EXCHANGE AGREEMENT
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THIS EXCHANGE AGREEMENT (the "Agreement") is made as of April 12, 2000,
by and among MAXYGEN, INC., a Delaware corporation ("Maxygen"), MAXYGEN HOLDINGS
LTD., a Cayman Islands corporation ("Holdings"), all of whose capital stock is
owned directly by Maxygen, PROFOUND PHARMA A/S, a Danish corporation
("ProFound"), and the shareholders of ProFound.
RECITALS
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A. The Boards of Directors of Maxygen, Holdings and ProFound have
determined that it is advisable and for the respective benefit of Maxygen,
Holdings and ProFound, and their respective securityholders and in their
long-term strategic interests, to combine their businesses in order to combine
their complementary capabilities, assets and human resources to develop
protein-based drugs that address market needs for improved biopharmaceuticals,
and have approved this Agreement and authorized the transactions contemplated
hereby on the terms and subject to the conditions of this Agreement.
B. Pursuant to the terms of this Agreement: (i) the outstanding shares
of Common Stock of ProFound shall be exchanged for newly issued shares of Common
Stock of Maxygen; (ii) some or all of the warrants to subscribe for shares of
Common Stock of ProFound shall be exchanged for options to purchase shares of
Common Stock of Maxygen and (iii) the ProFound securities referenced in (i) and
(ii) above shall subsequently be exchanged by Maxygen for shares of Common Stock
of Holdings.
C. The parties intend that for tax purposes the exchanges provided for
in Recital B shall (i) be approved by the Danish tax authorities as tax deferred
reorganizations within the meaning of Section 13 of the Danish Act on Taxation
of Capital Gains on Shares (aktieavancebeskatningsloven) and (ii) not qualify as
"tax free" reorganizations within the meaning of Section 368 of the United
States Internal Revenue Code.
D. The ProFound Securityholders (as defined below) own all of the
outstanding capital stock of ProFound and all securities or other instruments
convertible into or exercisable for capital stock of ProFound.
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THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
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For purposes of this Agreement, the following terms shall have the
meanings specified or referred to in this Section 1:
"Accounts Receivable"-- shall mean all accounts receivable reflected on
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the Financial Statements or accounts receivable ledger of ProFound.
"Agreement"-- shall mean this Exchange Agreement.
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"Alternative Acquisition"-- as defined in Section 7.8.
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"BankInvest I" -- shall mean Bankforeningernes
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Erhvervsudviklingsforening BankInvest Biomedicinsk Udvikling.
"BankInvest II" -- shall mean Aktieselskabet BI Biomedicinsk Udvikling
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"Business Day"-- shall mean any day, Monday through Friday, on which
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U.S. federally chartered banks are open for business in San Francisco,
California and Danish banks are open for business in Copenhagen, Denmark.
"CCL"-- shall mean the Cayman Islands Companies Law (1998).
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"Claim"-- as defined in Section 12.4.
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"Closing"-- as defined in Section 2.3(a).
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"Closing Date"-- shall mean the date and time as of which the Closing
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actually takes place.
"Code"-- shall mean the United States Internal Revenue Code.
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"Commission"-- shall mean the United States Securities and Exchange
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Commission.
"Confidentiality Agreement"-- shall mean the Confidentiality Agreement,
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dated February 7, 2000, between Maxygen and ProFound.
"Contract"-- shall mean any agreement, contract, obligation, promise,
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commitment or undertaking of any kind (whether written or oral and whether
express or implied), other than those that have been terminated.
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"DCA"-- shall mean the Danish Companies Act, as amended.
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"DGCL"-- shall mean the Delaware General Corporation Law, as amended.
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"Employee Benefit Plan"-- shall mean any plan, policy, program,
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practice, agreement, understanding or arrangement (whether written or oral)
providing compensation or other benefits (other than ordinary cash compensation)
to any current or former director, officer, employee or consultant (or to any
dependent or beneficiary thereof), of ProFound, which are now, or were since
inception of ProFound, maintained by ProFound, or under which ProFound has or
could have any obligation or liability, whether actual or contingent, including,
without limitation, all incentive, bonus, deferred compensation, vacation,
holiday, cafeteria, medical, disability, stock purchase, stock option, warrant,
stock appreciation, phantom stock, restricted stock or other stock-based
compensation plans, policies, programs, practices or arrangements.
"Employment Agreements"-- as defined in Section 7.9.
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"Encumbrance"-- shall mean any mortgage, charge, claim, community
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property interest, equitable interest, lien, option, pledge, security interest,
right of first refusal or restriction of any kind, including any restriction on
use, voting, transfer, receipt of income or exercise of any other attribute of
ownership; and the verb "Encumber" shall be construed accordingly.
"Environmental Claim"-- shall mean any accusation, allegation, notice
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of violation, action, claim, Encumbrance, Lien, demand, abatement or other Order
or direction (conditional or otherwise) by any Governmental Authority or any
Person for personal injury (including sickness, disease or death), tangible or
intangible property damage, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or restrictions resulting from or based upon (i) the existence, or the
continuation of the existence, of a Release (including, without limitation,
sudden or non-sudden accidental or non-accidental Releases) of, or exposure to,
any Hazardous Material or other substance, clinical, material, pollutant,
contaminant, odor, audible noise, or other Release in, into or onto the
environment (including, without limitation, the air, soil, surface water or
groundwater) at, in, by, from or related to the Facilities or any activities
conducted thereon; (ii) the environmental aspects of the transportation,
storage, treatment or disposal of Hazardous Materials in connection with the
operation of the Facilities; or (iii) the violation, or alleged violation, of
any Environmental Laws, Orders or Governmental Permits of or from any
Governmental Authority relating to environmental matters connected with the
Facilities.
"Environmental, Health and Safety Liabilities"-- shall mean any cost,
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damage, expense, liability, obligation or other responsibility arising from or
under any Environmental Law, as well as any liability for torts and damages
according to general
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Danish rules, regulations and ordinary principles, including case law, or
Occupational Safety and Health Law and consisting of or relating to: (a) any
environmental, health or safety matter or condition (including on-site or off-
site contamination, generation, handling and disposal of Hazardous Materials,
occupational safety and health, and regulation of chemical and Hazardous
Materials); (b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, litigation, including civil and
criminal claims, demands and responses, investigative, remedial, response or
inspection costs and expenses arising under Environmental Law or Occupational
Safety and Health Law; (c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment or other remediation
or response actions required by applicable Environmental Law or Occupational
Safety and Health Law and for any natural resource damages; or (d) any other
compliance, corrective, investigative or remedial measures required under
Environmental Law or Occupational Safety and Health Law.
"Environmental Law"-- shall mean any Law concerning the environment, or
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activities that might threaten or result in damage to the environment or human
health, or any Law that is concerned in whole or in part with the environment
and with protecting or improving the quality of the environment and human and
employee health and safety and includes, but is not limited to, the Danish
Environmental Protection Act, the Danish Soil Pollution Act, the Danish Act on
Chemical Substances and Products, the Danish Act on Environmental Gene
Technology, the Danish Act on Compensation for Environmental Damages, the Danish
Act on Working Environment, as such laws have been amended or supplemented, and
the regulations, statutory orders, local council waste by-laws, and other
binding by-laws and guidance and practice notes adopted under any of those laws.
"Escrow Agent"-- as defined in Section 3.1.
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"Escrow Agreement"-- as defined in Section 3.1.
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"Escrow Shares"-- as defined in Section 3.1.
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"Exchange Act"-- shall mean the United States Securities Exchange Act
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of 1934, as amended, or any successor law.
"Exchange Agent"-- as defined in Section 2.4(a).
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"Exchanges"-- shall mean the Holdings Exchange and the Maxygen
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Exchange.
"Expiration Date"-- as defined in Section 12.1(b).
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"Facilities"-- shall mean any real property, leaseholds or other
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interests currently or formerly owned or operated by ProFound, and any
buildings, plants, structures or
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equipment (including motor vehicles) currently or formerly owned or operated by
ProFound.
"Founding Shareholders"-- shall mean Christian Karsten Hansen, Jan
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Moller Mikkelsen, Torben Halkier, Jens Sigurd Okkels, Anders Pedersen, Hans
Thalsgard Schambye, Knud Aunstrup, Claus Braestrup and Thue W. Schwartz.
"GAAP"-- shall mean generally accepted Danish accounting principles
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applied on a consistent basis.
"Governmental Authority"-- shall mean any court, tribunal, authority,
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agency, commission, bureau, department, official or other instrumentality of the
United States, the European Union, Denmark, any other country or any provincial,
state, local, county, city or other political subdivision.
"Governmental Permit"-- shall mean any license, franchise, permit or
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other authorization of any Governmental Authority.
"Hazardous Materials"-- shall mean any substance, material or waste
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which is regulated by any Environmental Law, including but not limited to,
petroleum products, asbestos and polychlorinated biphenyls.
"Holdings"-- as defined in the first paragraph of this Agreement.
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"Holdings Common Stock"-- shall mean the Common Stock of Holdings.
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"Holdings Exchange"-- as defined in Section 2.2.
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"Intellectual Property"-- as defined in Section 4.21(a).
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"Law"-- shall mean any Danish, European Union, other non-United States,
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United States, state or local (including common law) statute, code, directive,
ordinance, rule, regulation or other requirement.
"Lien"-- shall mean any lien, pledge, hypothecation, levy, mortgage,
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deed of trust, security interest, claim, lease, charge, option, right of first
refusal, easement, or other real estate declaration, covenant, condition,
restriction or servitude, transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation whatsoever.
"Lock-up Agreement"-- as defined in Section 7.12.
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"Losses"-- as defined in Section 12.2.
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"Maxygen"-- as defined in the first paragraph of this Agreement.
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"Maxygen Common Stock"-- shall mean the Common Stock, $0.0001 par value
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per share, of Maxygen.
"Maxygen Disclosure Schedule"-- shall mean the disclosure schedule
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delivered by Maxygen to ProFound concurrently with the execution and delivery of
this Agreement.
"Maxygen Exchange"-- as defined in Section 2.1.
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"Maxygen Indemnitee"-- as defined in Section 12.2.
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"Maxygen Material Adverse Effect"-- shall mean an event that materially
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and adversely affects the business, results of operation or financial condition
of Maxygen and its Subsidiaries taken as a whole; provided, however, that any
such effect resulting from (i) any change in economic or business conditions
generally affecting the biotechnology industry or (ii) any change in generally
accepted accounting principles or interpretations thereof generally affecting
the biotechnology industry or (iii) any reduction in the trading price of the
Maxygen Common Stock shall not be considered when determining if a Maxygen
Material Adverse Effect has occurred.
"Maxygen Reports"-- as defined in Section 6.3(a).
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"Occupational Safety and Health Law"-- shall mean any legal or
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governmental requirement or obligation relating to safe and healthful working
conditions or to occupational safety and health hazards, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
"Order"-- shall mean any order, consent, consent order, injunction,
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judgment, decree, consent decree, ruling, writ, assessment or arbitration award.
"Organizational Documents"-- shall mean: (a) the articles or
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certificate of incorporation, memorandum of association, articles of association
and the by-laws of a corporation; (b) the partnership agreement and any
statement of partnership of a general partnership; (c) the limited partnership
agreement and the certificate of limited partnership of a limited partnership;
(d) the articles or certificate of formation and operating agreement of a
limited liability company; (e) any charter, trust certificate or document or
similar document adopted or filed in connection with the creation, formation or
organization of a Person; and (f) any and all amendments to any of the
foregoing.
