Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Form 10-K405 for 12-31-2001 39 208K
2: EX-2.1 Agreement & Plan of Merger 54 231K
3: EX-4.2 Amend No.1 to Shareholder Rights Agreement 3 16K
6: EX-10.12 Amend 1 to Long Term Incentive Plan 1 6K
7: EX-10.13 Amend 2 to Long Term Incentive Plan 2 10K
4: EX-10.4 Amend 1 to Employment Agreement 2 13K
5: EX-10.6 Amend 1 to Change in Control Agreement 3 15K
8: EX-21.1 Subsidiaries 1 4K
9: EX-23.1 Consent of Ernst & Young LLP 1 7K
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
Dated as of February 11, 2002
among
CytRx Corporation,
GGC MERGER CORPORATION
AND
Global Genomics Capital, Inc.
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), is made and
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entered into as of February 11, 2002, by and among CytRx Corporation, a Delaware
corporation ("CytRx"), GGC Merger Corporation, a California corporation and a
wholly-owned subsidiary of CytRx ("Merger Sub"), and Global Genomics Capital,
Inc., a California corporation ( "GGC") and is made with respect to the
following facts:
A. CytRx has proposed that CytRx acquire all of the issued and outstanding
shares of GGC capital stock (collectively, the "Shares") pursuant to the merger
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of Merger Sub with and into GGC, with GGC continuing as the surviving
corporation (the "Merger"), in accordance with the California Corporation Code
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(the "CCC") and upon the terms and subject to the conditions set forth herein;
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B. The board of directors of CytRx (the "Board") has received (i) the
opinion of Sanli Pastore & Hill, Inc. (the "Independent Advisor"), an
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independent financial advisor to the Board, that, as of February 8, 2002, the
Merger is fair to CytRx and its stockholders from a financial point of view and
(ii) the opinion of A.M. Pappas & Associates regarding the technology of
Blizzard Genomics, Inc.;
C. The Board, has, after consultation with the Independent Advisor, and in
light of and subject to the terms and conditions set forth herein, (i)
determined that (x) the Merger is fair to CytRx and its stockholders from a
financial point of view, and (y) the Merger is advisable and in the best
interests of CytRx and its stockholders, (ii) adopted and approved this
Agreement, and (iii) determined to recommend that the stockholders of CytRx vote
to approve the issuance of the Merger Consideration in accordance with this
Agreement and the amendment to CytRx's certificate of incorporation as
contemplated in this Agreement;
D. The board of directors and sole shareholder of Merger Sub have adopted
and approved this Agreement, and the board of directors of GGC has adopted and
approved this Agreement and has determined to recommend that the shareholders of
GGC approve this Agreement;
E. Concurrently with the execution and delivery of this Agreement by the
Parties hereto, (i) each Designated GGC Shareholder (as defined in Section 9.2)
and CytRx have entered into a voting agreement in the form attached hereto as
Exhibit A (the "Voting Agreement"), pursuant to which each Designated GGC
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Shareholder has agreed to vote the Shares held by them at the GGC Shareholders
Meeting in favor of the Merger and has granted CytRx an irrevocable proxy to
vote such Shares at the GGC Shareholders Meeting in favor of the Merger, (ii)
CytRx and Steven A. Kriegsman entered into an Employment Agreement effective as
of the Effective Time in the form attached hereto as Exhibit B (the "Employment
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Agreement"), (iii) each of Elliott J. Cody and Leonard P. Ruiz, Jr. entered into
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consulting agreements in the forms attached hereto as Exhibits C and D with
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CytRx that will be effective as of the Effective Time, (iv) each of Elliott J.
Cody, Leonard P. Ruiz, Jr. and Steven A. Kriegsman have entered into termination
and release agreements in the forms attached hereto as Exhibit E with GGC that
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will be effective as of the Effective Time, (v) Wasserman, Comden, Casselman &
Pearson LLP and GGC have entered into an agreement in the form attached hereto
as Exhibit F (the "Letter Agreement"), pursuant to which Wasserman, Comden,
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Casselman & Pearson LLP have agreed, promptly after the
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Effective Time, to receive shares of CytRx Common Stock in lieu of cash to
satisfy all fees, expenses and costs owed to it by GGC at the Effective Time and
(vi) Kriegsman Capital Group, LLC and CytRx have entered into an agreement in
the form attached hereto as Exhibit G regarding certain post-Effective Time rent
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and other overhead expenses to be paid by CytRx;
F. GGC, CytRx and Merger Sub desire to make certain representations,
warranties, covenants and agreements in connection with the merger and also to
prescribe various conditions to the Merger.
Certain capitalized terms used in this Agreement are defined in Section 9.2
of this Agreement
Now, therefore, upon the above premises and in consideration of the mutual
promises, covenants, representations and warranties contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth
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in this Agreement, and in accordance with the CCC, Merger Sub shall be merged
with and into the GGC at the Effective Time. At the Effective Time, the separate
existence of Merger Sub shall cease, and GGC shall continue as the surviving
corporation (the "Surviving Corporation") and shall amend its articles of
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incorporation to change its name to "GGC, Inc." At the Effective Time, CytRx
will amend its certificate of incorporation to change its name to "Global
Genomics, Inc."
1.2 Closing. Unless this Agreement shall have been terminated pursuant
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to Section 7.1 and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the closing of the Merger (the "Closing") will take place
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on the date occurring two business days following satisfaction or waiver of the
conditions set forth in Article VI (the "Closing Date"), but in no event later
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than July 31, 2002, at 10:00 a.m., Eastern standard time, at the offices of
Wasserman, Comden, Casselman & Pearson LLP, 11755 Wilshire Boulevard, Suite
1230, Los Angeles, California 90025, unless another date, time or place is
agreed to in writing by the parties hereto.
1.3 Effective Time of the Merger. On the Closing Date, the Surviving
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Corporation shall file a certificate of merger conforming to the requirements of
the CCC (the "Certificate of Merger") with the Secretary of State of the State
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of California and make all other filings or recordings required by the CCC in
connection with the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Secretary of State of the State
of California (the "Effective Time").
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1.4 Effects of the Merger. The Merger shall have the effects set forth
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in this Agreement and in the applicable provisions of the CCC.
1.5 Articles of Incorporation; By-Laws.
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(a) The articles of incorporation of Merger Sub, which are attached as
Exhibit 1.5(a) hereto, as in effect immediately prior to the Effective Time,
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shall be the articles of incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law; provided
that Article I of the articles of incorporation of the Surviving Corporation
shall be amended by the Certificate of Merger to read as follows: "The name of
the corporation is GGC, Inc."
(b) The by-laws of Merger Sub, which are attached as Exhibit 1.5(b)
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hereto, shall be the by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
1.6 Directors; Officers.
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(a) The directors of GGC immediately prior to the Effective Time shall
be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
(b) The officers of GGC immediately prior to the Effective Time shall
be the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
1.7 Further Actions. At and after the Effective Time, the Surviving
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Corporation shall take all action as shall be required in connection with the
Merger, including, without limitation, the execution and delivery of any
instruments, certificates or other documents as are necessary or desirable to
carry out the provisions of this Agreement.
ARTICLE II
CANCELLATION OF THE CAPITAL STOCK OF GGC
AND EXCHANGE WITH RESPECT THERETO
2.1 Effect on Capital Stock. At the Effective Time, by virtue of the
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Merger, and without any action on the part of CytRx, GGC or Merger Sub or the
shareholders of GGC or Merger Sub thereof:
(a) subject to the other provisions of Article II, each share of common
stock of GGC issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares) shall be converted into the right to receive a
number of shares of CytRx Common Stock equal to the quotient of (i) 9,962,881
divided by (ii) the sum of the total number of shares of GGC common stock
outstanding at the Effective Time (including those shares issued between the
date hereof and the Effective Time upon the exercise of GGC Stock Options
outstanding on the date hereof), plus the number of shares of GGC common stock
issuable upon the exercise of any Converting Options (as defined in Section 2.4)
and any other GGC Stock Options that are
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outstanding at the Effective Time (such quotient, the "Exchange Ratio"). No
fractional shares will be issued in the Merger. Each fractional share less than
one-half of share shall be rounded down to the nearest whole share and each
fractional share equal to or greater than one-half of a share shall be rounded
up to the nearest whole share. The total number of shares of CytRx Common Stock
issued pursuant to Section 2.1(a) above are collectively referred to herein as,
the "Merger Consideration". In no event will the aggregate number of shares of
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CytRx Common Stock issued in the Merger as Merger Consideration (including
shares of CytRx Common Stock issuable upon the exercise of Converting Options)
exceed 9,962,881 shares, unless increased in accordance with Article VIII
hereof.
(b) each share of GGC capital stock issued and held in GGC's treasury
immediately prior to the Effective Time shall, by virtue of the Merger, cease to
be outstanding and shall be cancelled and retired without payment of any
consideration therefor;
(c) each share of common stock, par value $.01 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of common stock
of the Surviving Corporation; and
(d) notwithstanding anything in this Agreement to the contrary, to the
extent required by the CCC, CytRx will not make any payment of Merger
Consideration with respect to Shares held by any person (a "Dissenting
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Stockholder") who elects to demand appraisal of such Dissenting Stockholder's
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Shares and duly and timely complies with all the provisions of the CCC
concerning the right of holders of Shares to require appraisal of their Shares
("Dissenting Shares"), but such Dissenting Stockholders shall have the right to
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receive such consideration as may be determined to be due such Dissenting
Stockholders pursuant to the dissenters' rights/shareholder appraisal laws of
the State of California after such Dissenting Stockholder has surrendered his or
her Certificate or Certificates representing Shares for which payment is being
made and has complied with all other requirements of the CCC. If, after the
Effective Time, a Dissenting Stockholder withdraws such Dissenting Stockholder's
demand for appraisal or fails to perfect or otherwise is no longer entitled to
such Dissenting Stockholder's right of appraisal and payment for such holder's
Shares, in any case pursuant to the CCC, such Dissenting Stockholder's Shares
will be deemed to have been converted as of the Effective Time into the right to
receive the applicable portion of the Merger Consideration pursuant to Section
2.1(a) and the Payment Agent shall issue and deliver the applicable portion of
the Merger Consideration to which such Dissenting Stockholder is entitled under
Section 2.1(a) upon surrender by such holder of the Certificate or Certificates
representing the Shares of GGC held by such Dissenting Stockholder immediately
prior to the Effective Time, in accordance with Section 2.2(b). GGC will give
CytRx prompt notice of any demands for appraisal of Dissenting Shares received
by GGC.
2.2 Delivery of Merger Consideration.
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(a) Payment Agent. Promptly after the Effective Time, CytRx shall
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deposit with CytRx's transfer agent or another exchange agent selected by CytRx
(the "Payment Agent"), for the benefit of the holders of the Shares, for payment
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in accordance with this Article II through the Payment Agent, a number of shares
of CytRx Common Stock equal to the Merger
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Consideration, reduced by (i) the Secondary Merger Consideration (as defined
below) and (ii) the number of shares of CytRx Common Stock issuable upon the
exercise of Converting Options and any other GGC Stock Options outstanding at
the Effective Time (the "Initial Merger Consideration"). Five percent (5%) of
the Merger Consideration, or 498,144 shares of CytRx Common Stock (the
"Secondary Merger Consideration") will be held by CytRx (the "Escrow Agent") in
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escrow in accordance with Section 2.3 and the Escrow Agreement.
