the Management Accounts.
(f) Except as set forth in Section 4.14(f) of the Disclosure Schedule,
since the Management Accounts Date (i) no change has been made in the rate or
basis of remuneration, fee or other benefits provided for or paid to any
director, consultant, employee, contractor or scientific advisor of the Company
or the Subsidiary and (ii) no change has been made in any other terms of
employment or engagement of any such director, consultant, employee, contractor
or scientific advisor.
(g) Neither the Company nor the Subsidiary has entered into any
agreement or given any assurance (whether legally binding or not) regarding any
future variation in any contract of employment or other agreement in respect of
any of their directors, employees, consultants, contractors or scientific
advisors or any agreement imposing an obligation on the Company or the
Subsidiary to increase the basis and/or rates of remuneration or payment and/or
the provision of other benefits to or on behalf of its directors, employees,
consultants, contractors or scientific advisors at any future date.
(h) All employees of the Company and the Subsidiary who require a work
permit will have a valid work permit in force at the Closing.
(i) Within the period of twelve months prior to the date of this
Agreement the Company has not been a party to any relevant transfer as defined
in the Transfer of Undertakings (Protection of Employment) Regulations 1981 (as
amended) nor has the Company failed to comply with any duty to inform and
consult any appropriate representatives of any employees pursuant to such
legislations.
(j) Neither the Company nor the Subsidiary is liable to pay any
industrial levy nor do they have any outstanding undischarged liability to pay
any governmental or regulatory authority in any jurisdiction, other than as
provided in the Accounts, nor any taxation, contribution or other impost arising
in connection with the employment or engagement by the Company or the Subsidiary
of employees, directors, consultants, contractors, or scientific advisers, other
than Pay As You Earn in the United Kingdom in respect of employees and Value
Added Tax in respect of consultants, contractors and advisors registered for
Value Added Tax.
(k) The Company is not aware of any facts or matters affecting any
employee of the Company or the Subsidiary which might reasonably be considered
grounds for dismissing such employee or warning such employee that the
continuation of any conduct or behavior may lead to dismissal.
(l) No grievance or complaint of sex, race or disability discrimination,
whether formal or informal, is pending in an administrative or litigation
proceeding nor, to the Company's knowledge, has
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<PAGE>
been raised by any employee, director or consultant or former employee, director
or consultant of the Company or the Subsidiary in the twelve months prior to
Closing.
(m) Neither the Company nor the Subsidiary has made any loans to or
entered into any credit transaction with any of its directors or to any
employee.
(n) Other than the Company's 1996 Unapproved Company Share Option Plan
(the "Company Option Plan"), a copy of which has been delivered to Purchaser,
neither the Company nor the Subsidiary has any deferred compensation, pension,
health, profit sharing, bonus, stock purchase, stock option, hospitalization,
insurance, severance, redundancy, workers' compensation, supplemental
unemployment benefits, vacation benefits, disability benefits, or any other
employee benefit or otherwise) or welfare benefit plan or obligation covering
any of its officers or employees ("Employee Plans") or any informal
understanding with respect to the foregoing.
(o) The Company Option Plan has been maintained in material compliance
with its governing rules or terms, and all applicable requirements as to the
filing of reports, documents and notices with governmental or regulatory
agencies and the furnishing of documents to participants or beneficiaries have
been satisfied. No employee, former employee or relative or dependent of such
employee or other participants in the Company Option Plan has made any claim
against the Company or the Subsidiary in respect thereof.
(p) Neither the Company nor the Subsidiary has entered into any union
membership, security of employment, redundancy, recognition or other collective
agreement (whether legally binding or not) with a trade union, works council,
staff association, employee representatives or other organization or body of
employees, nor has the Company or the Subsidiary done any act which might be
construed as recognition.
(q) There are no controversies or labor or trade disputes or union
organization activities pending or, to the knowledge of the Company, threatened
between the Company or the Subsidiary and any of their respective employees nor
are there facts known to the Company which might indicate that there may be any
such dispute or activities.