"Person"-- shall mean any individual, corporation (including any
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non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union or
other entity or governmental body or Governmental Authority.
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"Proceeding"-- shall mean any claim, action, investigation,
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arbitration, litigation or other judicial, administrative or regulatory
proceeding.
"ProFound Common Stock"-- shall mean the Class A and Class B Common
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Stock of ProFound.
"ProFound Disclosure Schedule"-- shall mean the disclosure schedule
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delivered by ProFound to Maxygen and Holdings concurrently with the execution
and delivery of this Agreement.
"ProFound Financial Statements"-- shall mean (i) the audited balance
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sheet and statement of shareholders owning more than five percent of the share
capital of ProFound as of December 31, 1999 and the related income statement and
statement of cash flow for the year then ended, and (ii) the ProFound Interim
Financial Statements. The ProFound Financial Statements are included in Section
4.5 of the ProFound Disclosure Schedule.
"ProFound Intellectual Property"-- as defined in Section 4.21(a).
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"ProFound Interim Financial Statements"-- shall mean the unaudited
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balance sheet and statement of shareholders owning more than five percent of the
share capital of ProFound as of February 29, 2000, and the related unaudited
income statement for the two months then ended.
"ProFound Material Adverse Effect"-- shall mean any material adverse
--------------------------------
change in the business, operations, properties, assets, liabilities, results of
operations, condition or prospects (financial or otherwise) of ProFound;
provided, however, that any such effect resulting from (i) any change in
economic or business conditions generally affecting the biotechnology industry
or (ii) any change in generally accepted accounting principles or
interpretations thereof generally affecting the biotechnology industry shall not
be considered when determining if a ProFound Material Adverse Effect has
occurred.
"ProFound Registered Intellectual Property"-- as defined in Section
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4.21(a).
"ProFound Securities"-- shall mean the ProFound Common Stock and the
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ProFound Warrants.
"ProFound Securityholders"-- shall mean the holders of ProFound Common
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Stock and ProFound Warrants.
"ProFound Shareholders" -- shall mean the holders of ProFound Common
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Stock.
"ProFound Warrants"-- shall mean warrants to purchase shares of
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ProFound Common Stock.
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"Registered Intellectual Property"-- as defined in Section 4.21(a).
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"Related Person"-- as defined in Section 4.23.
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"Release"-- shall mean any release, spill, effluent, emission, leaking,
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pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the indoor or outdoor environment of any Hazardous Material
through or in the air, soil, surface water or groundwater.
"Remedial Action"-- shall mean all actions, including, without
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limitation, any expenditures, required or voluntarily undertaken to (i) clean
up, remove, treat, or in any other way address any Hazardous Material or other
substance in the indoor or outdoor environment; (ii) prevent the Release or
threat of Release, or minimize the further Release of any Hazardous Material or
other substance so it does not migrate or endanger or threaten to endanger
public health or welfare of the indoor or outdoor environment; (iii) perform
pre-remedial studies and investigations or post-remedial monitoring and care; or
(iv) bring any Facility into compliance with all Environmental Laws and
Environmental Permits.
"Representatives"-- shall mean officers, directors, employees, agents,
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attorneys, accountants, advisors and representatives.
"Returns"-- shall mean returns, reports and forms.
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"Securities Act"-- shall mean the United States Securities Act of 1933,
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as amended, or any successor law.
"Securityholder Representative"-- as defined in Section 3.2(a).
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"Shareholders Agreement"-- shall mean the Shareholders Agreement dated
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April 28, 1999 among certain ProFound Securityholders.
"Subsidiary"-- shall mean with respect to any Person, any corporation,
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joint venture, limited liability company, partnership, association or other
business entity of which 50% or more of the total voting power of stock or other
equity entitled to vote generally in the election of directors or managers or
equivalent Persons thereof is owned or controlled, directly or indirectly, by
such Person.
"Tax Authority"-- shall mean the Danish, United States, and any state,
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local or foreign government or any agency or subdivision thereof.
"Taxes"-- shall mean all taxes, charges, fees, customs, duties or other
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assessments, however denominated, including all interest, penalties, additions
to tax or additional taxes that may become payable in respect thereof, imposed
by a Tax Authority, which shall
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include, without limitation, all income taxes, payroll and employee withholding
taxes, unemployment insurance, social security, sales and use taxes, excise
taxes, capital taxes, franchise taxes, gross receipt taxes, occupation taxes,
real and personal property taxes, value added taxes, stamp taxes, transfer
taxes, workers' compensation taxes, taxes relating to benefit plans and other
obligations of the same or similar nature.
"Transaction Documents"-- means the agreements, documents or
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instruments executed and delivered by a party hereto as contemplated under this
Agreement.
2. THE EXCHANGES; CLOSING
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2.1 THE MAXYGEN EXCHANGE
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(a) Upon the terms and subject to the conditions set forth in this
Agreement (including, without limitation, the last sentence of Section 2.1(e))
and in accordance with the DCA, at the Closing all of the ProFound
Securityholders (shall transfer and assign all of their respective right, title
and interest in and to all of their ProFound Securities to Maxygen in exchange
for shares of Maxygen Common Stock and options to purchase shares of Maxygen
Common Stock (collectively the "Maxygen Exchange") as provided in this Section
2.1.
(b) Each share of Class A ProFound Common Stock shall be exchanged for
shares of Maxygen Common Stock. The total number of shares of Maxygen Common
Stock that Maxygen will issue under this Section 2.1(b) is 328,799 shares. The
number of shares of Maxygen Common Stock to be issued to each holder of Class A
ProFound Common Stock is set forth on Exhibit 2.1.
(c) Each share of Class B ProFound Common Stock held by BankInvest I and
Novo Nordisk A/S shall be exchanged for shares of Maxygen Common Stock. The
total number of shares of Maxygen Common Stock that Maxygen will issue under
this Section 2.1(c) is 417,032 shares. The number of shares of Maxygen Common
Stock to be issued to each of BankInvest I and Novo Nordisk A/S is set forth on
Exhibit 2.1.
(d) Each share of Class B ProFound Common Stock and each ProFound
Warrant to purchase shares of Class B ProFound Common Stock held by BankInvest
II shall be exchanged for shares of Maxygen Common Stock. The total number of
shares of Maxygen Common Stock that Maxygen will issue under this Section 2.1(d)
is 234,174 shares.
(e) Subject to the last sentence of this Section 2.1(e), each ProFound
Warrant to purchase shares of Class A ProFound Common Stock shall be exchanged
for an option on substantially similar terms and conditions as those of such
ProFound Warrants, issued under the Maxygen International Stock Option Plan, to
purchase shares
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of Maxygen Common Stock. The total number of shares of Maxygen Common Stock to
be covered by all these "substitute Maxygen options" is 41,812. The exercise
price per share of Maxygen Common Stock under those substitute Maxygen options
will be $22.65. The number of shares of Maxygen Common Stock covered by the
substitute Maxygen options to be granted to each holder of a ProFound Warrant to
purchase shares of Class A ProFound Common Stock is set forth on Exhibit 2.1.
The substitute Maxygen options shall have the same vesting schedule as the
vesting schedule for the corresponding ProFound Warrant. In other words, the
present vesting schedule that applies to a ProFound Warrant shall be continued
for the Maxygen option that is substituted for that warrant. Notwithstanding the
foregoing, a given holder of a ProFound Warrant to purchase shares of Class A
ProFound Common Stock shall not be entitled to receive any substitute Maxygen
options unless he or she will be a continuing employee of ProFound after the
Closing and has delivered, before the Closing, the agreements required by
Section 9.9.
2.2 THE HOLDINGS EXCHANGE
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The parties acknowledge that, in accordance with the CCL and the DGCL,
immediately following the Maxygen Exchange, Maxygen intends to exchange the
ProFound Securities for 1,000 shares of Holdings Common Stock (the "Holdings
Exchange"). However, nothing in this Agreement shall require Maxygen to effect
the Holdings Exchange.
2.3 THE CLOSING
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(a) Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
11, and subject to the satisfaction or waiver of the conditions set forth in
Sections 9 and 10, the consummation of the Exchanges shall take place on or as
promptly as practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Sections 9 and 10 at the
offices of Heller Ehrman White & McAuliffe LLP, 2500 Sand Hill Road, Suite 100,
Menlo Park, California 94025 (the "Closing"), unless another date, time or place
is agreed to in writing by ProFound and Maxygen.
(b) As soon as practicable following the Closing, the parties hereto
shall cause the Exchanges to be memorialized by making all filings or recordings
required under the CCL, DCA and the DGCL.
(c) At and after the Closing, the Exchanges will have the
effects set forth in this Agreement, and ProFound shall be a wholly owned
subsidiary of Holdings.
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2.4 SURRENDER OF CERTIFICATES
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(a) Exchange Agent. ChaseMellon Shareholders Services, L.L.C. shall act
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as exchange agent (the "Exchange Agent") for the Maxygen Exchange.
(b) Common Stock and Options to Purchase Common Stock. Promptly after
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the Closing, Maxygen shall make available for exchange in accordance with
Section 2.1 the aggregate number of shares of Maxygen Common Stock and options
to purchase Maxygen Common Stock issuable pursuant to Section 2.1 in exchange
for the issued and outstanding ProFound Securities.
2.5 EXCHANGE PROCEDURES
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(a) Surrender of Certificates. At the Closing, the ProFound
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Shareholders shall deliver to the Exchange Agent (i) certificates representing
all of the ProFound Securities held by them, duly completed and validly
executed, (ii) documentary evidence of the due recordation in ProFound's share
register of Maxygen's (and then Holdings') full and unrestricted title to all of
the ProFound Securities held by them and (iii) such other documents as may be
required, whereupon each ProFound Shareholder shall be entitled to receive in
exchange therefor, subject to the escrow requirements of Section 3.1,
certificates evidencing the number of shares of Maxygen Common Stock to which
such ProFound Shareholder is entitled pursuant to Section 2.1.
(b) No Further Ownership Rights in ProFound Securities. All shares of
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Maxygen Common Stock issued upon the surrender for exchange of shares of
ProFound Common Stock in accordance with the terms hereof and all Maxygen
Options issued upon surrender for exchange of ProFound Warrants shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of ProFound Common Stock and such ProFound Warrants.
(c) Restrictive Legends. Certificates evidencing shares of Maxygen
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Common Stock pursuant to this Agreement shall bear the
following legends:
(i) All certificates shall bear a restrictive legend indicating
that the shares evidenced thereby cannot be transferred except in accordance
with the terms of the applicable Lock-Up Agreement.
(ii) All certificates shall bear a restrictive legend indicating
that the shares evidenced thereby were not registered pursuant to the Securities
Act, including any restrictive legend required by, or useful to aid compliance
with, Regulations D and S adopted by the Commission thereunder.