(b) Payment Procedures. As soon as reasonably practicable after the
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Effective Time, the Payment Agent shall mail to each holder of record of a
certificate or certificates which at the Effective Time represented Shares (the
"Certificates"), the following documents: (i) a letter of transmittal (which
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shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Payment
Agent and shall be in such form and have such other provisions as GGC, CytRx and
the Payment Agent may reasonably specify); and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for payment with respect
thereto. Upon surrender of a Certificate for cancellation to the Payment Agent
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled, subject to Section 2.3, to receive in exchange
therefor the Merger Consideration payable with respect to the Shares represented
by such Certificate pursuant to the provisions of this Article II, and the
Certificate so surrendered shall forthwith be cancelled. In the event that a
holder has lost or misplaced a Certificate, or a Certificate has been destroyed
or stolen, an affidavit of loss thereof (together with an appropriate indemnity
and bond and any other document necessary to evidence and effect such bona fide
transfer, if CytRx so requires by notice in writing to the holder of such
Certificate) satisfactory in form and substance to CytRx and the Payment Agent
shall accompany such letter of transmittal in lieu of the applicable
Certificate. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of GGC, payment of the applicable Merger
Consideration may be made to a transferee if the Certificate representing such
Shares is presented to the Payment Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.2, each Certificate (other than Dissenting Shares to which statutory
dissenters' rights have been perfected as provided in Section 2.1(d)) shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration with respect thereto
subject to Sections 2.3 and Article VIII. No interest shall accrue or be paid to
any beneficial owner of Shares or any holder of any Certificate with respect to
the Merger Consideration payable upon the surrender of any Certificate. CytRx
and the Payment Agent shall not be obligated to deliver any Merger Consideration
until a holder of Shares surrenders such holder's Certificate or Certificates of
Shares for exchange in accordance with this Section 2.2(b).
(c) No Further Ownership Rights in the Shares. The Merger Consideration
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(as may be adjusted by Sections 2.3, 2.5 and Article VIII) paid with respect to
the cancellation of Shares in accordance with the terms hereof shall be deemed
to have been paid in full satisfaction of all rights pertaining to such Shares
and after the Effective Time there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the Shares which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article II,
subject to applicable law in the case of Dissenting Shares. No dividend or other
distribution payable to the holders of record of CytRx Common Stock as of any
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time subsequent to the Effective Time shall be delivered to the holder of any
Certificate until such holder surrenders such Certificate for exchange as
provided in this Article II.
(d) No Liability. If any Certificates shall not have been surrendered
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prior to five (5) years after the Effective Time (or immediately prior to such
earlier date on which the Merger Consideration in respect of such Certificate
would otherwise escheat to or become the property of any Regulatory Authority),
any cash or other property payable in respect of such Certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto. Notwithstanding the foregoing, none of the Surviving
Corporation, CytRx or the Payment Agent shall be liable to any holder of a
Certificate or the Shares represented thereby for any Merger Consideration
delivered in respect of such Certificate or the Shares represented thereby to a
public official pursuant to any abandoned property, escheat or other similar
law.
(e) Withholding Rights. CytRx or the Payment Agent shall be entitled to
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deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Certificates or Shares represented thereby such
amounts (if any) as CytRx or the Payment Agent is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), or any provision of state, local or
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foreign tax Law. To the extent that amounts are so withheld by CytRx or the
Payment Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by CytRx or the Payment Agent.
2.3 Escrow Agreement. At Closing, CytRx, the Escrow Agent and the GGC
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Shareholder Representative shall enter into an escrow agreement in the form
attached hereto as Exhibit 2.3 (the "Escrow Agreement"). Promptly after the
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Effective Time, each GGC Escrowee will be deemed to have received and consented
to the deposit of the Secondary Merger Consideration with the Escrow Agent to be
held in escrow in accordance with the terms of the Escrow Agreement.
2.4 Stock Options and Warrants with Respect to Shares.
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(a) GGC shall take all actions necessary pursuant to the terms and
provisions of any outstanding options or warrants to acquire shares of its
capital stock, or otherwise, to cause the following: (i) all outstanding options
or warrants to acquire shares of GGC capital stock granted by GGC (the "GGC
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Stock Options") shall be exercisable in full immediately prior to the Effective
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Time and (ii) all GGC Stock Options that are not exercised one day prior to the
Effective Time will terminate and expire as of the Effective Time, except for
those options or warrants granted by GGC to Steven A. Kriegsman, Clifford H.
Pearson, Steve K. Wasserman, David B. Casselman, Leonard J. Comden, Leonard P.
Ruiz, Jr., Elliott J. Cody and Jeffrey L. Davidson (copies of which are attached
hereto as Exhibit 2.4) (the "Converting Options"), which shall be treated as set
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forth in subparagraph (b) below. GGC shall give written notice to the holders of
all GGC Stock Options of the foregoing. All actions required to be taken
pursuant to this Section 2.4 with respect to GGC Stock Options has been, or
prior to the Effective Time will be, taken by GGC.
(b) At the Effective Time, the Converting Options shall be converted
into and become an option to purchase CytRx Common Stock, and CytRx shall assume
each Converting Option, in accordance with its terms, except that from and after
the Effective Time, (i) each
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Converting Option assumed by CytRx hereunder may be exercised solely for shares
of CytRx Common Stock, (ii) the number of shares of CytRx Common Stock subject
to such Converting Option shall be equal to the number of shares of GGC common
stock subject to such Converting Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, and (iii) the per share exercise price under
each such Converting Option shall be adjusted by dividing the per share exercise
price under each such Converting Option by the Exchange Ratio and rounding up to
the nearest cent. CytRx shall not be obligated to issue any fraction of a share
of CytRx Common Stock upon exercise of Converting Options and any fraction of a
share of CytRx Common Stock that otherwise be subject to a Converting Option
shall rounded to the nearest whole share.
2.5 Accrued GGC Liabilities; Adjustment to Merger Consideration. At
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Closing, GGC shall deliver a certificate (the "Closing Liabilities Certificate")
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signed by the chief executive officer and chief financial officer of GGC,
certifying as to GGC's good faith estimate as to the amount of liabilities of
GGC accrued but unpaid at Closing (other than liabilities for (i) the Audit
Expenses (as defined in Section 5.1(b)) and (ii) the fees, costs and expenses of
Wasserman, Comden, Casselman & Pearson LLP, which will be handled in accordance
with the Letter Agreement). To the extent that such estimate exceeds $5,000, the
number of shares of CytRx Common Stock issuable as Merger Consideration
hereunder at Closing shall be reduced by a number of shares (rounded to the
nearest whole share) that, when multiplied by the Average Closing Price (as
defined in Section 8.5(c)) equals the amount of such accrued but unpaid
liabilities. If the Merger Consideration is adjusted downwards in accordance
with this Section 2.5, the reduced number of shares (instead of 9,962,881) shall
be the number used to determine the Exchange Ratio in Section 2.1(a).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of GGC. GGC represents and warrants
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to CytRx and Merger Sub that, except as specifically disclosed in the letter
dated the date hereof and delivered by GGC to CytRx simultaneously with the
execution and delivery of this Agreement (the "GGC Disclosure Letter"):
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(a) Organization, Standing and Power. GGC is a corporation duly organized,
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validly existing and in good standing under the laws of the state of California,
has all requisite power and authority and all necessary governmental approvals
to own, lease and operate its properties and assets and to conduct its business
as it is now being conducted and is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties and assets makes such
qualification or license necessary, other than in such jurisdictions where the
failure to be so qualified or licensed would not, individually or in the
aggregate, have a Material Adverse Effect on GGC. Blizzard is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota. GGC has made available to CytRx true and complete copies of its
articles of incorporation and by-laws, each as amended and in effect as of the
date of this Agreement. Such articles of incorporation and by-laws are in full
force and effect, and GGC is not in violation of any provision of its articles
of incorporation or by-laws. The minute book of GGC has been
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made available to CytRx for its review and the minutes contained therein are
true and complete in all material respects as in effect as of the date of this
Agreement and accurately reflect all amendments thereto and all proceedings of
the board of directors (including any and all committees of the board of
directors) and the shareholders of GGC
(b) Capital Structure.
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(i) The authorized capital stock of GGC consists of 20,000,000
shares of common stock and 1,000,000 shares of preferred stock, no par value per
share (the "Preferred Stock"). There are no shares of Preferred Stock issued or
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outstanding. There are (A) 12,206,853 shares of GGC common stock outstanding,
(B) 1,274,701 shares of GGC common stock authorized and reserved for issuance
upon the exercise of outstanding GGC Stock Options and (C) no shares of GGC
common stock held by GGC in its treasury. Schedule 3.1(b)(i) to the GGC
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Disclosure Letter sets forth a true and complete list of all granted or
outstanding GGC Stock Options (including the Converting Options), including the
holders thereof, the exercise prices and the vesting schedules therefor.
(ii) No bonds, debentures, notes or other indebtedness having
the right to vote (or convertible into or exercisable for securities having the
right to vote) on any matters on which shareholders of GGC may vote ("Voting
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Debt") are issued or outstanding.
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(iii) All outstanding shares of GGC's capital stock are
validly issued, fully paid and nonassessable and were issued free of preemptive
rights (contractual or otherwise) and in compliance with applicable securities
Laws. All shares of GGC common stock subject to issuance upon the exercise of
GGC Stock Options will be duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights and will be issued in compliance
with applicable securities laws and regulations.
(iv) Except as set forth in Section 3.1(b)(i), there are no
shares of capital stock or other equity securities of GGC outstanding and no
Equity Rights relating to the capital stock of GGC. Except as specifically
contemplated by this Agreement, no Person has any Contract or any right or
privilege (whether pre-emptive or contractual) capable of becoming a Contract or
Equity Right for the purchase, subscription or issuance of any securities of
GGC.
(v) The authorized capital stock of Blizzard consists of (i)
10,000,000 shares of common stock, of which 3,251,109 shares are issued and
outstanding as of the date of this Agreement and not more than 3,251,109 shares
will be issued and outstanding at the Effective Time. All of the issued and
outstanding shares of capital stock of Blizzard are duly and validly issued and
outstanding and are fully paid and nonassessable. None of the outstanding shares
of capital stock of Blizzard has been issued in violation of any preemptive
rights (contractual or otherwise) of the current or past shareholders of
Blizzard. Except as set forth in Schedule 3.1(b)(v) to the GGC Disclosure
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Letter, there are no shares of capital stock or other equity securities of
Blizzard outstanding and no outstanding Equity Rights relating to the capital
stock of Blizzard. Except as specifically contemplated by this Agreement, no
Person has any Contract or any right or privilege (whether pre-emptive or
contractual) capable of becoming a Contract or
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Equity Right for the purchase, subscription or issuance of any securities of
Blizzard. As of the date hereof, GGC holds, of record and beneficially,
1,300,444 shares of Blizzard common stock.
(c) Authority.
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(i) GGC has all requisite corporate power and authority to
enter into, deliver and perform this Agreement and to consummate the
transactions contemplated hereby, including the Merger. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby, including the Merger, have been duly and validly authorized
by all necessary corporate action on the part of GGC, subject to approval of the
GGC shareholders. This Agreement has been duly executed and delivered by GGC and
constitutes a valid and binding obligation of GGC enforceable in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
(ii) Neither the execution and delivery of this Agreement by
GGC, nor the consummation by GGC of the transactions contemplated hereby, nor
compliance by GGC with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of the certificate or articles of
incorporation or bylaws of any GGC Entity or any resolution adopted by the board
of directors or the shareholders of any GGC Entity, or (ii) except as disclosed
in Schedule 3.1(c)(ii) of the GGC Disclosure Letter, constitute or result in a
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Default under, or require any Consent pursuant to, or result in the creation of
any Lien on any Asset of any GGC Entity under, any Contract or Permit of any GGC
Entity, or (iii) subject to receipt of the requisite Consents referred to in
subsection (iii) below, constitute or result in a Default under, or require any
Consent pursuant to, any Law or Order applicable to any GGC Entity or any of
their respective material Assets (including CytRx or any GGC Entity becoming
subject to or liable for the payment of any Tax or any of the Assets owned by
CytRx or any GGC Entity being reassessed or revalued by any Regulatory
Authority).
(iii) No notice to, Consent of or filing with, any Regulatory
Authority is required by or with respect to GGC in connection with the execution
and delivery of this Agreement and the Certificate of Merger by GGC, the
consummation by GGC of the transactions contemplated hereby and thereby, and
compliance of GGC with any of the provisions hereof or thereof, except the
filing of the Certificate of Merger as contemplated by Section 1.3.