(r) To the actual knowledge of the Company, none of the employees of the
Company or the Subsidiary belongs to any union or collective bargaining unit or
is represented by any works council, staff association or other body
representing employees relating to their activities as employees of the Company
or the Subsidiary.
(s) Each of the Company and the Subsidiary has complied with its
obligations under all applicable foreign, state and federal equal employment
opportunity and other laws and regulations related to employment or working
conditions including, but not limited to, the Equal Pay Act 1970, Article 119 of
the Treaty of Rome, the Sex Discrimination Act 1975, the Race Relations Act
1976, the Trade Union and Labour Relations (Consolidation) Act 1992, the Trade
Union Reform and Employment Rights Act 1993, the Disability Discrimination Act
1995 and the Employment Rights Act 1996.
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4.15 Compliance with Law.
-------------------
(a) All licenses, franchises, permits, approvals, clearances, consents,
certificates and other evidences of authority of the Company and the Subsidiary
that are necessary for the carrying on of their respective businesses
("Permits") are in full force and effect and, to the knowledge of the Company,
neither the Company nor the Subsidiary is in violation of any Permit in any
material respect. The Permits are not subject to any unusual or onerous
conditions. The businesses of the Company and the Subsidiary have been conducted
in accordance with their respective Memoranda and Articles of Association and,
except where such non-compliance would not have an Adverse Effect, all
applicable laws, regulations, orders and other requirements of governmental
authorities (whether in the United Kingdom or any other jurisdiction).
(b) To the knowledge of the Company, there are no investigations,
proceedings, inquiries, communications or other circumstances which indicate
that any Permits may be revoked, cancelled, superseded, modified or not renewed.
(c) No outstanding notices in relation to any statutory obligation have
been served on either the Company or the Subsidiary in respect of any of its
assets or in respect of any contravention or non-compliance with or alleged
contravention or non-compliance with any obligation or otherwise.
(d) Neither the Company nor the Subsidiary is a party to any agreement,
arrangement or concerted practice and is not carrying on any practice which in
whole or in part:
(i) is or requires to be registered under the Restrictive
Trade Practices Act 1976;
(ii) contravenes Articles 85 or 86 of the Treaty of Rome or
Articles 53 or 54 of the Agreement constituting the European Economic
Area or which has been notified to the European Commission or EFTA
Surveillance Authority for a negative clearance or exemption or which
ought to have been so notified;
(iii) contravenes or is invalidated by the provisions of the
Resale Prices Act 1976;
(iv) constitutes an anti-competitive practice as defined in the
Competition Act 1980;
(v) contravenes the Fair Trading Act 1973 or the Data
Protection Act 1984; or
(vi) contravenes or is invalidated by any anti-trust, fair
trading, consumer protection, sectoral regulation or similar legislation
in any jurisdiction where the Company or the Subsidiary has any assets
or carries on business.
(e) Neither the Company nor the Subsidiary has been a party to any
acquisition, merger or joint venture which was or was required to be notified to
the European Commission under Council Regulation 4064/89 or to the EFTA
Surveillance Authority or the European Commission under Article 57 of the
Agreement constituting the European Economic Area.
(f) To the knowledge of the Company, there is not in existence any
practice of the Company or the Subsidiary which is or has been under
investigation by or on behalf of the Office of Fair Trading, the Monopolies and
Mergers Commission, the Secretary of State for Trade and Industry or the
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Commission of the European Communities or the EFTA Surveillance Authority or any
authority having jurisdiction in anti-trust, monopoly, competition or consumer
protection matters.
(g) Neither the Company nor the Subsidiary has received any process,
notice or communication (formal or informal) by or on behalf of the Office of
Fair Trading, the Monopolies and Mergers Commission, the Secretary of State for
Trade and Industry, the Commission of the European Communities or the EFTA
Surveillance Authority or any authority having jurisdiction in anti-trust,
monopoly, competition or consumer protection matters in relation to any aspect
of the business of the Company or the Subsidiary or any agreement or arrangement
to which it is or is alleged to be a party, and no circumstances exist which may
or might give rise to the Company or the Subsidiary receiving any such process,
notice or communication.