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3. ESCROW OF SHARES
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3.1 DELIVERY OF ESCROW SHARES
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In lieu of delivering to the ProFound Shareholders certificates for the
full number of shares of Maxygen Common Stock provided for in Section 2.1, at
the Closing Maxygen shall deliver pursuant to the escrow agreement substantially
in the form attached hereto as Exhibit 3.1 (the "Escrow Agreement") 140,728
shares of Maxygen Common Stock (the "Escrow Shares") to Maxygen as escrow agent
(the "Escrow Agent"). The ProFound Shareholders acknowledge and agree that the
Escrow Shares shall severally and jointly secure the indemnification obligations
set forth in Section 12. The Escrow Shares shall be held by the Escrow Agent for
at least 18 months after the Closing (and any longer period as provided in the
Escrow Agreement) and shall be applied in accordance with the terms of the
Escrow Agreement.
3.2 SECURITYHOLDER REPRESENTATIVE
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(a) Each ProFound Shareholder hereby irrevocably constitutes and
appoints, effective as of the Closing, Christian Karsten Hansen (together with
his permitted successors, the "Securityholder Representative"), as the true and
lawful agent and attorney-in-fact to enter into any agreement in connection with
the transactions contemplated by this Agreement and any transactions
contemplated by the Escrow Agreement, to exercise any or all of the powers,
authority and discretion conferred on him under any such agreement, to accept
delivery of and to submit for exchange and cancellation any ProFound Securities,
to waive any terms and conditions of any such agreement, to give and receive
notices on his behalf and to be his, her or its exclusive representative with
respect to any matter or Proceeding arising with respect to any transaction
contemplated by any such agreement, including, without limitation, the defense,
settlement or compromise of any Proceeding for which any Maxygen Indemnitee may
be entitled to indemnification, and to act as the "Purchaser Representative" for
any ProFound Shareholder who is not an "accredited investor" as that term is
defined in Rule 501 adopted by the Commission under the Securities Act in
connection with evaluating the merits and risks of investing in the Maxygen
securities to be issued in the Maxygen Exchange, and the Securityholder
Representative agrees to act as, and to undertake the duties and
responsibilities of, such agent and attorney-in-fact.
(b) Maxygen and the other Maxygen Indemnitees shall be entitled to deal
exclusively with the Securityholder Representative on all matters contemplated
herein and in the Escrow Agreement, including on the matters indicated in
Sections 10 and 11 and on all matters relating to Section 12, and shall be
entitled to rely exclusively (without further evidence of any kind whatsoever)
on any document executed or purported to be executed on behalf of any ProFound
Shareholder by the Securityholder Representative, and on any
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other action taken or purported to be taken on behalf of any ProFound
Shareholder by the Securityholder Representative, as fully binding upon such
ProFound Shareholder.
(c) The Securityholder Representative shall not be liable to anyone for
any action taken or not taken by him in good faith or for any mistake of fact or
law for anything that he may do or refrain from doing in connection with his
obligations under this Agreement and the Escrow Agreement (i) with the consent
of ProFound Shareholders who, as of the date of this Agreement, owned a majority
of the outstanding shares of ProFound Common Stock, or (ii) in the absence of
his own gross negligence or willful misconduct. Any action taken or not taken
pursuant to the advice of counsel shall be conclusive evidence of the absence of
gross negligence or willful misconduct. The ProFound Shareholders shall, jointly
and severally, indemnify and hold the Securityholder Representative harmless
from any and all liability and expenses that may arise out of any action taken
or omitted by him as Securityholder Representative in accordance with this
Agreement and the Escrow Agreement, except such liability and expense as may
result from the gross negligence or willful misconduct of the Securityholder
Representative.
(d) The Securityholder Representative may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Securityholder Representative shall not be liable for other parties' forgeries,
fraud or false representations.
(e) The Securityholder Representative shall have the reasonable
assistance of Maxygen's, Holdings' and ProFound's officers and employees for
purposes of performing his duties and exercising his rights hereunder, provided
that the Securityholder Representative shall treat confidentially and not
disclose any nonpublic information from or about Maxygen, Holdings or ProFound
to anyone (except on a need to know basis to individuals who agree to treat such
information confidentially).
(f) If the Securityholder Representative shall be unable or unwilling to
serve in such capacity, his successor shall be named by those Persons holding a
majority of the shares of ProFound Common Stock outstanding just before the
Closing, and such successor shall serve and exercise the powers of the
Securityholder Representative hereunder and under the Escrow Agreement. If for
any reason there is no Securityholder Representative at any time, all references
herein to the Securityholder Representative shall be deemed to refer to ProFound
Shareholders who hold a majority of the shares of ProFound Common Stock
outstanding just before the Closing.
(g) The Securityholder Representative hereby represents and
warrants to the other ProFound Shareholders that: (i) he has such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the investment in the Maxygen securities to be issued in
the Maxygen Exchange and (ii) there
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is no material relationship between himself and Maxygen other than the matters
set forth in this Agreement relating to the Maxygen securities that he will
receive as a result of the transactions contemplated by this Agreement,
including possible receipt of a portion of the additional Maxygen options
described in Section 8.1 and the compensation and other benefits that he will
receive as an employee of ProFound after the Closing, whether under his
Employment Agreement referenced in Section 7.9 or otherwise.
4. REPRESENTATIONS AND WARRANTIES CONCERNING PROFOUND
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Except as set forth in the ProFound Disclosure Schedule by means of a
disclosure that references the specific representation and warranty which that
the exception is intended to modify, ProFound and the ProFound Shareholders
hereby represent and warrant to Maxygen and Holdings as follows:
4.1 ORGANIZATION AND GOOD STANDING
------------------------------
(a) Section 4.1 of the ProFound Disclosure Schedule contains a complete
and accurate list of the jurisdictions in which ProFound is authorized to do
business. ProFound is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or formation, with
full corporate power and authority to conduct its business as it is now being
conducted and to own or use the assets and properties that it purports to own or
use. ProFound is duly qualified to do business as a foreign corporation and is
in good standing under the Laws of each state or other jurisdiction in which
either the ownership or use of the assets or properties owned or used by it, or
the nature of the activities conducted by it, requires such qualification,
except where the failure to be so qualified could not reasonably be expected to
have a ProFound Material Adverse Effect. ProFound does not have, and has never
had, any Subsidiaries.
(b) ProFound has delivered to Maxygen correct and complete copies of the
Organizational Documents of ProFound.
4.2 AUTHORITY; NO CONFLICT
----------------------
(a) ProFound has the right, power, authority and capacity to execute and
deliver this Agreement and the Transaction Documents to which it is and will be
a party, to consummate the transactions contemplated hereby and thereby and to
perform its obligations under this Agreement and the Transaction Documents to
which it is and will become a party. This Agreement has been duly authorized and
approved, executed and delivered by ProFound and constitutes the legal, valid
and binding obligation of ProFound, enforceable against ProFound in accordance
with its terms. Upon the authorization and approval, execution and delivery by
ProFound of the Transaction Documents to which it is a party, such Transaction
Documents will constitute legal, valid
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and binding obligations of ProFound, enforceable against ProFound in accordance
with their respective terms.
(b) Neither the execution and delivery of this Agreement or any
Transaction Document by ProFound nor the consummation or performance by ProFound
of the Maxygen Exchange or any of the other transactions contemplated hereby or
thereby will, directly or indirectly (with or without notice or lapse of time or
both):
(i) contravene, conflict with or result in a violation or breach of
(A) any provision of any Organizational Document of ProFound, (B) any resolution
adopted by the board of directors or the shareholders of ProFound, (C) any Law
or any Order, award, decision, settlement or process to which ProFound or any of
the assets or properties owned or used by ProFound may be subject, or (D) any
Governmental Permit that is held by ProFound;
(ii) result in a breach of or constitute a default, give rise to a
right of termination, cancellation or acceleration, create any entitlement to
any payment or benefit, or require the consent, authorization or approval of or
any notice to or filing with any Person under any material Contract to which
ProFound is a party or to which any of its or their assets or properties are
bound, or require the consent, authorization or approval of or any notice to or
filing with any Governmental Authority to which ProFound or any of its or their
assets or properties is subject; or
(iii) result in the imposition or creation of any Encumbrance or
Lien upon or with respect to any of the assets or properties owned or used by
ProFound.
4.3 CAPITALIZATION
--------------
The authorized, issued and outstanding equity securities of ProFound
consist solely of 633,459 shares of common stock, DK1 par value per share. Of
those shares, 175,000 shares are designated Class A Common Stock and 458,459
shares are designated Class B Common Stock. All of the outstanding shares of
ProFound Common Stock have been duly authorized and validly issued, are fully
paid and nonassessable and are owned, of record and beneficially, by the Persons
and in the amounts set forth in Section 4.3 of the ProFound Disclosure Schedule.
Warrants to purchase 34,245 shares of Class A Common Stock and 139,289 shares of
Class B Common Stock are issued and outstanding. All of the ProFound Warrants
have been duly authorized and validly issued and are owned, of record and
beneficially, by the Persons and in the amounts set forth in Section 4.3 of the
ProFound Disclosure Schedule. Section 4.3 of the ProFound Disclosure Schedule
sets forth all outstanding securities of ProFound, including but not limited to
all debt securities, ProFound Common Stock, ProFound Warrants, rights and all
other securities convertible or exercisable into or for, or exchangeable for,
capital stock. Except as set forth in Section 4.3 of the ProFound Disclosure
Schedule, there are no
15
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voting trusts or other Contracts or understandings to which ProFound or any
ProFound Securityholder is a party with respect to the transfer, voting or
registration of any ProFound Securities and there are no Contracts relating to
the issuance, sale or transfer of any equity securities or other securities of
ProFound. ProFound does not own or have any Contract to acquire any equity
securities or other securities of any Person or any, direct or indirect, equity
or ownership interest in any other business. No Person has any pre-emptive
rights, nor any right of first refusal, tag-along, drag along right or any
rights similar thereto with respect to any security of ProFound. All of the
ProFound Securities have been issued in compliance with all Danish securities
Laws.
4.4 BOOKS AND RECORDS
-----------------
The books of account and other records of ProFound, all of which have
been furnished to Maxygen, are true, complete and correct in all material
respects. The minute books of ProFound contain true, accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, the board of directors, and committees of the board of directors
of ProFound. The share registry of ProFound contains a true, complete and
correct record of all issuances, transfers and repurchases of all ProFound
Securities.
4.5 FINANCIAL STATEMENTS
--------------------
The ProFound Financial Statements (i) have been prepared from the books
and records of ProFound in accordance with GAAP (except for the omission of
footnotes and cash flow statement from the ProFound Interim Financial
Statements), (ii) fully reflect all liabilities and contingent liabilities of
ProFound required to be reflected therein on such basis as at the dates thereof,
and (iii) fairly present the financial position of ProFound and the share
holdings of ProFound's more-than-five-percent stockholders as of the dates of
the balance sheets included in the ProFound Financial Statements and the results
of ProFound's operations and (in the case of the audited financial statements
included in the ProFound Financial Statements) cash flow for the periods
indicated.
4.6 NO UNDISCLOSED LIABILITIES
--------------------------
ProFound does not have any liabilities or obligations of any nature
(whether known or unknown, absolute, accrued, contingent or otherwise, and
whether due or to become due), except for liabilities or obligations reflected
or reserved against in the ProFound Financial Statements and current liabilities
incurred in the ordinary course of business since the date of the balance sheet
included in the ProFound Interim Financial Statements, consistent with past
practices, which will not, individually or in the aggregate, have a ProFound
Material Adverse Effect.