(d) Investment. There are no more than thirty-five holders of capital
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stock of GGC (each a "GGC Shareholder") that fail to qualify as an "accredited
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investors" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act. To the Knowledge of GGC, each GGC Shareholder is acquiring
CytRx Common Stock pursuant to this Agreement for investment for such GGC
Shareholder's own account, not as a nominee or agent, and not with the view to,
or for resale in connection with, any distribution thereof. Neither GGC nor, to
the Knowledge of GGC, any GGC Shareholder, owns any right, title or interest
(legal or beneficial) to any securities of a CytRx or any Equity Rights or right
of any kind to have any such security issued.
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(e) Absence of Certain Changes or Events. Except as disclosed in
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Schedule 3.1(e) to the GGC Disclosure Letter, since December 31, 2001, GGC has
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conducted its business only in the ordinary course and consistent with prior
practice and there has not been any event, occurrence, fact, condition, change,
development or effect that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on GGC. None of the
GGC Entities has taken any action, or failed to take any action, prior to the
date of this Agreement, which action or failure, if taken after the date of this
Agreement, would represent or result in a material breach or violation of any of
the covenants and agreements of GGC provided in this Agreement.
(f) Litigation. There is no Litigation pending against, nor, to GGC's
----------
Knowledge, threatened against or affecting any GGC Entity or any GGC Entity's
Assets, or to which any GGC Entity, or any director, officer or employee of any
GGC Entity in his or her capacity as such, is a party, before or by any federal,
foreign, state, local or other governmental or non-governmental department,
commission, board, bureau, agency, court or other instrumentality, or by any
private person or entity. There are no existing nor, to the Knowledge of GGC,
threatened orders, judgments or decrees of any court or other Regulatory
Authority which specifically apply to GGC or any GGC Entity.
(g) Financial Statements. Attached as Schedule 3.1(g)-1 to the GGC
-------------------- -----------------
Disclosure Letter are the unaudited financial statements of GGC for the year
ended December 31, 2001, which reflect the results of operations and financial
condition of GGC for such period and at such date (the "GGC Financial
-------------
Statements"). The GGC Financial Statements have been prepared in accordance with
----------
GAAP consistently applied other than as indicated in Schedule 3.1(g)-2 to the
-----------------
GGC Disclosure Letter and except for the omission of notes thereto. The GGC
Financial Statements present fairly the financial position of GGC as of the date
indicated and present fairly the results of GGC's operations for the period then
ended, and are in accordance with the books and records of GGC, which have been
properly maintained and are complete and correct in all material respects.
Attached as Schedule 3.1(g)-3 to the GGC Disclosure Letter are the unaudited
-----------------
financial statements of Blizzard for the year ended December 31, 2001, which, to
the Knowledge of GGC, reflect the results of operations and financial condition
of Blizzard for such period and at such date (the "Blizzard Financial
------------------
Statements"). To the Knowledge of GGC, the Blizzard Financial Statements have
----------
been prepared in accordance with GAAP consistently applied other than as
indicated in Schedule 3.1(g)-4 to the GGC Disclosure Letter and except for the
-----------------
omission of notes thereto. To the Knowledge of GGC, the Blizzard Financial
Statements have been prepared from and in accordance with GGC's books and
records. To the Knowledge of GGC, the Blizzard Financial Statements present
fairly the financial position of Blizzard as of the date indicated and present
fairly the results of Blizzard's operations for the period then ended, and are
in accordance with the books and records of Blizzard, which have been properly
maintained and are complete and correct in all material respects.
(h) Absence of Undisclosed Liabilities. GGC has no, and, to the
----------------------------------
Knowledge of GGC, no other GGC Entity has any, Liabilities that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
GGC, except Liabilities which are accrued or reserved against in the balance
sheet of GGC as of December 31, 2001 included in the GGC Financial Statements or
the balance sheet of Blizzard as of December 31, 2001, included in the Blizzard
Financial Statements delivered prior to the date of this Agreement. Neither GGC
nor, to the Knowledge of GGC, any other GGC Entity has incurred or paid any
Liability since December
10
31, 2001, except for such Liabilities incurred or paid (i) in the ordinary
course of business consistent with past business practice and which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on GGC or (ii) in connection with the transactions contemplated by this
Agreement. Except as disclosed in Schedule 3.1(h) to the GGC Disclosure
---------------
Letter, neither GGC nor, to the Knowledge of GGC, any other GGC
Entity is directly or indirectly liable, by guarantee, indemnity, or otherwise,
upon or with respect to, or obligated, by discount or repurchase agreement or in
any other way, to provide funds in respect to, or obligated to guarantee or
assume any Liability or any Person for any amount in excess of $10,000.
(i) Compliance with Laws. Neither GGC nor, to the Knowledge of GGC, any
--------------------
other GGC Entity has been or currently is in violation of any applicable local,
state or federal Law, Order or any other requirement of any Regulatory
Authority, affecting or relating to any GGC Entity or any GGC Entity assets.
Neither GGC nor, to the Knowledge of GGC, any other GGC Entity is subject to any
fine, penalty, Liability or disability as the result of a failure to comply with
any requirement of federal, state or local Law nor has any GGC Entity received
any notice of such noncompliance, affecting or relating to any GGC Entity.
(j) Tax Matters.
-----------
(i) GGC and, to the Knowledge of GGC, each other GGC Entity
have timely filed with the appropriate Taxing authorities all Tax Returns in all
jurisdictions in which Tax Returns are required to be filed, and such Tax
Returns are correct and complete in all respects. All Taxes of GGC and, to the
Knowledge of GGC, of each other GGC Entity, whether or not shown on any Tax
Return, have been fully and timely paid. There are no Liens for any Taxes (other
than a Lien for current real property or ad valorem Taxes not yet due and
payable) on any of the Assets of GGC and, to the Knowledge of GGC, there are no
Liens for any Taxes (other than a Lien for current real property or ad valorem
Taxes not yet due and payable) on any of the Assets of any other GGC Entity. No
claim has ever been made by an authority in a jurisdiction where GGC does not
file a Tax Return that GGC may be subject to Taxes by that jurisdiction and, to
the Knowledge of GGC, no claim has ever been made by an authority in a
jurisdiction where any other GGC Entity does not file a Tax Return that such GGC
Entity may be subject to Taxes by that jurisdiction.
(ii) GGC has not received any notice of assessment or proposed
assessment in connection with any Taxes, and there are no threatened or pending
disputes, claims, audits or examinations regarding any Taxes of GGC or the
Assets of GGC. None of the other GGC Entities has received any notice of
assessment or proposed assessment in connection with any Taxes, and there are no
threatened or pending disputes, claims, audits or examinations regarding any
Taxes of any other GGC Entity or the Assets of any other GGC Entity. No officer
or employee responsible for Tax matters of GGC or, to the Knowledge of GGC, of
any other GGC Entity expects any Regulatory Authority to assess any additional
Taxes for any period for which Tax Returns have been filed. Neither GGC nor, to
the Knowledge of GGC, any other GGC Entity has waived any statute of limitations
in respect of any Taxes or agreed to a Tax assessment or deficiency.
11
(iii) GGC, and, to the Knowledge of GGC, each other GGC
Entity, has complied with all applicable Laws, rules and regulations relating to
the withholding of Taxes and the payment thereof to appropriate authorities,
including Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee or independent contractor, and Taxes
required to be withheld and paid pursuant to Sections 1441 and 1442 of the
Internal Revenue Code or similar provisions under foreign Law.
(iv) The unpaid Taxes of GGC, and, to the Knowledge of GGC,
each other GGC Entity (i) did not, as of the most recent fiscal month end,
exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the most recent balance sheet (rather than in any notes thereto)
for such GGC Entity and (ii) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with past custom and
practice of the GGC Entities in filing their Tax Returns.
(v) Neither GGC nor, to the Knowledge of GGC, any other GGC
Entity, is a party to any Tax allocation or sharing agreement and neither GGC
nor, to the Knowledge of GGC, any other GGC Entity has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was GGC) or has any Tax Liability of any Person
under Treasury Regulation Section 1.1502-6 or any similar provision of state,
local or foreign Law (other than the other members of the consolidated group of
which GGC is parent), or as a transferee or successor, by contract or otherwise.
(vi) During the five-year period ending on the date hereof,
neither GGC nor, to the Knowledge of GGC, any other GGC Entity was a
distributing corporation or a controlled corporation in a transaction intended
to be governed by Section 355 of the Internal Revenue Code.
(vii) Neither GGC nor, to the Knowledge of GGC, any other GGC
Entity has made any payments, is obligated to make any payments, or is a party
to any contract that could obligate it to make any payments that could be
disallowed as a deduction under Section 280G or 162(m) of the Internal Revenue
Code. Neither GGC nor, to the Knowledge of GGC, any other GGC Entity has been a
United States real property holding corporation within the meaning of Code
Section 897(c)(1)(A)(ii). None of the GGC Entities has been or will be required
to include any adjustment in taxable income for any Tax period (or portion
thereof) pursuant to Section 481 of the Internal Revenue Code or any comparable
provision under state or foreign Tax Laws as a result of transactions or events
occurring prior to the Closing.
(viii) GGC and, to the Knowledge of GGC, each of the other GGC
Entities is in compliance with, and its records contain all information and
documents (including properly completed IRS Forms W-9) necessary to comply with,
all applicable information reporting and Tax withholding requirements under
federal, state, and local Tax Laws, and such records identify with specificity
all accounts subject to backup withholding under Code Section 3406.
12
(ix) Neither GGC nor, to the Knowledge of GGC, any GGC Entity,
has or has had in any foreign country a permanent establishment, as defined in
any applicable tax treaty or convention between the United States and such
foreign country.
(k) Assets.
------
(i) Except as disclosed in Schedule 3.1(k) to the GGC
---------------
Disclosure Letter or as disclosed or reserved against in the GGC Financial
Statements or Blizzard Financial Statements, the GGC Entities have good and
marketable title, free and clear of all Liens, to all of their respective
Assets, except for any such Liens or other defects of title which are not
reasonably likely to have a Material Adverse Effect on GGC. All tangible
properties used in the GGC's businesses, and, to the Knowledge of GGC, all
tangible properties used in the businesses of each of the other GGC Entities,
are in good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with such GGC Entity's past practices.
(ii) All Assets which are material to GGC's business held
under leases or subleases by GGC, are held under valid Contracts enforceable in
accordance with their respective terms (except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. To the
Knowledge of GGC, all Assets which are material to each other GGC Entity's
business held under leases or subleases by such GGC Entity, are held under valid
Contracts enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect.
(iii) GGC and, to the Knowledge of GGC, each other GGC Entity,
have maintained and currently maintain insurance in amounts, scope, and coverage
that are deemed adequate by such GGC Entity's board of directors or executive
management. Neither GGC nor, to the Knowledge of GGC, any other GGC Entity, has
received notice from any insurance carrier that (i) any policy of insurance will
be canceled or that coverage thereunder will be reduced or eliminated, or (ii)
premium costs with respect to such policies of insurance will be substantially
increased. To the Knowledge of GGC, there are presently no claims for amounts
exceeding in any individual case $10,000 pending under such policies of
insurance and no notices of claims in excess of such amounts have been given by
any GGC Entity under such policies.
(iv) The Assets of GGC include all Assets required to operate
the business of GGC as presently conducted.
(l) Environmental Matters.
---------------------
(i) Each GGC Entity and its Operating Properties are, and have
been, in compliance with all Environmental Laws.
13
(ii) During the period of (i) each GGC Entity's ownership or
operation of any of its current properties or (ii) each GGC Entity's holding of
a security interest in any Operating Property, to the Knowledge of GGC, there
have been no releases, discharges, spillages, or disposals of Hazardous Material
in, on, under, adjacent to, or affecting (or potentially affecting) such
properties. Prior to the period of (i) any GGC Entity's ownership or operation
of any of their respective current properties or (ii) any GGC Entity's holding
of a security interest in any Operating Property, to the Knowledge of GGC, there
were no releases, discharges, spillages, or disposals of Hazardous Material in,
on, under, or affecting any such property or Operating Property.
(m) Labor Relations.