(h) Neither the Company nor the Subsidiary is, nor has it been, in
receipt of any state aid within the meaning of Article 92 of the Treaty of Rome.
(i) To the knowledge of the Company, there have not been and are not
pending, or in existence, any investigations or inquiries by, or on behalf of,
any governmental or administrative or other body in respect of any of the
affairs of the Company or the Subsidiary.
(j) Neither the Company nor the Subsidiary has paid any commission or
made any payment whether to secure business or otherwise to any person, firm or
company which in the hands of such person, firm or company would in accordance
with the relevant law give rise to legal liability.
(k) No director, officer, agent, employee or other person acting on
behalf of the Company or the Subsidiary has been party to the use of any assets
of the Company or the Subsidiary for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political or other
activity, or to the establishment or maintenance of any unlawful or unrecorded
fund of monies or other assets, or to the making of any false or fictitious
entries in the books or records of the Company or the Subsidiary, or to the
making of any unlawful payment.
(l) All statements and declarations made to HM Customs & Excise or any
other customs authority, including all import declarations, made by or on behalf
of the Company or the Subsidiary have been true, complete and accurate in all
material respects.
4.16 Litigation. There is no claim, dispute, action, proceeding, notice,
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order, suit, appeal or investigation, at law or in equity, pending or, to the
knowledge of the Company, threatened, against the Company or the Subsidiary or
any pension scheme of either the Company or the Subsidiary or any of their
respective directors, officers, employees, former employees or agents, or
involving any of their respective assets or properties, before any court,
agency, authority, arbitration panel or other tribunal. The Company is not aware
that there are any facts which, if known to shareholders, customers, suppliers,
governmental authorities or other persons, would result in any such claim (other
than customary and normal returns of product in the ordinary course of business
consistent with past practice), dispute, action, proceeding, suit or appeal or
investigation that would have or would reasonably be likely to have a material
adverse effect on the Company or the Subsidiary. Neither the Company nor the
Subsidiary is subject to any order, writ, injunction or decree of any court,
agency, authority, arbitration panel or other tribunal, nor is the Company or
the Subsidiary in default with respect to any notice, order, writ, injunction or
decree.
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4.17 Contracts. Section 4.17 of the Disclosure Schedule contains a
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complete and accurate list of each contract and agreement in the following
categories to which the Company or the Subsidiary is a party, or by which the
Company or the Subsidiary is bound in any respect: (a) agreements for the
purchase, sale, lease or other disposition of equipment, goods, materials,
supplies, or capital assets, or for the performance of services which are not
terminable without penalty on 30 days' notice and as to which there are
obligations remaining to be performed by the Company or the Subsidiary, in any
case involving more than (pound)7,500; (b) contracts or agreements for the joint
performance of work or services, and all other joint venture, collaboration,
research, or other agreements, and grant requests or proposals for research and
development contracts not otherwise listed in Section 4.14 of the Disclosure
Schedule or in the Intellectual Property Disclosure Schedule (as defined in
Section 4.19); (c) management or employment contracts, consulting or scientific
advisory contracts, collective bargaining contracts, termination and severance
agreements not otherwise listed in Section 4.14 of the Disclosure Schedule; (d)
notes, mortgages, deeds of trust, loan agreements, security agreement,
guarantees, debentures, indentures, credit agreements and other evidences of
indebtedness; (e) warrants, repurchase or other contracts or agreements relating
to the issuance of capital stock or other equity interests of the Company or the
Subsidiary; (f) contracts or agreements with third parties who act as agents,
brokers, consignees, sale representatives or distributors; (g) contracts or
agreements with any director, officer, employee, consultant or shareholder
(other than in their capacities as employees of the Company) not otherwise
listed in Section 4.14 or Section 4.23 of the Disclosure Schedule; (h) powers of
attorney or similar authorizations granted by the Company or the Subsidiary to
third parties; (i) licenses, sublicenses, royalty agreements and other contracts
or agreements to which the Company or the Subsidiary is a party, or otherwise
subject, relating to technical assistance or to Proprietary Rights not otherwise
set forth in the Intellectual Property Disclosure Schedule; (j) personal
property or capital equipment leases and other rental, use or service
arrangements of the Company or the Subsidiary involving payment obligations in
excess of (pound)25,000 and which cannot be terminated without penalty on 30
days' notice; and (k) other contracts material to the business of the Company.