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4.7 NO MATERIAL ADVERSE CHANGE
--------------------------
Since December 31, 1999, there has not been any ProFound Material
Adverse Effect and no event has occurred or circumstance exists that could
reasonably be expected to result in a ProFound Material Adverse Effect.
4.8 TAXES
-----
(a) ProFound has filed or caused to be filed with the appropriate Taxing
Authorities in a timely manner all Tax Returns required to be filed by it; (ii)
the information on such Returns is complete and accurate in all material
respects; (iii) ProFound has paid in full on a timely basis all Taxes or made
adequate provision in the Financial Statements for all Taxes (whether or not
shown on any Return) required to be paid by them; (iv) there are no Encumbrances
or Liens for Taxes upon the assets or properties of ProFound other than for
Taxes not yet due and payable; (v) no deficiencies for Taxes have been claimed,
proposed, or assessed by any Tax Authority or other Governmental Authority with
respect to ProFound, and (vi) there are no pending or, to ProFound's knowledge,
threatened audits, investigations or claims for or relating to any liability in
respect of Taxes of ProFound.
(b) There are no outstanding Contracts or waivers with respect to
ProFound extending the statutory period of limitation applicable to any Taxes
and ProFound has not requested any extension of time within which to file any
Return, which has not yet been filed.
(c) ProFound has made provision for all Taxes payable by it and such
provision is reflected on the ProFound Financial Statements with respect to any
period covered thereby as to Taxes which are not payable prior to the date of
such Financial Statements; (ii) the provisions for Taxes with respect to
ProFound for any period prior to the Closing are adequate to cover all Taxes
with respect to such period; (iii) ProFound has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, shareholder or other Person;
(iv) all material elections with respect to Taxes made by ProFound as of the
date hereof are set forth in Section 4.8 of the ProFound Disclosure Schedule;
(v) there are no private letter rulings in respect of any Tax pending between
ProFound and any Tax Authority, if such ruling would affect ProFound; (vi)
ProFound has never been a member of an affiliated group within the meaning of
Section 1504 of the Code, or filed or been included in a combined, consolidated
or unitary return of any Person; (vii) ProFound is not liable for Taxes of any
other Person, and ProFound is not currently under any obligation to indemnify
any Person with respect to Taxes, or a party to any tax sharing agreement or any
other agreement providing for payments by ProFound with respect to Taxes; (viii)
ProFound is not, and never has been, a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code), during the applicable
period
17
<PAGE>
specified in Section 897(c)(1)(A)(ii) of the Code; (ix) ProFound is not a party
to any joint venture, partnership or other arrangement or Contract which could
be treated as a partnership for Tax purposes; (x) ProFound has not agreed to or
is required, as a result of a change in method of accounting or otherwise, to
include any adjustment under Section 481 of the Code (or any corresponding
provision of Law) in taxable income; (xi) ProFound is not a party to any
Contract, arrangement or plan that could result (taking into account the
transactions contemplated by this Agreement), separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code (or any corresponding provision of Law); and (xii) Section 4.8
of the Disclosure Schedule contains a list of all jurisdictions to which any Tax
is properly payable or in which any Return is required to be filed by ProFound,
and no written claim has ever been made by any Tax Authority in any other
jurisdiction that ProFound is subject to taxation in such jurisdiction and
(xiii) ProFound is not jointly taxed with any other corporation under Section 31
of the Danish Act on Corporate Taxation.
(d) ProFound has not taken any action that would jeopardize or limit its
right or ability to make use of, and has not failed to take any action that is
necessary or desirable to make full use of, the losses ProFound has incurred
since its inception against its future income under Danish tax law.
4.9 ACCOUNTS RECEIVABLE
-------------------
All ProFound Accounts Receivable represent or will represent valid
obligations arising from services actually performed or sales actually made in
the ordinary course of business. All of the Accounts Receivable are or will be
collectible at the full recorded amount thereof, less any applicable reserves
established in accordance with GAAP, in the ordinary course of business and
consistent with ProFound's past practices.
4.10 TITLE TO PROPERTIES; ENCUMBRANCES
---------------------------------
Section 4.10 of the ProFound Disclosure Schedule contains a complete
and accurate list of all real property, leaseholds or other interests therein
owned or held by ProFound. ProFound does not own, and has never owned, any real
property other than as specified in Section 4.10 of the ProFound Disclosure
Schedule and, for each such property, Section 4.10 of the ProFound Disclosure
Schedule sets forth the owner thereof, a brief description thereof (including
approximate square footage), when purchased or acquired and the approximate
purchase price thereof, the use made of such property and the approximate annual
costs, fees and taxes associated with such property. ProFound has delivered or
made available to Maxygen true, correct and complete copies of the real property
leases to which ProFound is party or pursuant to which it uses or occupies any
real property. Except as set forth in Section 4.10 of the ProFound Disclosure
Schedule, ProFound has good title to all of the assets and properties, real and
personal, tangible and intangible, it owns or purports to own, or uses in its
business, including those reflected on
18
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its books and records and in the ProFound Financial Statements (except for
accounts receivable collected and inventories, materials and supplies disposed
of in the ordinary course of business consistent with past practice after the
date of the balance sheet included in the ProFound Interim Financial
Statements). ProFound has a valid leasehold, license or other interest in all of
the other tangible assets or properties, real or personal, which are used in the
operation of its business. Except as set forth in Section 4.10 of the ProFound
Disclosure Schedule, all assets and properties owned, leased or used by ProFound
are free and clear of all Encumbrances and Liens, except for (a) liens for
current Taxes not yet due, (b) workers', common carrier and other similar liens
arising in the ordinary course of business, none of which materially detracts
from the value or impairs the use of the asset or property subject thereto, or
impairs the operations of ProFound, (c) Encumbrances or Liens disclosed in the
ProFound Financial Statements, and (d) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of ProFound, and (ii) zoning Laws and other
land use restrictions that do not impair the present or anticipated use of the
property subject thereto.
4.11 CONDITION AND SUFFICIENCY OF ASSETS
-----------------------------------
The Facilities and other tangible assets and property owned or used by
ProFound are structurally sound, are in good operating condition and repair
(normal wear and tear excepted), and are adequate for the uses to which they are
being put, and none of such Facilities or other property and assets owned or
used by ProFound is in need of maintenance or repairs except for ordinary,
routine maintenance and repairs that are not material in nature or cost. The
Facilities and other tangible assets and property owned or used by ProFound are
sufficient for the continued conduct of its business after the Closing in
substantially the same manner as conducted prior to the Closing.
4.12 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS
-------------------------------------------------
(a) ProFound is in compliance in all material respects with all Laws,
licenses and Orders affecting any or all of the assets or properties owned or
used by ProFound or the business or operations of ProFound including,
Occupational Safety and Health Laws and Environmental Laws. ProFound has not
been charged with violating, or to the knowledge of ProFound, threatened with a
charge of violating, nor is ProFound under investigation with respect to a
possible violation of, any provision of any Law, Order or administrative ruling
or license relating to any of its or their assets or properties or any aspect of
its or their business.
(b) Section 4.12 of the ProFound Disclosure Schedule contains a complete
and accurate list of each Governmental Permit that ProFound is required by Law
to hold
19
<PAGE>
or that otherwise relates to the business of, or to any of the assets or
properties owned or used by, ProFound. Each Governmental Permit listed or
required to be listed in Section 4.12 of the Disclosure Schedule is valid and in
full force and effect, has not been breached or violated by ProFound, and is not
subject to any Proceedings for suspension, modification or revocation.
4.13 LEGAL PROCEEDINGS
-----------------
There is no pending Proceeding:
(a) that has been commenced by or against ProFound or that otherwise
relates to the business of, or any of the assets or properties owned or used by,
ProFound; or
(b) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the transactions
contemplated hereby.
To the knowledge of ProFound, no such Proceeding has been threatened.
4.14 ABSENCE OF CERTAIN CHANGES AND EVENTS
-------------------------------------
Since December 31, 1999, ProFound has conducted its business only in the
ordinary course, consistent with past practice, and there has not been any:
(a) declaration, setting aside, making or payment of any dividend or
other distribution or repurchase or payment in respect of any shares of capital
stock of ProFound or any warrants or other rights to acquire any shares of such
stock;
(b) Encumbrance or Lien of or on any of its assets or properties;
(c) except to the extent indicated in Section 4.14 of the ProFound
Disclosure Schedule, payment or increase of any bonuses, salaries or other
compensation to any shareholder, director, officer, consultant, agent or sales
representative or (except in the ordinary course of business consistent with
past practice) employee or entry into any employment, severance or similar
Contract with any director, officer or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees, except in
the ordinary course of business consistent with past practice;
(e) damage to or destruction of any asset or property, whether or not
covered by insurance, or loss of any customer, which could reasonably be
expected to have a ProFound Material Adverse Effect;
20
<PAGE>
(f) entry into, termination of, or receipt of notice of termination of
any Contract or transaction involving a total remaining commitment by or to
ProFound of at least DK400,000 including the entry into (i) any document
evidencing any indebtedness; (ii) any capital or other lease; or (iii) any
guaranty;
(g) sale, lease or other disposition (other than in the ordinary course
of business consistent with past practice) of any asset or property;
(h) creation, incurrence or assumption of any indebtedness for borrowed
money or guarantee of any obligation or the net worth of any Person in an
aggregate amount in excess of DK400,000, except for endorsements of negotiable
instruments for collection in the ordinary course of business;
(i) loan or advance to any Person other than travel and other similar
routine advances in the ordinary course of business consistent with past
practice, or acquisition of any capital stock or other securities of or any
ownership interest in, or a significant portion of the assets of, any other
business enterprise;
(j) capital investment or capital expenditure or capital improvement,
addition or betterment in amounts which exceed DK400,000 in the aggregate;
(k) institution or settlement of any Proceeding before any Governmental
Authority relating to it or its assets or properties;
(l) change in the method of accounting or the accounting principles or
practices used by ProFound in the preparation of the ProFound Financial
Statements;
(m) amendment or other modification of any of the Organizational
Documents of ProFound;
(n) transfer or grant of any rights or licenses under, or entry into any
settlement regarding the infringement of, any ProFound Intellectual Property, or
entry into any licensing or similar agreements or arrangements; or
(o) agreement, whether oral or written, by ProFound to do any of the
foregoing.