---------------
i) Neither GGC nor, to the Knowledge of GGC, any other GGC
Entity, is the subject of any Litigation asserting that it or any other GGC
Entity has committed an unfair labor practice (within the meaning of the
National Labor Relations Act or comparable state Law) or other violation of
state or federal labor Law or seeking to compel it or any other GGC Entity to
bargain with any labor organization or other employee representative as to wages
or conditions of employment, nor is GGC nor, to the Knowledge of GGC, any other
GGC Entity, party to any collective bargaining agreement or subject to any
bargaining order, injunction or other Order relating to GGC's or any other GGC
Entity's relationship or dealings with its employees, any labor organization or
any other employee representative. There is no strike, slowdown, lockout or
other job action or labor dispute involving GGC nor, to the Knowledge of GGC,
any other GGC Entity, pending or threatened and there has been no such actions
or disputes in the past five years. To the Knowledge of GGC, in the past five
years, there has not been any attempt by any GGC Entity employees or any labor
organization or other employee representative to organize or certify a
collective bargaining unit or to engage in any other union organization activity
with respect to the workforce of any GGC Entity. The employment of each employee
and the engagement of each independent contractor of GGC is terminable at will
by GGC without any penalty, liability or severance obligation incurred by GGC.
GGC will not owe any amounts to any of its employees or independent contractors
as of the Closing Date, including any amounts incurred for any wages, bonuses,
vacation pay, sick leave, contract notice periods, change of control payments or
severance obligations.
ii) All of GGC's employees employed in the United States are
either United States citizens or are legally entitled to work in the United
States under the Immigration Reform and Control Act of 1986, as amended, other
United States immigration Laws and the Laws related to the employment of
non-United States citizens applicable in the state in which the employees are
employed.
(n) Employee Benefit Plans. GGC has never had and currently does not
----------------------
have any Employee Benefit Plans.
(o) Material Contracts. Except as disclosed on Schedule 3.1(o) of the
------------------ ---------------
GGC Disclosure Letter or otherwise reflected in the GGC Financial Statements,
neither GGC, nor any of its Assets, businesses, or operations, is a party to, or
is bound or affected by, or receives benefits under, (i) any employment,
severance, termination, consulting, or retirement Contract providing for
aggregate payments to any Person in any calendar year in excess of $10,000, (ii)
any Contract
14
relating to the borrowing of money by GGC or the guarantee by GGC of any such
obligation (other than Contracts evidencing trade payables and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contract which prohibits or restricts GGC from engaging in any
business activities in any geographic area, line of business or otherwise in
competition with any other Person, (iv) any Contract between or among GGC and
the other GGC Entities, (v) any Contract involving Intellectual Property (other
than Contracts entered into in the ordinary course with customers and
"shrink-wrap" software licenses), (vi) any Contract relating to the purchase or
sale of any goods or services (other than Contracts entered into in the ordinary
course), (vii) any Contract material to GGC's business or (viii) any Contract
relating to GGC's capital stock (collectively, the "GGC Contracts"). With
-------------
respect to each GGC Contract and except as disclosed in Schedule 3.1(o) to the
---------------
GGC Disclosure Letter: (A) the Contract is in full force and effect; (B) GGC is
not in Default thereunder; (C) GGC has not repudiated or waived any material
provision of any such Contract; and (D) no other party to any such Contract is,
to the Knowledge of GGC, in Default in any respect or has repudiated or waived
any material provision thereunder. All of the indebtedness of GGC for money
borrowed is prepayable at any time by GGC without penalty or premium.
(p) Intellectual Property.
---------------------
(i) To the Knowledge of GGC, Schedule 3.1(p)(i) to the GGC
------------------
Disclosure Letter contains a true and complete list of all Intellectual Property
owned by, registered in the name of or used by any GGC Entity in its business or
for which application has been made. To GGC's Knowledge, each GGC Entity owns or
has a license to use all of the Intellectual Property used by such GGC Entity in
the course of its business, including sufficient rights in each copy possessed
by each GGC Entity. To the Knowledge of GGC, each GGC Entity is the owner of or
has a license, with the right to sublicense, to any Intellectual Property sold
or licensed to a third party by such GGC Entity in connection with such GGC
Entity's business operations, and such GGC Entity has the right to convey by
sale or license any Intellectual Property so conveyed. To GGC's Knowledge, no
GGC Entity is in Default under any of its Intellectual Property licenses. To the
Knowledge of GGC, no proceedings have been instituted or are pending or
threatened, which challenge the rights of any GGC Entity with respect to
Intellectual Property used, sold or licensed by such GGC Entity in the course of
its business, nor has any person claimed or alleged any rights to such
Intellectual Property. To GGC's Knowledge, the conduct of the business of the
GGC Entities does not infringe any Intellectual Property of any other person. To
GGC's Knowledge, except as disclosed in Schedule 3.1(p)(i) to the GGC Disclosure
------------------
Letter, every officer, director, or employee of any GGC Entity is a party to a
Contract which requires such officer, director or employee to assign any
interest in any Intellectual Property to a GGC Entity and to keep confidential
any trade secrets, proprietary data, customer information, or other business
information of a GGC Entity. GGC and, to GGC's Knowledge, each other GGC Entity
has taken all reasonable precautions to preserve and document its trade secrets
and to protect the secrecy, confidentiality and value of its trade secrets.
(ii) Blizzard is the sole owner or has the exclusive perpetual
right to use, without consideration, all Intellectual Property necessary to
conduct its business as currently conducted and as currently contemplated to be
conducted in the future (the "Blizzard Intellectual Property"), free and clear
------------------------------
of any Lien or Liability. Blizzard has not granted or licensed to any
15
person or entity any rights with respect to any Blizzard Intellectual Property
and no other Person has any rights in or to any of the Blizzard Intellectual
Property. The rights of Blizzard in and to any of the Blizzard Intellectual
Property will not be limited or otherwise affected by reason of any of the
transactions contemplated hereby. To GGC's Knowledge, the Blizzard Intellectual
Property does not infringe and is not alleged to have infringed any trademark,
copyright, patent or other proprietary right of any person. To GGC's Knowledge,
each item of Blizzard Intellectual Property is valid and enforceable and there
are no infringements of Blizzard's rights in and to the Blizzard Intellectual
Property by any person or entity. To GGC's Knowledge, Blizzard has not entered
into any consent, indemnification, forbearance to sue or settlement agreement
with any person or entity relating to any item of Blizzard Intellectual Property
or those of any person or entity.
(q) Reports. Since the date of organization, GGC and, to the Knowledge
-------
of GGC, each other GGC Entity, has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with Regulatory Authorities. To GGC's Knowledge, as of
their respective dates, each of such reports complied in all material respects
with all applicable Laws.
(r) Statements True and Correct.
---------------------------
(i) To GGC's Knowledge, no statement, certificate, instrument,
or other writing furnished or to be furnished by any GGC Entity or any Affiliate
thereof to CytRx pursuant to this Agreement or any other document, agreement, or
instrument referred to herein contains or will contain any untrue statement of
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(ii) None of the information supplied or to be supplied by any
GGC Entity or any Affiliate thereof for inclusion in (i) the Proxy Statement to
be mailed to CytRx stockholders in connection with the CytRx Stockholders'
Meeting, (ii) any materials to be delivered to GGC Shareholders in connection
with the GGC Shareholders Meeting, or (iii) any other documents to be filed by a
GGC Entity or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed or delivered, and with respect to the
Proxy Statement, when first mailed to the stockholders of CytRx, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or, in the case of the Proxy Statement or
any amendment thereof or supplement thereto, at the time of the CytRx
Stockholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
CytRx Stockholders' Meeting.
(iii) All documents that any GGC Entity or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
16
(s) GGC Subsidiaries. Except as set forth in Schedule 3.1(s) to the GGC
---------------- ---------------
Disclosure Letter, GGC has not owned and does not currently own, directly or
indirectly, of record, beneficially or equitably, any capital stock or other
equity, ownership or proprietary interest in any corporation, partnership,
limited liability company, association, trust, joint venture or other entity.
Set forth in Schedule 3.1(s) to the GGC Disclosure Letter is a listing of all
---------------
predecessor companies of GGC, including the names of any entities from whom GGC
previously acquired material assets, and any other entity of which GGC has been
a subsidiary or division. Except as listed on Schedule 3.1(s) to the GGC
---------------
Disclosure Letter, GGC has not sold or disposed of, by way of asset sale, stock
sale, spin-off or otherwise, any material assets or business of GGC.
(t) Blizzard Stock Purchase Agreement. Blizzard is not in breach of or
---------------------------------
in Default under that certain Stock Purchase Agreement dated November 15, 2000
between GGC and Blizzard.
3.2 Representations and Warranties of CytRx and Merger Sub. CytRx and
------------------------------------------------------
Merger Sub, jointly and severally, represent and warrant to GGC that, except as
disclosed in (i) the letter dated the date hereof and delivered by CytRx and
Merger Sub to GGC simultaneously with the execution and delivery of this
Agreement (the "CytRx Disclosure Letter") or (ii) the CytRx SEC Documents (as
-----------------------
defined in Section 3.2(g)):
(a) Organization, Standing and Power. CytRx is a corporation, duly
--------------------------------
organized, validly existing and in good standing under the laws of the state of
Delaware and Merger Sub is a corporation, duly organized, validly existing and
in good standing under the laws of the state of California. Each of CytRx and
Merger Sub has all requisite power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, and is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
license necessary, other than in such jurisdictions where the failure to be so
qualified or licenses would not, individually or in the aggregate, have a
Material Adverse Effect on CytRx or Merger Sub.
(b) Authority.
---------
(i) CytRx and Merger Sub have all requisite corporate power
and authority to enter into, deliver and perform this Agreement and to
consummate the transactions contemplated hereby, subject to the approval of the
issuance of the Merger Consideration by the CytRx stockholders. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of CytRx or Merger Sub, as the case may be, subject
to the approval of the issuance of the Merger Consideration by the CytRx
stockholders. Subject to such stockholder approval, this Agreement has been duly
executed and delivered by CytRx and Merger Sub and constitutes a valid and
binding obligation of CytRx or Merger Sub, as the case may be, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law).
17
(ii) Neither the execution and delivery of this Agreement by
CytRx or Merger Sub, nor the consummation by CytRx or Merger Sub of the
transactions contemplated hereby, nor compliance by CytRx or Merger Sub with any
of the provisions hereof, will (i) conflict with or result in a breach of any
provision of any CytRx Entity's certificate or articles of incorporation or
bylaws or any resolution adopted by the board of directors or the shareholders
of any CytRx Entity, or (ii) except as disclosed in Schedule 3.2(b)(ii) of the
-------------------
CytRx Disclosure Letter, constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any Asset of any
CytRx Entity, any Contract or Permit of any CytRx, or, (iii) subject to receipt
of the requisite Consents referred to in subsection (iii) below, constitute or
result in a Default under, or require any Consent pursuant to, any Law or Order
applicable to any CytRx Entity or any of their respective material Assets
(including any CytRx Entity becoming subject to or liable for the payment of any
Tax or any of the Assets owned by any CytRx Entity being reassessed or revalued
by any Regulatory Authority).
(iii) No notice to, Consent of or filing with, any Regulatory
Authority is required by or with respect to CytRx or Merger Sub in connection
with the execution and delivery of this Agreement by CytRx and Merger Sub, the
consummation by CytRx or Merger Sub, as the case may be, of the transactions
contemplated hereby, and compliance by CytRx and Merger Sub with any of the
provisions hereof, except (A) in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws and the
rules of the Nasdaq National Market, and notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, and (B) the filing of the Certificate of Merger as
contemplated by Section 1.3.
(c) Interim Operations of Merger Sub. Merger Sub was incorporated on
--------------------------------
February 6, 2002, has engaged in no other business activities and has conducted
its operations only as contemplated hereby.