There are no other outstanding agreements, arrangements or contracts to
which either the Company or the Subsidiary is a party in any of the foregoing
categories, other than those attached to the Disclosure Schedule. Section 4.17
of the Disclosure Schedule sets forth a summary, identifying the parties and
briefly stating the nature of the discussions, of any negotiations or offers or
the like that are reasonably likely to result in the Company or the Subsidiary
entering into any agreement or arrangement of a kind described in this Section.
Neither the Company nor the Subsidiary has nor, to the knowledge of the
Company, has any of the employees of the Company or the Subsidiary entered into
any contract or agreement containing covenants limiting the right of the Company
or the Subsidiary to compete in any business or with any person. As used in this
Agreement, the terms "contract" and "agreement" include every contract and
agreement, and every legally enforceable commitment, understanding and promise,
in each case whether written or oral.
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4.18 No Default.
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(a) To the knowledge of the Company, each of the contracts, agreements
or other instruments listed in Sections 4.14, 4.17, 4.19 and 4.23 of the
Disclosure Schedule is a legal, binding and enforceable obligation by or against
the Company or the Subsidiary, as the case may be, subject to the effect of
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
federal or state laws affecting the rights of creditors and the effect or
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies. To the knowledge of the Company, no party with whom
the Company or the Subsidiary has an agreement or contract is in default
thereunder or has breached any term or provision thereof which is material to
the conduct of the business of the Company or the Subsidiary, as the case may
be.
(b) Neither the Company nor the Subsidiary has assigned or licensed any
of its rights under, and each of the Company and the Subsidiary has performed,
or is now performing, the obligations of, and each of the Company and the
Subsidiary is not in material default (or would by the lapse of time and/or the
giving of notice be in default) in respect of, any contract, agreement or
commitment binding upon it or its assets or properties and material to the
conduct of its business. No third party has notified the Company or the
Subsidiary of any claim, dispute or controversy with respect to any of the
contracts of the Company or the Subsidiary, as the case may be, nor has the
Company or the Subsidiary received notice or warning of alleged nonperformance,
delay in delivery or other noncompliance by the Company or the Subsidiary, as
the case may be, with respect to its obligations under any of those contracts,
nor, to the knowledge of the Company as of the date hereof, are there any facts
which exist indicating that any of those contracts may be totally or partially
terminated or suspended by the other parties thereto.
4.19 Proprietary Rights.
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(a) Section 4.19 of the Disclosure Schedule sets forth a complete and
accurate list (the "Intellectual Property Disclosure Schedule") of all patents
and applications for patents, trademarks, trade names, service marks, and
copyrights, and applications therefor, owned or used by the Company or the
Subsidiary or in which it has any rights or licenses. Such list specifies, as
applicable: (i) the title of the patent, trademark trade name, service mark,
copyright or application therefor; (ii) the jurisdiction by or in which such
patent, trademark, trade name, service mark or copyright exists and has been
issued or registered or in which an application has been filed, including the
registration or application numbers; and (iii) all Licenses (copies of which
have been delivered to Purchaser). For the purposes of this Agreement,
"Licenses" means all licenses, sub-licenses, agreements, permissions,
undertakings and understandings pursuant to which any third party is licensed or
authorized to use any Proprietary Rights (as defined below) of the Company or
the Subsidiary or pursuant to which the Company or the Subsidiary is authorized
to use the Proprietary Rights of any third party (but not including any off-the-
shelf shrink wrap license) and "Licensors" means the licensors under the
Licenses.
(b) The Company has delivered t