4.15 CONTRACTS; NO DEFAULTS
----------------------
(a) Section 4.15(a) of the ProFound Disclosure Schedule contains a
complete and accurate list, and ProFound has delivered to Maxygen true, correct
and complete copies, if any are in force, of:
21
<PAGE>
(i) each Contract involving payments of at least DK400,000 that
involves performance of services or delivery of goods or materials by ProFound;
(ii) each Contract involving payments of at least DK400,000 that
involves performance of services or delivery of goods or materials to ProFound;
(iii) each lease and other Contract affecting any leasehold or
other interest in any real or personal property to which ProFound is a party;
(iv) each material license agreement or other Contract to which
ProFound is a party with respect to patents, trademarks, copyrights, biologic or
other materials, trade secrets or other Intellectual Property, including
agreements with current or former employees, consultants or contractors
regarding the use or disclosure of any intellectual property;
(v) each collective bargaining agreement and other Contract to or
with any labor union or other employee representative of a group of employees
involving or affecting ProFound;
(vi) each joint venture, partnership and other Contract involving a
sharing of profits, losses, costs or liabilities by ProFound with any other
Person or requiring ProFound to make a capital contribution;
(vii) each Contract to which ProFound is a party containing
covenants that in any way purport to restrict the business activity of ProFound
or any of the ProFound Securityholders or limit the freedom of ProFound or any
of the ProFound Securityholders to engage in any line of business or to compete
with any Person or hire any Person;
(viii) each employment or consulting agreement between ProFound and
its employees and consultants;
(ix) each agreement between ProFound and an officer or director of
ProFound or any affiliate of any of the foregoing;
(x) each Contract for capital expenditures by ProFound in excess of
DK400,000;
(xi) each agreement of ProFound under which any money has been or
may be borrowed or loaned or any note, bond, factoring agreement, indenture or
other evidence of indebtedness has been issued or assumed (other than those
under which there remain no ongoing obligations of ProFound), and each guaranty
by ProFound of any evidence of indebtedness or other obligation, or of the net
worth, of any Person (other than endorsements for the purpose of collection in
the ordinary course of business);
22
<PAGE>
(xii) each stock purchase, merger or other agreement pursuant to
which ProFound acquired any material amount of assets (other than capital
expenditures), and all relevant documents and agreements delivered in connection
therewith;
(xiii) each agreement pursuant to which ProFound has issued any
equity securities;
(xiv) each agreement to which ProFound is a party containing a
change of control provision; and
(xv) each other agreement to which ProFound is a party having an
indefinite term or a fixed term of more than one year (other than those that are
terminable at will or upon not more than 30 days' notice by ProFound without
penalty) or requiring payments by ProFound of more than DK400,000 per year.
(b) Each Contract identified or required to be identified in Section
4.15(a) of the ProFound Disclosure Schedule is in full force and effect and is
valid and enforceable against ProFound and, to the knowledge of ProFound,
against the other parties thereto in accordance with its terms.
(c) ProFound is in full compliance with all applicable terms and
requirements of each Contract under which ProFound has any obligation or
liability or by which ProFound or any of the assets or properties owned or used
by ProFound is or was bound, except for such noncompliance that could not
reasonably be expected to have a ProFound Material Adverse Effect.
(d) To the knowledge of ProFound, each other Person that has or had any
obligation or liability under any Contract under which ProFound has any rights
is in full compliance with all applicable terms and requirements of such
Contract.
(e) To the knowledge of ProFound, no event has occurred and no
circumstance exists that (with or without notice or lapse of time or both) is
likely to result in a material violation or breach of any Contract.
4.16 INSURANCE
---------
Section 4.16 of the ProFound Disclosure Schedule sets forth the premium
payments and describes all the insurance policies of ProFound. These policies
are now in full force and effect in accordance with their terms and expire on
the dates shown on Section 4.16 of the ProFound Disclosure Schedule. There has
been no default in the payment of premiums on any of such policies, and there is
no ground for cancellation or avoidance of any such policies, or any increase in
the premiums thereof, or for reduction of the coverage provided thereby. Such
policies shall continue in full force and effect up to the expiration dates
shown in Section 4.16 of the Disclosure Schedule. True, correct
23
<PAGE>
and complete copies of all insurance policies listed in Section 4.16 of the
ProFound Disclosure Schedule have been previously furnished to Maxygen.
4.17 ENVIRONMENTAL MATTERS
---------------------
(a) ProFound is in compliance with all applicable Environmental Laws
including, but is not limited to, the possession by ProFound of all Governmental
Permits required under applicable Environmental Laws, and compliance with the
terms and conditions thereof. ProFound has not received notice of, and neither
ProFound nor any predecessor is the subject of, any Environmental Claim or
Remedial Action. There are no circumstances or conditions related to ProFound,
ProFound's operations or any Facility that are reasonably likely to prevent or
interfere with such compliance or give rise to an Environmental Claim or
Remedial Action in the future.
(b) There are no Environmental Claims that are pending or, to the
knowledge of ProFound, threatened against ProFound, any Facility or against any
Person whose liability for any Environmental Claim ProFound has retained or
assumed either contractually or by operation of Law.
(c) Neither ProFound, nor any other Person acting on behalf of ProFound
(solely with respect to any such other Person, with ProFound's knowledge) has
(A) disposed of, transported or arranged for the disposal of any Hazardous
Materials to, at or upon: (i) any location other than a site lawfully permitted
to receive such Hazardous Materials or (ii) any Facilities and (B) there has not
occurred during the period ProFound operated or possessed any Facility or is
presently occurring a Release, or threatened Release, of any Hazardous Materials
on, into or beneath the surface of, or adjacent to, any Facilities.
(d) Section 4.17 of the ProFound Disclosure Schedule identifies (i) all
environmental audits, assessments, or occupational health studies undertaken by
ProFound or its agents on its behalf, or undertaken by any Governmental
Authority, or any Person, relating to the Facilities; (ii) the results of any
groundwater, soil, air or asbestos monitoring undertaken by ProFound or its
agents on its behalf, or, to the knowledge of ProFound, undertaken by any
Governmental Authority or any third Person, relating to any Facility; and (iii)
all written communications between ProFound and any Governmental Authority
arising under or related to Environmental Laws.
4.18 EMPLOYEES
---------
(a) Section 4.18 of the ProFound Disclosure Schedule contains a complete
and accurate list of the following information for each employee of ProFound:
name; job title; base salary; bonus; vacation accrued; service credited for
purposes of vesting and
24
<PAGE>
eligibility to participate under any employee benefit plan of any nature; and
whether such employee is a party to a non-competition agreement with ProFound.
(b) No Founding Shareholder and, to the knowledge of ProFound, no
employee of ProFound, is a party to, or is otherwise bound by, any agreement or
arrangement, including any non-competition or similar agreement, between such
Founding Shareholder or employee and any other Person that could materially
adversely affect (i) the performance of his or her duties as an officer or
employee of, or consultant to, ProFound, or (ii) the ability of ProFound to
conduct its business as previously conducted or presently proposed to be
conducted in the future. Since December 31, 1999, no officer or other employee
has terminated and, to the knowledge of ProFound, no other officer or employee
of ProFound intends to terminate, his or her employment or consulting
relationship with ProFound.
(c) No employee of ProFound is bound by any agreement with any other
Person that is violated or breached by such employee performing the services he
or she is performing for ProFound in connection with the business presently
conducted or presently proposed to be conducted by ProFound in the future.
(d) ProFound has delivered to Maxygen prior to the date hereof true and
complete copies of any employment agreements and any procedures and policies
relating to the employment of employees of ProFound and the use of temporary
employees and independent contractors by ProFound (including summaries of any
procedures and policies that are unwritten).
4.19 EMPLOYEE BENEFITS
-----------------
(a) ProFound does not maintain, have an obligation to contribute to or
have any actual or contingent liability with respect to any Employee Benefit
Plan. ProFound has delivered to Maxygen prior to the date hereof true and
complete copies of (i) plan instruments and amendments thereto for all Employee
Benefit Plans (or written summaries of any Employee Benefit Plans that are
unwritten) and related trust agreements, insurance and other contracts, summary
plan descriptions, and summaries of material modifications, and material
communications distributed to the participants of each Plan, (ii) to the extent
annual reports are required with respect to any Employee Benefit Plan, the three
most recent annual reports and attached schedules for each Employee Benefit Plan
as to which such report is required to be filed and (iii) where applicable, the
most recent (A) opinion, notification and determination letters, (B) audited
financial statements, and (C) actuarial valuation reports.
(b) Each Employee Benefit Plan which provides health, disability or
death benefits is fully insured; ProFound is not obligated to directly pay any
such benefits or to reimburse any third Person payor for the payment of such
benefits.
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<PAGE>
(c) Each Employee Benefit Plan is and has been operated in material
compliance with its terms and all applicable Laws, Orders or governmental rules
and regulations currently in effect with respect thereto, and by its terms can
be amended and/or terminated at any time. As of and including the Closing,
ProFound (i) shall have performed all material obligations required to be
performed by it under, and shall not be in material default under or in material
violation of any Employee Benefit Plan and (ii) shall have made all
contributions or payments required to be made by it up to and including the
Closing with respect to each Employee Benefit Plan, or adequate accruals
therefor will have been provided for and will be reflected on the ProFound
Financial Statements. All notices, filings and disclosures required by any Law
have been timely made.
(d) ProFound has not received notice of and is not aware of any
Proceeding (other than routine claims for benefits) pending or, to the knowledge
of ProFound, threatened with respect to any Employee Benefit Plan or against any
fiduciary of any Employee Benefit Plan, and there are no facts that could give
rise to any such Proceeding. There has not occurred any circumstances by reason
of which ProFound may be liable for an act, or a failure to act, by a fiduciary
with respect to any Employee Benefit Plan.
(e) There are no Proceedings against ProFound pending or, to ProFound's
knowledge, threatened and no facts exist as a result of which ProFound could
have any liability based on, arising out of, in connection with or otherwise
relating to the classification of any individual by ProFound as an independent
contractor.
(f) Section 4.19(f) of the ProFound Disclosure Schedule sets forth a
true and complete list of each current or former employee, officer or director
of ProFound who holds (i) any warrant or option to purchase ProFound Common
Stock, together with the number of shares of ProFound Common Stock subject to
such warrant or option, the exercise price of such warrant or option (to the
extent determinable), and the expiration date of such warrant or option; (ii)
any shares of ProFound Common Stock that are restricted as a result of an
agreement with ProFound or the stock plan of ProFound; and (iii) any other
right, directly or indirectly, to receive ProFound securities or any other
compensation based in whole or in part on the value of ProFound capital stock,
together with the number of shares of ProFound stock subject to such right.
(g) Section 4.19(g) of the ProFound Disclosure Schedule sets forth a
true and complete list of (i) all agreements with consultants who are
individuals obligating ProFound to make annual cash payments in an amount
exceeding DK200,000; and (ii) all agreements with respect to the services of
independent contractors or leased employees who are individuals or individuals
doing business in a corporate form whether or not they participate in any of the
Employee Benefit Plans.
26
<PAGE>
(h) No Employee Benefit Plan invests in ProFound Securities; and (ii)
the consummation of the transactions contemplated by this Agreement will not,
alone or together with any other event, (A) entitle any employee or former
employee of ProFound to any payment, (B) result in an increase in the amount of
compensation or benefits or accelerate the vesting or timing of payment of any
benefits or compensation payable in respect of any employee or former employee
or (C) result in any parachute payment, whether under the Danish Salaried
Employees Act, any other Danish law or any private agreement, and whether or not
such payment is considered reasonable compensation for services rendered.
ProFound will take all actions within its control to ensure that all actions
required to be taken by a fiduciary of any Employee Benefit Plan in order to
effectuate the transaction contemplated by this Agreement shall comply with the
terms of such Plan and applicable Law.
(i) No Employee Benefit Plan provides benefits, including, without
limitation, death or medical benefits (through insurance or otherwise) with
respect to any employee or former employee of ProFound beyond their retirement
or other termination of service other than (i) coverage mandated by applicable
Law, (ii) retirement or death benefits under any Pension Plan, (iii) disability
benefits under any welfare plan that have been fully provided for by insurance
or otherwise, (iv) deferred compensation benefits accrued as liabilities on the
ProFound Financial Statements or (v) benefits in the nature of severance pay.