(d) Absence of Certain Changes or Events. Except as contemplated by
------------------------------------
this Agreement or as disclosed in Schedule 3.2(d) to the CytRx Disclosure
---------------
Letter, since December 31, 2001, CytRx has conducted its businesses only in the
ordinary course and consistent with prior practice and there has not been any
event, occurrence, fact, condition, change, development or effect that has had
or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on CytRx. None of the CytRx Entities has taken any
action, or failed to take any action, prior to the date of this Agreement, which
action or failure, if taken after the date of this Agreement, would represent or
result in a material breach or violation of any of the covenants and agreements
of CytRx provided in this Agreement.
(e) Litigation. Except as set forth on Schedule 3.2(e) to the CytRx
---------- ---------------
Disclosure Letter, there is no Litigation pending against, or, to CytRx's
Knowledge, threatened against or affecting any CytRx Entity or any CytRx
Entity's Assets, or to which any CytRx Entity, or any director, officer or
employee of any CytRx Entity in his or her capacity as such, is a party, before
or by any federal, foreign, state, local or other governmental or
non-governmental department, commission, board, bureau, agency, court or other
instrumentality, or by any private person or entity. There are no existing or,
to the Knowledge of CytRx, threatened orders, judgments or decrees of any court
or other Regulatory Authority which specifically apply to CytRx.
(f) Intellectual Property. Except as set forth on Schedule 3.2(f) to
--------------------- ---------------
the CytRx Disclosure Letter, CytRx is the sole owner or has the exclusive
perpetual right to use, without consideration,
18
all Intellectual Property and any other intangible asset listed on Schedule
--------
3.2(f) of the CytRx Disclosure Letter (collectively, the "CytRx Intellectual
------ ------------------
Property"), free and clear of any Lien or Liability. Except as set forth on
--------
Schedule 3.2(f) to the CytRx Disclosure Letter, CytRx has not granted or
---------------
licensed to any person or entity any rights with respect to the CytRx
Intellectual Property and no other Person has any rights in or to any of the
CytRx Intellectual Property (including, without limitation, any rights to market
or distribute any of the CytRx Intellectual Property). The rights of CytRx in
and to any of the CytRx Intellectual Property will not be limited or otherwise
affected by reason of any of the transactions contemplated hereby. To the
Knowledge of CytRx, the CytRx Intellectual Property does not infringe and is not
alleged to have infringed any trademark, copyright, patent or other proprietary
right of any person. To the Knowledge of CytRx, each item of CytRx Intellectual
Property is valid and enforceable and there are no infringements of CytRx's
rights in and to the CytRx Intellectual Property by any person or entity. To the
Knowledge of CytRx, CytRx has not entered into any consent, indemnification,
forbearance to sue or settlement agreement with any person or entity relating to
any item of CytRx Intellectual Property or those of any person or entity. CytRx
has taken all reasonable precautions to preserve and document its trade secrets
and to protect the secrecy, confidentiality and value of its trade secrets.
(g) SEC Documents.
-------------
(i) CytRx has made available to GGC (through reference to
documents filed by EDGAR or otherwise), accurate and complete copies of each
report, schedule, registration statement and definitive proxy statement filed by
CytRx with the SEC between December 31, 1997 and the date hereof (as such
documents have since the time of their filing been amended, the "CytRx SEC
---------
Documents"), which are all the documents (other than preliminary material) that
---------
CytRx was required to file with the SEC since such date until the date hereof.
As of their respective dates, (i) CytRx SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such CytRx SEC Documents, and (ii) none of the CytRx SEC Documents contained, at
the time they were filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(ii) Except as disclosed in Schedule 3.2(g)(ii) to the CytRx
-------------------
Disclosure Letter, the consolidated financial statements of CytRx included in
the CytRx SEC Documents, (A) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (B) have
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of unaudited interim
financial statements, as may be permitted by the SEC on Form 10-Q under the
Exchange Act) and (C) fairly presented, in all material respects, the
consolidated financial position of CytRx as at the dates thereof and the
consolidated results of their operations, stockholders' equity and cash flows
for the periods then ended, except that the unaudited interim financial
statements may not contain footnotes and were or are subject to normal and
recurring year-end adjustments. Since December 31, 2001, except as and to the
extent set forth in CytRx SEC Documents and except for liabilities or
obligations incurred in the ordinary course of business consistent with past
practice and of substantially the
19
same character, type and magnitude as incurred in the past, CytRx has not
incurred any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that would have a Material Adverse Effect on CytRx. All
agreements, contracts and other documents required to be filed as exhibits to
any of CytRx SEC Documents have been so filed.
(h) Compliance with Laws. Neither CytRx nor any CytRx Entity has been
--------------------
or currently is in violation of any applicable local, state or federal law,
order, injunction or decree, or any other requirement of any governmental body,
agency or other Regulatory Authority or court, affecting or relating to any
CytRx Entity or any CytRx Entity assets. No CytRx Entity is subject to any fine,
penalty, Liability or disability as the result of a failure to comply with any
requirement of federal, state or local Law nor has any CytRx Entity received any
notice of such noncompliance, affecting or relating to any CytRx Entity.
(i) Tax Matters.
-----------
(i) Except as disclosed in Schedule 3.2(i)(i) to the CytRx
Disclosure Letter, all CytRx Entities have timely filed with the appropriate
Taxing authorities all Tax Returns in all jurisdictions in which Tax Returns are
required to be filed, and such Tax Returns are correct and complete in all
respects. All Taxes of the CytRx Entities (whether or not shown on any Tax
Return) have been fully and timely paid. There are no Liens for any Taxes (other
than a Lien for current real property or ad valorem Taxes not yet due and
payable) on any of the Assets of any of the CytRx Entities. No claim has ever
been made by an authority in a jurisdiction where any CytRx Entity does not file
a Tax Return that such CytRx Entity may be subject to Taxes by that
jurisdiction.
(ii) None of the CytRx Entities has received any notice of
assessment or proposed assessment in connection with any Taxes, and there are no
threatened or pending disputes, claims, audits or examinations regarding any
Taxes of any CytRx Entity or the assets of any CytRx Entity. No officer or
employee responsible for Tax matters of any CytRx Entity expects any Regulatory
Authority to assess any additional Taxes for any period for which Tax Returns
have been filed. None of the CytRx Entities has waived any statute of
limitations in respect of any Taxes or agreed to a Tax assessment or deficiency.
(iii) Each CytRx Entity has complied with all applicable Laws,
rules and regulations relating to the withholding of Taxes and the payment
thereof to appropriate authorities, including Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee or
independent contractor, and Taxes required to be withheld and paid pursuant to
Sections 1441 and 1442 of the Internal Revenue Code or similar provisions under
foreign Law.
(iv) The unpaid Taxes of each CytRx Entity (i) did not, as of
the most recent fiscal month end, exceed the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the most recent balance
sheet (rather than in any notes thereto) for such CytRx Entity and (ii) do not
exceed that reserve as adjusted for the passage of time through the Closing Date
in accordance with past custom and practice of the CytRx Entities in filing
their Tax Returns.
20
(v) None of the CytRx Entities is a party to any Tax
allocation or sharing agreement and none of the CytRx Entities has been a member
of an affiliated group filing a consolidated federal income Tax Return (other
than a group the common parent of which was CytRx) or has any Tax Liability of
any Person under Treasury Regulation Section 1.1502-6 or any similar provision
of state, local or foreign Law (other than the other members of the consolidated
group of which CytRx is parent), or as a transferee or successor, by contract or
otherwise.
(vi) During the five-year period ending on the date hereof,
none of the CytRx Entities was a distributing corporation or a controlled
corporation in a transaction intended to be governed by Section 355 of the
Internal Revenue Code.
(vii) None of the CytRx Entities has made any payments, is
obligated to make any payments, or is a party to any contract that could
obligate it to make any payments that could be disallowed as a deduction under
Section 280G or 162(m) of the Internal Revenue Code. CytRx has not been a United
States real property holding corporation within the meaning of Internal Revenue
Code Section 897(c)(1)(A)(ii). None of the CytRx Entities has been or will be
required to include any adjustment in taxable income for any Tax period (or
portion thereof) pursuant to Section 481 of the Internal Revenue Code or any
comparable provision under state or foreign Tax Laws as a result of transactions
or events occurring prior to the Closing.
(viii) Each of the CytRx Entities is in compliance with, and
its records contain all information and documents (including properly completed
IRS Forms W-9) necessary to comply with, all applicable information reporting
and Tax withholding requirements under federal, state, and local Tax Laws, and
such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code.
(ix) No CytRx Entity has or has had in any foreign country a
permanent establishment, as defined in any applicable tax treaty or convention
between the United States and such foreign country.
(j) Environmental Matters.
---------------------
(i) Each CytRx Entity and its Operating Properties are, and
have been, in compliance with all Environmental Laws.
(ii) During the period of (i) any CytRx Entity's ownership or
operation of any of their respective current properties or (ii) any CytRx
Entity's holding of a security interest in any Operating Property, to the
Knowledge of CytRx, there have been no releases, discharges, spillages, or
disposals of Hazardous Material in, on, under, adjacent to, or affecting (or
potentially affecting) such properties. Prior to the period of (i) any CytRx
Entity's ownership or operation of any of their respective current properties or
(ii) any CytRx Entity's holding of a security interest in any Operating
Property, to the Knowledge of CytRx, there were no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, or affecting any
such property or Operating Property.
21
(k) Employee Benefit Plans.
----------------------
(i) CytRx has disclosed in Schedule 3.2(k)(i) to the CytRx
------------------
Disclosure Letter, and has delivered or made available to GGC prior to the
execution of this Agreement, (i) copies of each Employee Benefit Plan currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
any CytRx Entity or ERISA Affiliate thereof for the benefit of employees, former
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries or under which employees, retirees, former employees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "CytRx Benefit Plans") and (ii) a
-------------------
list of each Employee Benefit Plan that is not identified in (i) above (e.g.,
former Employee Benefit Plans) but for which the CytRx Entity or ERISA Affiliate
has or reasonably could have any obligation or Liability. Any of the CytRx
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in ERISA Section 3(2), is referred to herein as a "CytRx ERISA Plan."
----------------
Each CytRx ERISA Plan which is also a "defined benefit plan" (as defined in
Internal Revenue Code Section 414(j)) is referred to herein as a "CytRx Pension
-------------
Plan."
----
(ii) Each CytRx Benefit Plan is in compliance with the terms
of such CytRx Benefit Plan, in compliance with the applicable requirements of
the Code, in material compliance with the applicable requirements of ERISA, and
in compliance with any other applicable Laws. CytRx has not received any
communication (written or unwritten) from any government agency questioning or
challenging the compliance of any CytRx Benefit Plan with applicable Laws. No
CytRx Benefit Plan is currently being audited by a governmental agency for
compliance with applicable Laws or has been audited with a determination by the
governmental agency that the Employee Benefit Plan failed to comply with
applicable Laws.
(iii) There has been no oral or written representation or
communication with respect to any aspect of the Employee Benefit Plans made to
employees of the CytRx which is not in accordance with the written or otherwise
preexisting terms and provisions of such plans. There are no unresolved claims
or disputes under the terms of, or in connection with, the CytRx Benefit Plans
other than claims for benefits which are payable in the ordinary course of
business and no action, proceeding, prosecution, inquiry, hearing or
investigation has been commenced with respect to any CytRx Benefit Plan.
(iv) All CytRx Benefit Plan documents and annual reports or
returns, audited or unaudited financial statements, actuarial valuations,
summary annual reports, and summary plan descriptions issued with respect to the
CytRx Benefit Plans are correct and complete, have been timely filed with the
IRS, the DOL or distributed to participants of the CytRx Benefit Plans (as
required by Law), and there have been no changes in the information set forth
therein.
(v) No "party in interest" (as defined in ERISA Section 3(14))
or "disqualified person" (as defined in Internal Revenue Code Section
4975(e)(2)) of any CytRx Benefit Plan has engaged in any nonexempt "prohibited
transaction" (described in Internal Revenue Code Section 4975(c) or ERISA
Section 406).
22
(vi) No Liability under Title IV of ERISA has been or is
expected to be incurred by CytRx or its ERISA Affiliates and no event has
occurred that could reasonably result in Liability under Title IV of ERISA being
incurred by CytRx or its ERISA Affiliates with respect to any ongoing, frozen,
or terminated single-employer plan of CytRx or the single-employer plan of any
ERISA Affiliate. There has been no "reportable event," within the meaning of
ERISA Section 4043 for which the 30-day reporting requirement has not been
waived by any ongoing, frozen, or terminated single employer plan of CytRx or of
an ERISA Affiliate.