(j) ProFound has not proposed, agreed to or announced any changes to any
Employee Benefit Plan that would cause an increase in benefits under any such
Employee Benefit Plan (or the creation of new benefits or plans) or to change
any employee coverage which would cause an increase in the expense of
maintaining any such plan.
(k) No Employee Benefit Plan provides for the payment of severance
benefits.
(l) Section 4.19(l) of the ProFound Disclosure Schedule summarizes all
amounts that would be required by any applicable law to be paid to the employees
of ProFound who terminate employment or are terminated.
4.20 LABOR RELATIONS
---------------
(a) Since December 31, 1999, no employee of ProFound has terminated, and
to the knowledge of ProFound, no ProFound employee is considering terminating,
his or her employment with ProFound.
(b) To the knowledge of ProFound, no condition or state of facts or
circumstances exists which could materially adversely affect ProFound's
relations with its
27
<PAGE>
employees, including the consummation of the transactions contemplated by this
Agreement.
(c) ProFound is in compliance in all material respects with all
applicable Law respecting employment and employment practices, terms and
conditions of employment and wages and hours and none of them is engaged in any
unfair labor practice.
(d) No collective bargaining agreement with respect to the business of
ProFound is currently in effect or being negotiated. ProFound has not
encountered any labor union or collective bargaining organizing activity with
respect to its employees. ProFound has no obligation to negotiate any such
collective bargaining agreement, and, to the knowledge of ProFound, there is no
indication that the employees of ProFound desire to be covered by a collective
bargaining agreement.
(e) There are no strikes, slowdowns, work stoppages or other labor
trouble pending or, to the knowledge of ProFound, threatened with respect to the
employees of ProFound, nor has any of the above occurred or, to the knowledge of
ProFound, been threatened.
(f) There is no representation claim or petition pending before the
National Labor Relations Board or any state or local labor agency and, to the
knowledge of ProFound, no question concerning representation has been raised or
threatened respecting the employees of ProFound.
(g) There are no complaints or charges against ProFound pending before
the ordinary courts, the Danish Industrial Tribunal, industrial arbitration
tribunal, the Danish Working Environment Service or other Danish Governmental
Authority, and, to the knowledge of ProFound, no complaints or charges have been
filed or threatened to be filed against ProFound with any such board or agency.
(h) To the knowledge of ProFound, no charges with respect to or relating
to the business of ProFound are pending before any agency responsible for the
prevention of unlawful employment practices.
(i) Section 4.20(i) of the ProFound Disclosure Schedule accurately sets
forth all unpaid severance which, as of the date hereof, is due or claimed, in
writing, to be due from ProFound to any Person whose employment with ProFound
was terminated.
(j) ProFound has not received notice of the intent of any Governmental
Authority responsible for the enforcement of labor or employment Laws to conduct
an investigation of ProFound, and no such investigation is in progress.
28
<PAGE>
(k) ProFound is not and, to the knowledge of ProFound, no employee of
ProFound is, in violation in any material respect of any employment agreement,
non-disclosure agreement, non-compete agreement or any other agreement regarding
an employee's employment with ProFound.
(l) ProFound has paid all wages which are due and payable to
each of its employees and each of its independent contractors.
4.21 INTELLECTUAL PROPERTY
---------------------
(a) For the purposes of this Agreement, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following and all
---------------------
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and applications
therefor throughout the world, (v) all trade names, logos, URLs, common law
trademarks and service marks, trademark and service mark registrations and
applications therefor throughout the world; (vi) all databases and data
collections and all rights therein throughout the world; (vii) all moral and
economic rights of authors and inventors, however denominated, throughout the
world, and (viii) any similar or equivalent rights to any of the foregoing
anywhere in the world.
"ProFound Intellectual Property" shall mean any Intellectual Property
------------------------------
that is owned by, or exclusively licensed to ProFound.
"Registered Intellectual Property" means all United States,
--------------------------------
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; and (iv) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued, filed with, or recorded by any state, government or other public legal
authority.
"ProFound Registered Intellectual Property" means all of the Registered
-----------------------------------------
Intellectual Property owned by, or filed in the name of, ProFound.
29
<PAGE>
(b) No material ProFound Intellectual Property or product or service of
ProFound is subject to any Proceeding or outstanding Order, agreement, or
stipulation restricting in any manner the use, transfer, or licensing thereof by
ProFound, or which may affect the validity, use or enforceability of such
ProFound Intellectual Property.
(c) Section 4.21 of the ProFound Disclosure Schedule is a complete and
accurate list of all ProFound Registered Intellectual Property and specifies,
where applicable, the jurisdictions in which each such item of ProFound
Registered Intellectual Property has been issued or registered or in which an
application for such issuance and registration have been filed, including the
respective registration or application numbers. Each material item of ProFound
Registered Intellectual Property is valid and subsisting, all necessary
registration, maintenance and renewal fees currently due in connection with such
ProFound Registered Intellectual Property have been made and all necessary
documents, recordations and certificates in connection with such ProFound
Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such ProFound
Registered Intellectual Property.
(d) ProFound owns and has good and exclusive title to, or has license
(sufficient for the conduct of its business as currently conducted and as
proposed to be conducted) to, each material item of ProFound Intellectual
Property or other Intellectual Property used by ProFound free and clear of any
Lien or Encumbrance (excluding licenses and related restrictions); and ProFound
is the exclusive owner of all trademarks and trade names used in connection with
the operation or conduct of the business of ProFound, including the sale of any
products or the provision of any services by ProFound.
(e) ProFound owns exclusively, and has good title to, all copyrighted
works that are products of ProFound or which ProFound otherwise expressly
purports to own.
(f) To the extent that any material Intellectual Property has been
developed or created by any Person for ProFound, ProFound has a written
agreement with such Person with respect thereto and ProFound thereby either (i)
has obtained ownership of, and is the exclusive owner of, or (ii) has obtained a
license (sufficient for the conduct of its business as currently conducted and
as proposed to be conducted) to all such Person's Intellectual Property in such
work, material or invention by operation of law or by valid assignment, to the
fullest extent it is legally possible to do so.
(g) ProFound has not transferred ownership of, or granted any exclusive
license with respect to, any Intellectual Property that is or was material to
ProFound's Intellectual Property, to any third party.
30
<PAGE>
(h) The ProFound Disclosure Schedule lists all material contracts,
licenses and agreements to which ProFound is a party (i) with respect to
ProFound Intellectual Property licensed or transferred to any third party (other
than end-user licenses in the ordinary course); or (ii) pursuant to which a
third party has licensed or transferred any material Intellectual Property to
ProFound.
(i) All material contracts, licenses and agreements relating to ProFound
Intellectual Property are in full force and effect. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination, or suspension of such
contracts, licenses and agreements. ProFound is in material compliance with, and
has not materially breached any term of such contracts, licenses and agreements
and, to the knowledge of ProFound, all other parties to such contracts, licenses
and agreements are in compliance with, and have not materially breached any term
of, such contracts, licenses and agreements. Following the Closing, ProFound
will be permitted to exercise all ProFound rights under such contracts, licenses
and agreements to the same extent ProFound would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which ProFound would otherwise be required to pay.
(j) In operating its business since the inception of ProFound (including
its design, development, manufacture, marketing and sales of products and
services), ProFound has not infringed or misappropriated any Intellectual
Property of any third Person or engaged in unfair competition or any unlawful
trade practice.
(k) ProFound has not received notice from any third party that the
operation of the business of ProFound or any act, product or service of
ProFound, infringes or misappropriates the Intellectual Property of any third
party or constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(l) Except as set forth in Section 4.21 of the ProFound Disclosure
Schedule and to the knowledge of ProFound, no Person has infringed or
misappropriated or is infringing or misappropriating any ProFound Intellectual
Property.
(m) ProFound has taken reasonable steps to protect the rights of
ProFound in ProFound's confidential information and trade secrets that it wishes
to protect or any trade secrets or confidential information of third parties
provided to ProFound, and, without limiting the foregoing, ProFound has and
enforces, or prior to the Closing will have and will enforce, a policy requiring
each employee and contractor to execute a proprietary
information/confidentiality agreement substantially in the form provided to
Maxygen and all current and former employees and contractors of ProFound have
executed such an agreement, except where the failure to do so is not reasonably
expected to be material to ProFound.
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<PAGE>
(n) Neither this Agreement nor the transactions contemplated by this
Agreement will result in (i) ProFound granting to any third party any right to
or with respect to any material Intellectual Property right owned by, or
licensed to, either of them, (ii) ProFound being bound by, or subject to, or any
non-compete or other material restriction on the operation or scope or their
respective businesses, or (iii) ProFound being obligated to pay any royalties or
other material amounts to any third party in excess of those payable by
ProFound, in the absence of this Agreement or the transaction contemplated
hereby.
4.22 CERTAIN PAYMENTS
----------------
Neither ProFound nor any shareholder, director, officer, agent or
employee of ProFound, or to the knowledge of ProFound, any other Person
associated with or acting for or on behalf of ProFound, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback or other payment to any Person, private or public, regardless
of form, whether in money, property or services: (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, or (iii) to obtain special concessions, or for special concessions
already obtained, for or in respect of ProFound or any affiliate of ProFound, or
(b) established or maintained any fund or asset of ProFound that has not been
recorded in the consolidated books and records of ProFound.
4.23 RELATIONSHIPS WITH RELATED PERSONS
----------------------------------
No stockholder, affiliate, officer, director or employee of ProFound,
nor any spouse or child of any of them or any Person associated with any of them
("Related Person"), has any ownership interest in any assets or properties
(including, without limitation, any Intellectual Property) used in or pertaining
to the business of ProFound. No stockholder, affiliate, officer or director, or
spouse or child of any of them, owns or owned, directly or indirectly, and
whether on an individual, joint or other basis, any equity interest or any other
financial or profit interest in any Person (other than less than two percent
(2%) of the outstanding capital stock of a Person) that (i) has or had business
dealings involving a total value in excess of DK100,000 with ProFound since the
inception of ProFound, or (ii) engaged in competition with ProFound. Except as
set forth in Section 4.23 of the ProFound Disclosure Schedule, no stockholder,
affiliate, officer, director or employee of ProFound nor any Related Person is a
party to any Contract with, or has any claim or right against, or owes any
amounts to, ProFound. All loans, payables and other amounts due to or from
ProFound and its affiliates are listed in Section 4.23 of the ProFound
Disclosure Schedule. As used in this Section 4.23, "stockholder" does not
include BankInvest I, BankInvest II, Novo Nordisk A/S or any corporate affiliate
of any of them.
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4.24 BROKERS OR FINDERS
------------------
Neither ProFound nor any of its agents has incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or financial advisory services or other similar payment in
connection with this Agreement or the Transaction Documents or the transactions
contemplated hereby or thereby.
4.25 CUSTOMER RELATIONSHIPS
----------------------
To the knowledge of ProFound, there are no facts or circumstances,
including the consummation of the transactions contemplated by this Agreement,
that are reasonably likely to result in the loss of any material Customer of
ProFound or a material change in the relationship of ProFound with such a
Customer.
4.26 RESTRICTIONS ON BUSINESS ACTIVITIES
-----------------------------------
There is no Contract or Order binding upon ProFound or, to the
knowledge of ProFound, threatened that has, or could reasonably be expected to
have, the effect of prohibiting or materially impairing any business practice of
ProFound (either individually or in the aggregate), any acquisition of property
by ProFound (either individually or in the aggregate), providing of any service
by ProFound or the hiring of employees or the conduct of business by ProFound
(either individually or in the aggregate).
4.27 OUTSTANDING INDEBTEDNESS
------------------------
Section 4.27 of the ProFound Disclosure Schedule sets forth as
of the date of the balance sheet included in the ProFound Interim Financial
Statements (a) the amount of all indebtedness for borrowed money of ProFound
then outstanding, the interest rate and maturity of that indebtedness, and the
amount of any prepayment penalty or premium applicable to that indebtedness, (b)
any Encumbrances or Liens which relate to such indebtedness and (c) the name of
the lender or the other payee of each such indebtedness.
4.28 DEPOSIT ACCOUNTS
----------------
Section 4.28 of the ProFound Disclosure Schedule contains a true,
correct and complete list of (a) the name of each financial institution in which
ProFound has an account or safe deposit box, (b) the names in which each account
or box is held, (c) the type of account, and (d) the name of each Person
authorized to draw on or have access to each account or box.
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<PAGE>
4.29 DISCLOSURE
----------
No representation or warranty of ProFound or any ProFound Shareholder
in this Agreement as modified by statements in the ProFound Disclosure Schedule
is inaccurate in any material respect or omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE PROFOUND SHAREHOLDERS
-----------------------------------------------------------
Each ProFound Shareholder hereby represents and warrants to Maxygen and
Holdings as follows:
5.1 AUTHORITY
---------
Each ProFound Shareholder has the right, power, authority and capacity
to execute and deliver this Agreement and the Transaction Documents to which it
is or will become a party, to consummate the Maxygen Exchange and the other
transactions contemplated hereby and thereby and to perform its respective
obligations under this Agreement and the Transaction Documents to which it is or
will become a party. This Agreement has been duly authorized, executed and
delivered by it and is enforceable against it in accordance with the terms
hereof. It has all authorizations and consents necessary for the execution and
delivery of this Agreement, and for the performance of its obligations
hereunder. If such ProFound Shareholder is not a natural Person, it is and at
the Closing will be duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with corporate power and
authority to own, lease and operate its properties and to conduct its business.
Upon the authorization and approval, execution and delivery by or on behalf of
the respective ProFound Shareholder of the Transaction Documents to which it is
or will become a party, such Transaction Documents will constitute legal, valid
and binding obligations of the respective ProFound Shareholder, enforceable
against such holder in accordance with their respective terms.
5.2 OWNERSHIP
---------
It has, and at the Closing will have, (i) good and marketable title to
all the ProFound Securities listed beside its name in Section 4.3 of the
ProFound Disclosure Schedule (as to the applicable ProFound Shareholder, the
"Applicable Securities"), free and clear of all Encumbrances and Liens, and (ii)
full legal right and power to sell, transfer and deliver the Applicable
Securities to Maxygen in accordance with this Agreement. The Applicable
Securities are the only securities of ProFound held by the ProFound Shareholder.
Upon delivery of the Applicable Securities to be exchanged by it
34
<PAGE>
to Maxygen in accordance with this Agreement, Maxygen will receive good and
marketable title to all the Applicable Securities, free and clear of all
Encumbrances and Liens.
5.3 TAXES
-----
On the Closing all stock transfer or other taxes (other than income
taxes) that are required to be paid in connection with the exchange and transfer
of the ProFound Securities to Maxygen will have been fully paid or provided for
and all laws imposing such taxes will have been fully complied with.
5.4 NO CONFLICT
-----------
None of the execution, delivery or performance of this Agreement or
any of the Transaction Documents to which such ProFound Shareholder is or will
become a party, and the consummation of the transactions contemplated herein or
therein by it conflicts or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien or
encumbrance upon, any of its properties or assets pursuant to (i) the terms of
its Organizational Documents; (ii) the terms of any contract or other agreement
to which it is a party or by which it is bound or to which any of its properties
is subject, which conflict, breach, violation or default would adversely affect
the ProFound Shareholder's ability to perform its obligations hereunder or
thereunder; (iii) any statute, rule or regulation of any Governmental Authority
having jurisdiction over it or any of its activities or properties; or (iv) the
terms of any Order of any arbitrator or any Governmental Authority having such
jurisdiction.
5.5 NO CONSENT
----------
No consent, approval, authorization or order of, or any filing or
declaration with any Governmental Authority is required for the consummation by
the ProFound Shareholder of any of the transactions on its part contemplated
under this Agreement.
5.6 INVESTMENT
----------
Such ProFound Shareholder is acquiring the Maxygen securities for
investment, for its own account and not with a view to distribution, it being
understood that some of the ProFound Shareholders may sell some of their shares
of Maxygen Common Stock to Maxygen. Such ProFound Shareholder acknowledges that
the Maxygen Common Stock will not be registered under the Securities Act and
will be subject to restrictions on transfer under the United States securities
laws and the terms of the applicable Lock-up Agreement.
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<PAGE>
5.7 BROKERS AND FINDERS
--------------------
The ProFound Shareholder has not retained any investment banker,
broker, or finder in connection with any of the transactions contemplated by
this Agreement.
5.8 UNREGISTERED SECURITIES
-----------------------
The ProFound Shareholder understands and acknowledges that the
offering of the Maxygen securities pursuant to this Agreement will not be
registered under the Securities Act on the grounds that the offering and sale of
Maxygen securities contemplated by this Agreement are exempt from registration
pursuant to Section 4(2) and/or Section 3(b) of the Securities Act and
Regulations S and D thereunder and that Maxygen's reliance upon such exemption
is predicated upon such ProFound Shareholder's representations as set forth in
this Agreement.
5.9 EXPERIENCE
----------
Each ProFound Shareholder represents that: (a) it has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of its prospective investment in the Maxygen securities;
(b) it believes it has received all the information it has requested from
Maxygen and considers necessary or appropriate for deciding whether to obtain
Maxygen securities; (c) it has had the opportunity to discuss Maxygen's
business, management, and financial affairs with Maxygen management, it being
understood that, in the case of Novo Nordisk A/S, that opportunity has arisen
primarily in the context of Novo Nordisk A/S's separate business relationship
with Maxygen.
5.10 NON-U.S. PERSON STATUS
----------------------
The ProFound Shareholder, if a natural person, is not a resident of
the United States. The ProFound Shareholder, if a partnership or corporation:
(a) is organized or incorporated in a jurisdiction other than a jurisdiction
that is part of the United States and (b) was not formed by a "U.S. person"
principally for the purpose of investing in securities that are not registered
under the Securities Act. Each ProFound Shareholder is a natural person, a
partnership or a corporation. For purposes of this Section 5.10, "U.S. person"
has the meaning given to that term in Regulation S adopted by the Commission
under the Securities Act.
6. REPRESENTATIONS AND WARRANTIES OF MAXYGEN
-----------------------------------------
Except as set forth in the Maxygen Disclosure Schedule by means of a
disclosure that references the specific representation and warranty which that
exception is intended to modify, or in the Maxygen Reports filed with the
Commission on or prior to
36
<PAGE>
the date hereof, Maxygen hereby represents and warrants to ProFound and the
ProFound Shareholders as follows:
6.1 ORGANIZATION AND GOOD STANDING
------------------------------
(a) Section 6.1 of the Maxygen Disclosure Schedule contains a complete
and accurate list of the jurisdictions in which Maxygen is authorized to do
business. Maxygen is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. Holdings is a corporation duly organized,
validly existing and in good standing under the laws of the Cayman Islands. Each
of Maxygen and Holdings has full corporate power and authority to conduct its
business as it is now being conducted and to own or use the assets and
properties that it purports to own or use. Each of Maxygen and Holdings is duly
qualified to do business as a foreign corporation and is in good standing under
the Laws of each state or other jurisdiction in which either the ownership or
use of the assets or properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except where the
failure to be so qualified could not reasonably be expected to have a Maxygen
Material Adverse Effect.
(b) Within 15 days after the date of this Agreement, Maxygen will
deliver to ProFound correct and complete copies of the Organizational Documents
of Maxygen and Holdings.
6.2 AUTHORITY; NO CONFLICT
----------------------
(a) Maxygen and Holdings have the right, power, authority and capacity
to execute and deliver this Agreement and the Transaction Documents to which
they are or will become a party, to consummate the Exchanges and the other
transactions contemplated hereby and thereby and to perform their respective
obligations under this Agreement and the Transaction Documents to which they are
or will become a party. This Agreement has been duly authorized and approved,
executed and delivered by Maxygen and Holdings and constitutes the legal, valid
and binding obligation of Maxygen and Holdings, enforceable against Maxygen and
Holdings in accordance with its terms. Upon the authorization and approval,
execution and delivery by Maxygen and Holdings of the Transaction Documents to
which they are or will become a party, such Transaction Documents will
constitute legal, valid and binding obligations of Maxygen and Holdings,
enforceable against Maxygen and Holdings in accordance with their respective
terms.
(b) Neither the execution and delivery of this Agreement or any
Transaction Document by Maxygen or Holdings nor the consummation or performance
by Maxygen or Holdings of the Exchanges or any of the other transactions
contemplated hereby or thereby will, directly or indirectly (with or without
notice or lapse of time or both):
37
<PAGE>
(i) contravene, conflict with or result in a violation or breach
of (A) any provision of the Organizational Documents of Maxygen or Holdings, (B)
any resolution adopted by the board of directors or the stockholders of Maxygen
or Holdings, (C) any legal requirement or any Order, award, decision, settlement
or process to which Maxygen or Holdings or any of the assets or properties owned
or used by Maxygen or Holdings may be subject, or (D) any Governmental Permit
that is held by Maxygen or Holdings;
(ii) result in a breach of or constitute a default, give rise to a
right of termination, cancellation or acceleration, create any entitlement to
any payment or benefit, or require the consent, authorization or approval of or
any notice to or filing with any third Person under any material Contract to
which Maxygen or Holdings is a party or to which their respective assets or
properties are bound, or require the consent, authorization or approval of or
any notice to or filing with any Governmental Authority to which Maxygen or
Holdings or their respective assets or properties is subject; or
(iii) result in the imposition or creation of any Encumbrance or
Lien upon or with respect to any of the assets or properties owned or used by
Maxygen or Holdings.
6.3 MAXYGEN REPORTS
---------------
(a) Maxygen has made available to each ProFound Shareholder Maxygen's
final prospectus dated March 20, 2000 and will make available to each ProFound
Shareholder its Annual Report on Form 10-K for the year ended December 31, 1999
and any and all reports required to be filed by Maxygen after the date of this
Agreement and before the Closing with the Commission pursuant to the Exchange
Act (collectively, the "Maxygen Reports").
(b) The Maxygen Reports complied and will comply as to form in all
material respects with the requirements of the Securities Act and the Exchange
Act in effect on the dates thereof. The Maxygen Reports, when filed pursuant to
the Securities Act and the Exchange Act, did not and will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(c) Each of the Maxygen financial statements (including the related
notes) included in the Maxygen Reports present fairly or will present fairly, in
all material respects, the consolidated financial position and consolidated
results of operations, changes in shareholders' equity and cash flow of Maxygen
as of the respective dates or for the respective periods set forth therein, all
in conformity with United States generally accepted accounting principles
consistently applied during the periods involved except as otherwise noted
therein, and subject, in the case of any unaudited interim financial
38
<PAGE>
statements included therein, to normal year-end adjustments and to absence of
complete footnotes.