(vii) Except as disclosed in Schedule 3.1(k)(vii) to the CytRx
--------------------
Disclosure Letter, no CytRx Entity has any Liability for retiree health and life
benefits under any of the CytRx Benefit Plans and there are no restrictions on
the rights of such CytRx Entity to amend or terminate any such retiree health or
benefit Plan without incurring any Liability thereunder except to the extent
required under Part 6 of Title I of ERISA or Internal Revenue Code Section
4980B. No Tax under Code Sections 4980B or 5000 has been incurred with respect
to any CytRx Benefit Plan and no circumstance exists which could give rise to
such Taxes.
(viii) Except as disclosed in Schedule 3.1(k)(viii) to the
---------------------
CytRx Disclosure Letter, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) result in
any payment (including severance, unemployment compensation, golden parachute,
or otherwise) becoming due to any director or any employee of any CytRx Entity
from any CytRx Entity under any CytRx Benefit Plan or otherwise, (ii) increase
any benefits otherwise payable under any CytRx Benefit Plan, or (iii) result in
any acceleration of the time of payment or vesting of any such benefit.
(ix) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any CytRx Entity and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans subject to the
provisions of Code Section 412 or ERISA Section 302, have been fully reflected
on the CytRx Financial Statements to the extent required by and in accordance
with GAAP.
(x) All individuals who render services to any CytRx Entity
and who are authorized to participate in a CytRx Benefit Plan pursuant to the
terms of such CytRx Benefit Plan are in fact eligible to and authorized to
participate in such CytRx Benefit Plan. All individuals participating in (or
eligible to participate in) any CytRx Benefit Plan are common-law employees of a
CytRx Entity.
(xi) On or after September 26, 1980, neither CytRx nor any of
its ERISA Affiliates has had an "obligation to contribute" (as defined in ERISA
Section 4212) to a "multiemployer plan" (as defined in ERISA Sections 4001(a)(3)
and 3(37)(A)).
l. Material Contracts. With respect to each Contract filed as an
------------------
exhibit to the CytRx Annual Report on Form 10-K filed for the year ending
December 31, 2000 or any CytRx SEC Document filed between the date thereof and
the date hereof, (A) such Contract is in full force and effect; (B) no CytRx
Entity is in Default thereunder; (C) no CytRx Entity has repudiated or
23
waived any material provision of any such Contract; and (D) no other party to
any such Contract is, to the Knowledge of CytRx, in Default in any respect or
has repudiated or waived any material provision thereunder.
m. Statements True and Correct.
---------------------------
(i) To CytRx's Knowledge, no statement, certificate,
instrument, or other writing furnished or to be furnished by any CytRx Entity or
any Affiliate thereof to CytRx pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(ii) None of the information supplied or to be supplied by any
CytRx Entity or any Affiliate thereof for inclusion in (i) the Proxy Statement
to be mailed to CytRx stockholders in connection with the CytRx Stockholders'
Meeting, (ii) any materials to be delivered to GGC Shareholders in connection
with the GGC Shareholder Meeting, and (iii) any other documents to be filed by a
CytRx Entity or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed or delivered, and with respect to the
Proxy Statement, when first mailed to the stockholders of CytRx, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or, in the case of the Proxy Statement or
any amendment thereof or supplement thereto, at the time of the CytRx
Stockholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
CytRx Stockholders' Meeting.
(iii) All documents that any CytRx Entity or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
n. Rights Agreements. CytRx has taken all necessary action (including,
-----------------
if required, redeeming all of the outstanding CytRx Rights or amending or
terminating the CytRx Rights Agreement) so that the entering into of this
Agreement and consummation of the Merger and the other transactions contemplated
hereby do not and will not result in any Person becoming able to exercise any
CytRx Rights under the CytRx Rights Agreement or enabling or requiring the CytRx
Rights to be separated from the shares of CytRx Common Stock to which they are
attached or to be triggered or to become exercisable.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
24
4.1 Covenants of GGC. During the period from the date of this Agreement
----------------
and continuing until the Effective Time, GGC agrees that (except as expressly
contemplated or permitted by this Agreement or to the extent that CytRx shall
otherwise consent in writing):
(a) Ordinary Course. GGC shall conduct its business in the usual,
---------------
regular and ordinary course and use commercially reasonable efforts to preserve
intact its present business organization, maintain its rights and preserve its
relationships with employees, officers, customers, suppliers and others having
business dealings with them. GGC shall maintain in force all insurance policies
and Consents with respect to GGC and shall maintain all assets and properties in
customary repair, order and condition, reasonable wear and tear excepted. GGC
shall not (i) enter into any new material line of business or (ii) incur or
commit to any significant capital expenditures or any obligations or liabilities
other than capital expenditures and obligations or liabilities incurred or
committed to as disclosed in the GGC Disclosure Letter. GGC will comply with all
applicable Laws wherever its business is conducted.
(b) Dividends; Changes in Stock. GGC shall not (i) declare or pay any
---------------------------
dividends on or make other distributions in respect of any of its capital stock,
(ii) split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii) repurchase, redeem or
otherwise acquire any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock.
(c) Issuance of Securities. GGC shall not issue, deliver or sell, or
----------------------
authorize or propose the issuance, delivery or sale of, any shares of its
capital stock of any class, any Voting Debt or any securities convertible into
or exercisable for (including any stock appreciation rights, phantom stock plans
or stock equivalents), or any rights, warrants or options to acquire, any such
shares or Voting Debt, or enter into any agreement with respect to any of the
foregoing, other than issuances of GGC common stock pursuant to exercises of GGC
Stock Options that are outstanding as of the date hereof and set forth in
Section 3.1(b)(i).
(d) Governing Documents. GGC shall not amend or propose to amend its
-------------------
articles of incorporation, by-laws or other governing instruments except in
furtherance of the consummation of the transactions contemplated in this
Agreement and to the extent such amendment or proposed amendment does not have a
Material Adverse Effect on GGC.
(e) No Acquisitions. GGC shall not (i) acquire or agree to acquire by
---------------
merging or consolidating with, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any business
or any corporation, limited liability company, partnership, association or other
business organization or division thereof or (ii) other than in the ordinary
course of business, otherwise acquire or agree to acquire any assets which, in
the case of this clause (ii), are material, individually or in the aggregate, to
GGC.
(f) No Dispositions. GGC shall not sell, lease, encumber or otherwise
---------------
dispose of, or agree to sell, lease, encumber or otherwise dispose of any of its
assets (including any shares of capital stock of Blizzard), except as disclosed
in the GGC Disclosure Letter and for dispositions
25
in the ordinary course of business and consistent with past practice and of
substantially the same character, type and magnitude as dispositions in the
past.
(g) Indebtedness. GGC shall not (i) incur any indebtedness for borrowed
------------
money or guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any long-term debt securities of GGC or guarantee
any long-term debt securities of others or enter into or amend any contract,
agreement, commitment or arrangement with respect to any of the foregoing, other
than (x) in replacement for existing or maturing debt, or (y) other borrowing
under existing lines of credit in the ordinary course of business consistent
with prior practice and of substantially the same character, type and magnitude
as borrowings made in the past or (ii) make any loans, advances or capital
contributions to any person.
(h) Other Actions. GGC shall not take any action that would, or might
-------------
reasonably be expected to, result in any of its representations and warranties
set forth in this Agreement being or becoming untrue in any material respect, or
in any of the conditions to the Merger set forth in Article VI not being
satisfied, or which would adversely affect the ability of any of the parties
hereto to obtain any of the Requisite Regulatory Approvals without imposition of
a condition or restriction of the type referred to in Section 6.2(e) and GGC
shall, in the event of, or promptly after the occurrence of, or promptly after
obtaining knowledge of the occurrence of or the impending or threatened
occurrence of, any fact or event which would cause or constitute a breach of any
of the representations and warranties set forth in this Agreement, the
non-satisfaction of any of the conditions to the Merger set forth in Article VI
or the failure to obtain the Requisite Regulatory Approvals, in each case at any
time after the date hereof and through the Closing Date, give detailed notice
thereof to CytRx, and GGC shall use its best efforts to prevent or promptly to
remedy such breach, non-satisfaction or failure, as the case may be.
(i) Advice of Changes. GGC shall confer on a regular basis with CytRx,
-----------------
report on operational matters and promptly advise CytRx, orally and in writing,
of any material change or event or any change or event which would cause or
constitute a material breach of any of the representations, warranties or
covenants of GGC contained herein.
(j) Accounting Methods. GGC shall not change its methods of accounting
------------------
in effect at January 1, 2002.
(k) Benefit Plans. During the period from the date of this Agreement
-------------
and continuing until the Effective Time, GGC agrees that it will not, without
the prior written consent of CytRx except as set forth in GGC Disclosure Letter,
(i) enter into or adopt any employee benefit plan or any agreement, arrangement,
plan or policy between GGC, on the one hand, and one or more of its employees,
directors or officers, on the other hand, (ii) except for normal increases in
the ordinary course of business and consistent with past practice and of
substantially the same character, type and magnitude as increases in the past
that in the aggregate, do not result in a material increase in benefits or
compensation expense to GGC, increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not required by
any plan and arrangement as in effect as of the date hereof (including, without
limitation, the granting of stock options, stock appreciation rights, restricted
stock, restricted stock units or performance units or shares) or enter into any
contract, agreement, commitment or
26
arrangement to do any of the foregoing, or (iii) enter into or renew any
contract, agreement, commitment or arrangement providing for the payment to any
director, officer or employee of GGC of compensation or benefits contingent, or
the terms of which are materially altered, upon the occurrence of any of the
transactions contemplated by this Agreement.
(l) Tax Elections. Except in the ordinary course of business and
-------------
consistent with past practice and of substantially the same character, type and
magnitude as elections made in the past, GGC shall not make any material Tax
election or settle or compromise any material federal, state, local or foreign
income Tax claim or liability or amend any previously filed Tax Return in any
respect.
(m) No Acquisitions of CytRx Common Stock. GGC shall not acquire any
-------------------------------------
shares of CytRx Common Stock prior to the Effective Time. If GGC has Knowledge
that any GGC Shareholder acquires shares of CytRx Common Stock prior to the
Effective Time, GGC shall promptly notify CytRx of such fact in writing.
4.2 Covenants of CytRx and Merger Sub. Except as expressly contemplated
---------------------------------
by this Agreement, as set forth in the CytRx Disclosure Letter or as may be
required for the Board to discharge its fiduciary duties to its stockholders
under applicable Law, after the date hereof and prior to the Effective Time,
without the prior written consent of GGC:
(a) Ordinary Course. CytRx shall conduct its business in the usual,
---------------
regular and ordinary course and use commercially reasonable efforts to preserve
intact its present business organization, maintain its rights and preserve its
relationships with customers, suppliers and others having business dealings with
them. CytRx shall maintain in force all insurance policies and Consents with
respect to CytRx and shall maintain all assets and properties in customary
repair, order and condition, reasonable wear and tear excepted. CytRx shall not
(i) enter into any new material line of business or (ii) incur or commit to any
significant capital expenditures or any obligations or liabilities other than
capital expenditures and obligations or liabilities incurred or committed to as
disclosed in the CytRx Disclosure Letter. CytRx will comply with all applicable
Laws wherever its business is conducted.
(b) Dividends; Changes in Stock. CytRx shall not (i) declare or pay any
---------------------------
dividends on or make other distributions in respect of any of its capital stock,
(ii) split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (iii) repurchase, redeem or
otherwise acquire any shares of its capital stock or any securities convertible
into or exercisable for any shares of its capital stock.