6.4 ABSENCE OF CERTAIN CHANGES AND EVENTS
-------------------------------------
Since December 31, 1999, Maxygen has conducted its business only in
the ordinary course and there has not been (i) any Maxygen Material Adverse
Effect; (ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock; or (iii) any material change in
its accounting principles, practices or methods.
6.5 VALIDITY OF SECURITIES
----------------------
The Maxygen Common Stock, when issued, sold, and delivered in
accordance with the terms and for the consideration expressed in this Agreement,
will be duly and validly issued (including, without limitation, issued in
compliance with applicable federal and state securities laws) and non-
assessable. The Maxygen Common Stock issuable upon exercise of the Maxygen
Options will have been duly and validly reserved and, assuming such Maxygen
Common Stock is issued to the ProFound Securityholders in accordance with the
Maxygen International Option Plan, will be duly and validly issued (including,
without limitation, issued in compliance with applicable United States and state
securities laws) and non-assessable.
6.6 HOLDINGS
--------
Holdings has been formed for the purpose of holding the securities of
entities that conduct some or all of the future non-U.S. operations of the
Maxygen entities, including ProFound, and holding certain intangible and other
assets.
6.7 SHORT SWING PROFIT RULE
-----------------------
Maxygen believes that, for so long as the Founding Shareholders'
duties and responsibilities at ProFound are no greater than those contemplated
by the Employment Agreements (see Section 7.9) and assuming no relevant change
in the interpretation of the Exchange Act by courts or the Commission, none of
the Founding Shareholders will be a person covered by Section 16(a) of the
Exchange Act and thus will not be subject to the short swing profits rule of
Section 16(b) of the Exchange Act.
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7. COVENANTS
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The parties, as applicable, hereby covenant and agree as follows:
7.1 NORMAL COURSE
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From the date hereof until the Closing, ProFound shall: (a) maintain
its corporate existence in good standing; (b) maintain the general character of
its business; (c) maintain in effect all of its presently existing insurance
coverage (or substantially equivalent insurance coverage); (d) preserve intact
in all material respects its business organization, preserve its goodwill and
the confidentiality of its business know how, exercise reasonable efforts to
keep available the services of its current officers and employees and preserve
its present material business relationships with its collaborators, licensors,
customers, suppliers and other Persons with which it has material business
relations; and (e) in all respects conduct its business only in the usual and
ordinary manner consistent with past practice and perform all Contracts.
7.2 CONDUCT OF BUSINESS
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Without limiting the provisions of Section 7.1, from the date hereof
until the Closing (or earlier if and when this Agreement is terminated in
accordance with its Section 11), ProFound shall not, except as contemplated by
this Agreement, directly or indirectly, do, or propose to do, any of the
following without the prior written consent of Maxygen, which consent shall not
be unreasonably withheld or delayed:
(a) amend or otherwise modify its Organizational Documents;
(b) issue, sell, dispose of or Encumber or authorize the issuance,
sale, disposition or Encumbrance of, or grant or issue any option, warrant or
other right to acquire or make any agreement of the type referred to in Section
4.3, with respect to, any shares of its capital stock or any other of its
securities or any security convertible or exercisable into or exchangeable for
any such shares or securities, or alter any term of any of its outstanding
securities or make any change in its outstanding shares of capital stock or its
capitalization, whether by reason of a reclassification, recapitalization, stock
split, combination, exchange or readjustment of shares, stock dividend or
otherwise;
(c) Encumber any material assets or properties;
(d) declare, set aside, make or pay any dividend or other distribution
to any shareholder with respect to its capital stock;
(e) redeem, purchase or otherwise acquire any of its capital stock or
other securities;
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(f) increase the compensation or other remuneration or benefits payable
or to become payable to any director or executive officer, or increase the
compensation or other remuneration or benefits payable or to become payable to
any of its other employees or agents, except, with respect to such other
employees or agents only, for increases in the ordinary course of business
consistent with past practice;
(g) adopt or (except as otherwise required by law) amend or make any
unscheduled contribution to any employee benefit plan for or with employees, or
enter into any collective bargaining agreement;
(h) terminate or modify any Contract requiring future payments to or
from such party, individually or in the aggregate, in excess of DK400,000,
except for terminations of Contracts upon their expiration during such period in
accordance with their terms;
(i) create, incur, assume or otherwise become liable for any
indebtedness in an aggregate amount in excess of DK400,000, or guarantee or
endorse any obligation or the net worth of any Person, except for endorsements
of negotiable instruments for collection in the ordinary course of business;
(j) pay, discharge or satisfy any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, in an aggregate
amount in excess of DK400,000, except for liabilities incurred in the ordinary
course of business prior to the date hereof where it shall not make any payment
or commitment in an aggregate amount in excess of DK800,000 (for purposes of
this Section 7.2(j), indebtedness that is created, incurred, assumed or for
which it is otherwise liable under Section 7.2(i) shall be included in
determining whether the foregoing basket amounts have been reached);
(k) sell, transfer, lease or otherwise dispose of any of its assets or
properties, except in the ordinary course of business consistent with past
practice and for a cash consideration equal to the fair value thereof at the
time of such sale, transfer, lease or other disposition;
(l) cancel, compromise, release or waive any material debt, claim or
right;
(m) make any loan or advance to any Person other than travel and other
similar routine advances in the ordinary course of business consistent with past
practice, or acquire any capital stock or other securities or any ownership
interest in, or substantially all of the assets of, any other business
enterprise;
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(n) make any material capital investment or expenditure or capital
improvement, addition or betterment, other than those specified in the list of
planned capital expenditures set forth on Exhibit 7.2(n);
(o) change its method of accounting or the accounting principles or
practices used in the preparation of the ProFound Financial Statements, other
than as required by GAAP;
(p) institute or settle any Proceeding before any Governmental
Authority relating to it or its assets or properties;
(q) adopt a plan of dissolution or liquidation;
(r) enter into any Contract, except Contracts made in the ordinary
course of business consistent with past practice;
(s) make any new election with respect to Taxes or any change in
current elections with respect to Taxes, or settle or compromise any federal,
state, local or foreign Tax liability or agree to an extension of a statute of
limitations;
(t) commence any legal proceeding or settle any legal proceeding; or
(u) enter into any commitment to do any of the foregoing, or take any
action that would make any of the representations or warranties of such party
contained in this Agreement untrue or incorrect in any material respect (subject
to the knowledge and materiality limitations set forth therein) or cause any
covenant, condition or agreement of such party in this Agreement not to be
complied with or satisfied in any material respect.
In addition, without the prior written consent of Maxygen, from the date
hereof until the Closing:
(i) none of the ProFound Securityholders shall effect, permit or
facilitate ProFound to become a party to any Alternative Acquisition,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction; and
(ii) none of the ProFound Securityholders shall permit or
facilitate the taking of any action prohibited in (a) to (u) above.
7.3 DANISH TAX FILING
-----------------
(a) With the assistance of ProFound, the ProFound Securityholders shall
jointly prepare and file, within 10 days after the date of this Agreement, an
application to the Danish Tax Authority for a ruling that the Exchanges will be
tax deferred reorganizations pursuant to Section 13 of the Danish Act on
Taxation of Capital Gains on
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Shares (aktieavancebeskatingsloven). The application shall be submitted to
Maxygen at least five days before filing for Maxygen's review and comment. The
ProFound Securityholders shall not submit the application without Maxygen's
prior consent, which shall not be unreasonably withheld. The ProFound
Shareholders, on their behalf and on behalf of the ProFound Securityholders,
acknowledge and agree that they, and not ProFound, Maxygen or Holdings, shall be
responsible for the accuracy of the contents of the application.
(b) If: (i) all the conditions set forth in Section 9 except the
--
condition set forth in Section 9.12 are satisfied, (ii) all the conditions set
forth in Section 10 except the condition set forth in Section 10.7 are satisfied
or are waived by ProFound or the Securityholder Representative, (iii) the Danish
tax authorities deny the application referenced in Section 7.3(a) by means of a
final, non-appealable written action which explains that a reason (but not
necessarily the only reason) the application was denied was the Holdings
Exchange, (iv) this Agreement is terminated after that denial by ProFound under
Section 11.2 or Section 11.4 and (v) ProFound elects to require that Maxygen
---
extend a loan to ProFound by giving Maxygen a written notice to that effect
within 20 days after that termination of this Agreement, then Maxygen, in lieu
----
of purchasing the ProFound Securities, will loan US$10 million to ProFound on
the terms and conditions set forth in the balance of this Section 7.3 and on
other reasonable and customary terms and conditions as the parties agree. The
closing and funding of that loan will occur within 20 days after ProFound gives
the notice specified in clause (v) above.
(c) The loan, if made, will have these principal features: The funds
loaned and all repayments will be made in, and all calculations will be based
upon, U.S. dollars. The loan will be secured by a first lien on all of
ProFound's tangible and intangible assets, it being understood that ProFound
will pay all costs (including any and all fees and Taxes) associated with
putting the lien in place and it being further understood that Maxygen's lien
will be junior to the lien currently held by Vaekstfonden on certain of
ProFound's assets. The loan will bear interest at one-year LIBOR plus 100 basis
points, with one-year LIBOR to be set for each calendar quarter or portion of
each calendar quarter during which any portion of the loan is outstanding on the
first Business Day of that calendar quarter based on the quotation for that day
published in The Wall Street Journal. The interest rate will increase to one-
--- ---- ------ -------
year LIBOR plus 600 basis points if and for so long as the loan is in default.
Interest will be payable quarterly. All principal will be payable on the fifth
anniversary after the loan is extended. Seventy-five percent of the loan (i.e.,
- -
US$7.5 million of the original principal plus all accrued and unpaid interest on
that principal) will be prepayable in whole or in part at the option of ProFound
without penalty or premium. Any prepayments will be applied first to accrued and
unpaid interest, and then to principal. In order to preserve Maxygen's
conversion right set forth in Section 7.3(d), the balance of the loan (i.e.,
- -
US$2.5 million of the original principal plus all accrued and unpaid interest on
that principal) will not be prepayable, even with
---
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penalty or premium, unless Maxygen so consents, which it shall be entitled not
to do in its sole discretion. During the duration of the loan, Maxygen shall be
a beneficiary of all affirmative and negative covenants that run to the benefit
of any other Person or Persons that then have outstanding loans to ProFound.
(d) At any time during the duration of the loan (including after its
maturity date if any portion of the loan is then in default), Maxygen, at
Maxygen's option exercisable by written notice to ProFound, may convert up to
US$2.5 million of the principal of the loan, plus all accrued and unpaid
interest on that principal, into shares of Class B ProFound Common Stock or
other equity securities of ProFound having the same rights, preferences and
privileges as shares of Class B ProFound Common Stock. The price per share of
the securities purchased on conversion will be the lower of (i) US$68 and (ii)
70 percent of the per security price at which ProFound securities are purchased
in ProFound's next round of equity financing (adjusted, if and as appropriate in
the case of clause (i) and clause (ii), to reflect stock splits, stock dividends
and similar events). The entitlements that accompany the securit