(c) Issuance of Securities. CytRx shall not issue, deliver or sell, or
----------------------
authorize or propose the issuance, delivery or sale of, any shares of its
capital stock of any class, any Voting Debt or any securities convertible into
or exercisable for (including any stock appreciation rights, phantom stock plans
or stock equivalents), or any rights, warrants or options to acquire, any such
shares or Voting Debt, or enter into any agreement with respect to any of the
foregoing, other than issuances of CytRx Common Stock (i) pursuant to exercises
of CytRx warrants and stock
27
options that are outstanding as of the date hereof, (ii) in satisfaction of
severance obligations to employees and officers or (iii) to pay the fees and
expenses of Cappello Capital Corp.
(d) Governing Documents. Except as expressly contemplated hereby, CytRx
-------------------
shall not amend or propose to amend its certificate of incorporation, by-laws or
other governing instruments, except in furtherance of the consummation of the
transactions contemplated in this Agreement and to the extent such amendment or
proposed amendment does not have a Material Adverse Effect on CytRx.
(e) No Acquisitions. CytRx shall not (i) acquire or agree to acquire by
---------------
merging or consolidating with, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any business
or any corporation, limited liability company, partnership, association or other
business organization or division thereof or (ii) other than in the ordinary
course of business, otherwise acquire or agree to acquire any assets which, in
the case of this clause (ii), are material, individually or in the aggregate, to
CytRx.
(f) No Dispositions. CytRx shall not sell, lease, encumber or otherwise
---------------
dispose of, or agree to sell, lease, encumber or otherwise dispose of any of its
assets (including capital stock of its Subsidiaries), except as disclosed in the
CytRx Disclosure Letter and for dispositions in the ordinary course of business
and consistent with past practice and of substantially the same character, type
and magnitude as dispositions in the past.
(g) Indebtedness. CytRx shall not (i) incur any indebtedness for
------------
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any long-term debt securities of
CytRx or guarantee any long-term debt securities of others or enter into or
amend any contract, agreement, commitment or arrangement with respect to any of
the foregoing, other than (x) in replacement for existing or maturing debt, or
(y) other borrowing under existing lines of credit in the ordinary course of
business consistent with prior practice and of substantially the same character,
type and magnitude as borrowings made in the past or (ii) make any loans,
advances or capital contributions to any person.
(h) Other Actions. CytRx shall not take any action that would, or might
-------------
reasonably be expected to, result in any of its representations and warranties
set forth in this Agreement being or becoming untrue in any material respect, or
in any of the conditions to the Merger set forth in Article VI not being
satisfied, or which would adversely affect the ability of any of the parties
hereto to obtain any of the Requisite Regulatory Approvals without imposition of
a condition or restriction of the type referred to in Section 6.2(e) and CytRx
shall, in the event of, or promptly after the occurrence of, or promptly after
obtaining knowledge of the occurrence of or the impending or threatened
occurrence of, any fact or event which would cause or constitute a breach of any
of the representations and warranties set forth in this Agreement, the
non-satisfaction of any of the conditions to the Merger set forth in Article VI
or the failure to obtain the Requisite Regulatory Approvals, in each case at any
time after the date hereof and through the Closing Date, give detailed notice
thereof to GGC, and CytRx shall use commercially reasonable efforts to prevent
or promptly to remedy such breach, non-satisfaction or failure, as the case may
be.
28
(i) Advice of Changes. CytRx shall confer on a regular basis with GGC,
-----------------
report on operational matters and promptly advise GGC, orally and in writing, of
any material change or event or any change or event which would cause or
constitute a material breach of any of the representations, warranties or
covenants of CytRx contained herein.
(j) Accounting Methods. CytRx shall not change its methods of
------------------
accounting in effect at January 1, 2002, except as required by changes in GAAP
as concurred on by CytRx's independent auditors.
(k) Benefit Plans. During the period from the date of this Agreement
-------------
and continuing until the Effective Time, CytRx agrees that it will not, without
the prior written consent of GGC except as set forth in CytRx Disclosure Letter,
(i) enter into, adopt, amend (except as may be required by law) or terminate any
employee benefit plan or any agreement, arrangement, plan or policy between
CytRx, on the one hand, and one or more of its employees, directors or officers,
on the other hand, (ii) except for normal increases in the ordinary course of
business and consistent with past practice and of substantially the same
character, type and magnitude as increases in the past that in the aggregate, do
not result in a material increase in benefits or compensation expense to CytRx,
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any plan and arrangement
as in effect as of the date hereof (including, without limitation, the granting
of stock options, stock appreciation rights, restricted stock, restricted stock
units or performance units or shares) or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing, or (iii) enter into or
renew any contract, agreement, commitment or arrangement providing for the
payment to any director, officer or employee of CytRx of compensation or
benefits contingent, or the terms of which are materially altered, upon the
occurrence of any of the transactions contemplated by this Agreement.
(l) Tax Elections. Except in the ordinary course of business and
-------------
consistent with past practice and of substantially the same character, type and
magnitude as elections made in the past, CytRx shall not make any material Tax
election or settle or compromise any material federal, state, local or foreign
income Tax claim or liability or amend any previously filed Tax Return in any
respect.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of the Proxy Statement; Financial Statements and Other
----------------------------------------------------------------------
Information; Preparation of GGC Shareholder Materials.
------------------------------------------------------
(a) CytRx shall as promptly as practicable (but subject to the
completion of the GGC Proxy Statement Financial Statements) prepare and file a
proxy or information statement relating to the CytRx Stockholders' Meeting
(together with all amendments, supplements and exhibits thereto, the "Proxy
-----
Statement") with the SEC and will use commercially reasonable efforts to respond
---------
to the comments of the SEC and to cause the Proxy Statement to be mailed to
CytRx's stockholders at the earliest practical time. CytRx will notify GGC
promptly of the receipt of any
29
comments from the SEC or its staff and of any request by the SEC or its staff
for amendments or supplements to the Proxy Statement or for additional
information and will supply GGC with copies of all correspondence between CytRx
or any of its representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to the Proxy Statement or the Merger. If at any time
prior to the CytRx Stockholders' Meeting there shall occur any event that should
be set forth in an amendment or supplement to the Proxy Statement, CytRx will
promptly prepare and mail to its stockholders such an amendment or supplement.
CytRx will not mail any Proxy Statement, or any amendment or supplement thereto,
to which GGC reasonably objects. GGC shall cooperate with CytRx in the
preparation of the Proxy Statement and will provide any information or documents
reasonably requested by CytRx for inclusion in the Proxy Statement. CytRx shall
include in the Proxy Statement reasonable disclosure regarding the anticipated
cash balance of CytRx at Closing (assuming that the Closing occurs on May 31,
2002) and the assumptions made by CytRx in determining such anticipated cash
balance.
(b) GGC shall prepare, and cooperate with CytRx and its accountants and
other representatives in the preparation of, all financial statements and other
financial information required by the Exchange Act and the proxy statement rules
to be included in the Proxy Statement (the "GGC Proxy Statement Financial
-----------------------------
Statements"). At Closing, CytRx shall pay up to $25,000 of the costs, fees and
----------
expenses incurred by GGC for any audit (the "Audit Expenses") of GGC required to
--------------
be conducted to prepare the GGC Proxy Statement Financial Statements.
(c) GGC shall as promptly as practicable prepare materials to be
provided to the GGC Shareholders in connection with the GGC Shareholders Meeting
and cause such materials to be mailed to the GGC Shareholders at the earliest
practical time. Such materials shall include, without limitation: (i) copies of
certain CytRx SEC Documents as requested by CytRx, (ii) copies of this Agreement
and the other agreements contemplated hereby and (iii) investor questionnaires
and other documents that CytRx reasonably requests the GGC Shareholders to
execute and deliver in connection with the Merger. If at any time prior to the
GGC Shareholders Meeting there shall occur any event that requires additional or
revised materials to be sent to the GGC Shareholders, GGC and CytRx will
promptly prepare and mail to the GGC Shareholders such additional or revised
materials. GGC will not mail any materials to the GGC Shareholders to which
CytRx reasonably objects. GGC will take all actions reasonably requested by
CytRx, including delivering documents to and gathering responses from the GGC
Shareholders in connection with satisfying CytRx of the availability of
applicable securities Laws exemptions from registration for the issuance of the
Merger Consideration hereunder.
5.2 Meetings.
--------
(a) CytRx shall call a stockholders' meeting to be held as promptly as
practicable for the purpose of voting upon (i) the issuance of the Merger
Consideration, (ii) the amendment of CytRx's certificate of incorporation as
contemplated in this Agreement and (iii) all ordinary annual meeting matters,
including, but not limited to, election of directors and ratification of
auditors (the "CytRx Stockholders' Meeting"). CytRx will, through its Board,
---------------------------
recommend to its stockholders approval of such matters, including the
composition of the post-Effective Time Board as set forth in Section 5.7 herein,
unless the taking of such action would be inconsistent with the Board's
fiduciary duties to its stockholders under applicable Laws. CytRx shall solicit
30
from its stockholders entitled to vote at the CytRx Stockholders' Meeting
proxies in favor of issuance of the Merger Consideration and shall take all
other action necessary or, in the judgment of CytRx, helpful to secure the vote
or consent of such holders required by the DGCL or this Agreement to effect the
Merger.
(b) GGC shall call the GGC Shareholders Meeting to be held as promptly
as practicable for the purpose of voting upon the Merger. GGC will, through its
board of directors, recommend to its shareholders approval of the Merger. GGC
shall take all action necessary or, in the judgment of GGC, helpful to (i)
secure the vote or consent of the GGC Shareholders required by the CCC or this
Agreement to effect the Merger and (ii) cause its shareholders to execute and
deliver to CytRx any documents reasonably requested by CytRx to be executed by
the GGC Shareholders in connection with the Merger.
5.3 Legal Conditions to Merger. Each of GGC and CytRx shall use
--------------------------
commercially reasonable efforts (i) to take, or cause to be taken, all actions
necessary to comply promptly with all legal requirements which may be imposed on
such party with respect to the Merger and to consummate the transactions
contemplated by this Agreement, subject to the approval of stockholders of CytRx
described in Section 6.1(a), and (ii) to obtain (and to cooperate with the other
party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Regulatory Authority and of any other public or private third
party which is required to be obtained or made by such party in connection with
the Merger and the transactions contemplated by this Agreement.
5.4 Brokers or Finders. Except as disclosed to the other party in
------------------
writing prior to the date hereof, each of CytRx and GGC represents that no
agent, broker, investment banker, financial advisor or other firm or person is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement, except the Independent Advisor and Cappello Capital Corp., whose fees
and expenses will be paid by CytRx in accordance with CytRx's agreement with
such firm(s) (a copy of each of which has been delivered to GGC by CytRx prior
to the date of this Agreement).
5.5 Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
(a) As of the Effective Time, the articles of incorporation of
the Surviving Corporation shall contain provisions no less favorable with
respect to indemnification than are set forth in the articles of incorporation
of GGC, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who at the Effective Time
were directors or officers of GGC. From and after the Effective Time, for a
period of six years, CytRx shall (i) cause the Surviving Corporation to
indemnify the directors and officers of GGC and (ii) indemnify the members of
the CytRx board of directors and the officers of CytRx immediately prior to the
Effective Time (the "Existing CytRx Directors and Officers"), on terms no less
favorable than the provisions with respect to indemnification that are set forth
in the certificate of incorporation of CytRx as of the Effective Time.
31
(b) The provisions of CytRx's certificate of incorporation and
bylaws with respect to indemnification of CytRx directors and officers shall not
be amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors or officers of GGC or
who were Existing CytRx Directors and Officers.
(c) From and after the date hereof and for three (3) years
from the Effective Time, CytRx shall maintain continuously in effect directors'
and officers' liability insurance covering the Existing CytRx Directors and
Officers for actions taken or omissions occurring at or prior to the Effective
Time on terms which in the aggregate are not less favorable than the more
favorable of (1) the terms of CytRx's current insurance coverage or (2) the
directors' and officers' liability insurance provided by CytRx after the
Effective Time to directors or officers of CytRx who are not Existing CytRx
Directors and Officers. In addition, CytRx shall take all actions necessary to
add Jack J. Luchese and Mark W. Reynolds as additional notice parties with
respect to termination, renewal and other notices regarding all of such policies
of directors' and officers' liability insurance. If at any time prior to the
expiration of such three year period CytRx elects to change its insurance
carrier with respect to its directors' and officers' liability insurance, CytRx
shall purchase tail coverage. Notwithstanding any of the above, prior to the
Effective Time, CytRx may purchase a prepaid extended reporting (or tail) binder
on its existing directors' and officers' liability insurance policy.
(d) CytRx and GGC agree that the Existing CytRx Directors and
Officers and the directors and officers of GGC immediately prior to the
Effective Time covered hereby are intended to be third party beneficiaries under
this Section 5.5 and shall have the right to enforce the obligations of the
Surviving Corporation and CytRx.
5.6 Stock Certificates; Shareholder Lists. Within ten (10) business
-------------------------------------
days after the date hereof, GGC shall issue and deliver to each GGC Shareholder
set forth in Schedule 3.1(b)(i) of the GGC Disclosure Schedule a stock
certificate evidencing the shares of GGC common stock owned of record by each
such GGC Shareholder and as reflected in Schedule 3.1(b)(i) of the GGC
Disclosure Schedule. GGC shall promptly upon request of CytRx furnish CytRx with
mailing labels containing the names and addresses of all record holders of GGC
capital stock and with security position listings of GGC capital stock held in
stock depositories, each as of the most recent practicable date, together with
all other available listings and computer files containing names, addresses and
security position listings of record holders and beneficial owners of GGC
capital stock. GGC shall furnish CytRx with such additional information,
including, without limitation, updated listings and computer files of
stockholders, mailing labels and security position listings, and such other
assistance as CytRx or its agents may reasonably request.
5.7 Post-Effective Time Board. At the CytRx Stockholders' Meeting and
-------------------------
for a period of two (2) years thereafter, CytRx agrees to propose to its
stockholders that the post-Effective Time Board consist of (i) three directors
who have been members of CytRx's board of directors at any time during the three
year period ending on the date immediately preceding the Effective Time
(collectively, "Eligible CytRx Directors"), who initially shall be Max Link,
------------------------
Herbert H. McDade, Jr. and Alexander L. Cappello, (ii) three directors from the
pre-Effective Time GGC board,
32
initially two of which shall be Steven A. Kriegsman and Louis Ignarro, Ph.D.,
and a third member shall be determined by GGC prior to the date of the filing of
the Proxy Statement, subject to the reasonable approval of the CytRx board of
directors, and (iii) a seventh director who shall be determined by a majority of
the three CytRx-designated directors and a majority of the three GGC-designated
directors. CytRx and GGC hereby agree that, for a period of two years after the
Effective Time, at least three (3) members of the Board must be Eligible CytRx
Directors.
5.8 Investment Banking; Consulting Agreements. At the Closing, CytRx
-----------------------------------------
will enter into the following:
(a) an extension of the existing investment banking agreement
with Cappello Capital Corp.;
(b) a consulting agreement with Leonard Ruiz in the form
attached hereto as Exhibit 5.8(b); and
--------------
(c) a consulting agreement with Elliott Cody in the form
attached hereto as Exhibit 5.8(c).
--------------
5.9 Registration Rights Agreement. At the Closing, CytRx will, and GGC
-----------------------------
will cause each GGC Escrowee to enter into a registration rights agreement in
the form attached hereto as Exhibit 5.9.
-----------
5.10 Investigation and Confidentiality.
---------------------------------
(a) Prior to the Effective Time, each party shall permit the
other to make or cause to be made such investigation of the business and
properties of it and its Subsidiaries and of their respective financial and
legal conditions as may be reasonably requested, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. No
investigation by either party shall affect the ability of that party to rely on
the representations and warranties of the other party.
(b) In addition to the parties' respective obligations under
that certain Mutual Non-Disclosure Agreement entered into by the parties hereto
and dated December 3, 2001 (the "Confidentiality Agreement), which is hereby
-------------------------
reaffirmed and adopted, and incorporated by reference herein, each party shall,
and shall cause its advisers and agents to, maintain the confidentiality of all
confidential information furnished to it by the other party concerning its and
its Subsidiaries' businesses, operations, and financial positions and shall not
use such information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other party.
5.11 Press Releases. Prior to the Effective Time, CytRx and GGC shall
--------------
consult with each other as to the form and substance of any press release or
other public disclosure materially
33
related to this Agreement or any other transaction contemplated hereby;
provided, that nothing in this Section 5.11 shall be deemed to prohibit any
party from making any disclosure which its counsel deems necessary or advisable
in order to satisfy such party's disclosure obligations imposed by Law.
5.12 Business Plan. Promptly after the date hereof, GGC and CytRx
-------------
jointly shall finalize and mutually agree upon a business plan for CytRx and the
Surviving Corporation which shall (i) be based substantially on the presentation
made to the CytRx board of directors during its February 8, 2002 meeting, (ii)
cover a five year period commencing at the Effective Time, and (iii) include,
without limitation, annual operating budgets and the intended business, growth
and acquisition strategies of CytRx and the Surviving Corporation (the "CytRx
-----
Business Plan"). The Parties agree that the CytRx Business Plan may not be
-------------
materially amended or deviated from without the approval of a majority of the
Eligible CytRx Directors, if any, then serving on the CytRx board of directors.
5.13 GGC Shareholder Representative. GGC, and by virtue of their
------------------------------
approval of the Merger, each GGC Escrowee, hereby appoints Dean Ader (the "GGC
---
Shareholder Representative") as agent and attorney-in-fact for GGC and the GGC
--------------------------
Escrowees for and on behalf of GGC and each such GGC Escrowee with full power
and authority to represent GGC and the GGC Escrowees and their respective
successors, heirs and representatives with respect to all matters arising under
(i) Article VIII and Section 2.3 of this Agreement and (ii) the Escrow
Agreement. All actions taken by the GGC Shareholder Representative hereunder
shall be binding upon GGC and the GGC Escrowees and their respective successors,
heirs and representatives as if expressly ratified and confirmed in writing by
each of them. The GGC Shareholder Representative, or any successor hereafter
approved, may resign and shall be discharged of all duties hereunder upon the
appointment of a successor GGC Shareholder Representative as provided hereby. In
case of such resignation, or in the event of the death of, or inability to act
as, the GGC Shareholder Representative, a successor shall be named from among
the GGC Escrowees by a majority of the members of the board of directors of the
Surviving Corporation. Each successor GGC Shareholder Representative shall have
all the power, authority, rights and privileges hereby conferred upon the
original GGC Shareholder Representative and the term "GGC Shareholder
Representative" as used herein shall be deemed to include such successor GGC
Shareholder Representative. In performing his/her duties under this Agreement,
or upon the claimed failure to perform his/her duties hereunder, the GGC
Shareholder Representative shall not be liable to GGC or the GGC Escrowees or
any other Person for any Damages which they may incur as a result of any act, or
failure to act under this Agreement or the Escrow Agreement; provided, however,
that the GGC Shareholder Representative shall be liable for actions taken or
omitted in bad faith or which constitute willful default or gross negligence.
CytRx shall indemnify and hold the GGC Shareholder Representative harmless from
and against all Damages incurred by the GGC Shareholder Representative arising
out of or related to its performance hereunder (unless such Damages arise out of
actions taken or omitted by the GGC Shareholder Representative in bad faith or
which constitute willful default or gross negligence). In addition, to the
extent that the GGC Shareholder Representative brings a claim hereunder in
his/her capacity as GGC Shareholder Representative, CytRx shall advance and pay
all costs, fees and expenses incurred by the GGC Shareholder Representative in
connection with such claim as such costs, fees and expenses are
34
incurred, including, without limitation, any costs, fees and expenses of
accountants, attorneys or other representatives or consultants engaged by the
GGC Shareholder Representative in the course of his/her performance hereunder.
CytRx and GGC hereby waive any conflicts of interests that may arise with
respect to the GGC Shareholder Representative's actions in his/her capacity as
GGC Shareholder Representative.
5.14 CytRx Representative. CytRx hereby appoints Jack J. Luchese (the
--------------------
"CytRx Representative") as agent and attorney-in-fact for CytRx for and on
--------------------
behalf of CytRx with full power and authority to represent CytRx and its
successors with respect to all matters arising under (i) Article VIII and
Section 2.3 of this Agreement and (ii) the Escrow Agreement. All actions taken
by the CytRx Representative hereunder shall be binding upon CytRx and its
successors as if expressly ratified and confirmed in writing by each of them.
The CytRx Representative, or any successor hereafter approved, may resign and
shall be discharged of all duties hereunder upon the appointment of a successor
CytRx Representative as provided hereby. In case of such resignation, or in the
event of the death of, or inability to act as, the CytRx Representative, a
successor shall be named by a majority of the Eligible CytRx Directors. Each
successor CytRx Representative shall have all the power, authority, rights and
privileges hereby conferred upon the original CytRx Representative and the term
"CytRx Representative" as used herein shall be deemed to include such successor
CytRx Representative. In performing its duties under this Agreement, or upon the
claimed failure to perform its duties hereunder, the CytRx Representative shall
not be liable to CytRx or any other Person for any Damages which they may incur
as a result of any act, or failure to act under this Agreement or the Escrow
Agreement; provided, however, that the CytRx Representative shall be liable for
actions taken or omitted in bad faith or which constitute willful default or
gross negligence. CytRx shall indemnify and hold the CytRx Representative
harmless from and against all Damages incurred by the CytRx Representative
arising out of or related to his performance hereunder (unless such Damages
arise out of actions taken or omitted by the CytRx Representative in bad faith
or which constitute willful default or gross negligence). In addition, to the
extent that the CytRx Representative brings a claim hereunder in his capacity as
CytRx Representative, CytRx shall advance and pay all costs, fees and expenses
incurred by the CytRx Representative in connection with such claim as such
costs, fees and expenses are incurred, including, without limitation, any costs,
fees and expenses of accountants, attorneys or other representatives or
consultants engaged by the CytRx Representative in the course of his performance
hereunder. CytRx and GGC hereby waive any conflicts of interests that may arise
with respect to the CytRx Representative's actions in his capacity as CytRx
Representative.
5.15 CytRx Options and Warrants. CytRx and GGC hereby acknowledge and
--------------------------
agree that, from and after the Effective Time, neither will amend the terms of
any outstanding stock options or warrants to purchase CytRx Common Stock without
the prior written consent of the holder of such outstanding stock option or
warrant. CytRx and GGC hereby acknowledge and agree that the Merger will
constitute a change in control under all outstanding stock options to purchase
CytRx Common Stock and the warrants described on Exhibit 5.15, which will
accelerate the vesting terms of those stock options and warrants and make each
of them fully exercisable upon the Effective Time. From and after the Effective
Time, neither CytRx nor GGC shall take any actions to withdraw the effectiveness
of any registration statements effective as of the Effective Time that covers
the issuance and/or resale of CytRx Common Stock (i) issuable or issued upon
35
the exercise of outstanding options and warrants to purchase CytRx Common Stock
or (ii) issuable or issued as an award under any stock option plan or long-term
incentive plan described in the CytRx Disclosure Letter, except pursuant to
contractual rights that exist as of the date hereof with the holders of such
stock options and warrants. From and after the Effective Time, CytRx shall, and
shall use its best efforts to cause its employees, agents and representatives
to, process expeditiously (i) exercises of options and warrants to purchase
CytRx Common Stock and (ii) sales of and other transactions involving CytRx
Common Stock.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation To Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) CytRx Stockholder Approval. The issuance of the Merger
--------------------------
Consideration shall have been approved and adopted by the affirmative vote of
the holders of a majority of the outstanding shares of CytRx Common Stock
entitled to vote thereon.
(b) Regulatory Approvals. All Consents of, filings and registrations
--------------------
with, and notifications to all Regulatory Authorities which are necessary for
the consummation of the Merger (the "Requisite Regulatory Approvals") shall have
been filed, occurred or been obtained and shall be in full force and effect and
all waiting periods required by Law shall have expired.
(c) No Injunctions or Restraints; Illegality. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding by any
Regulatory Authority seeking any of the foregoing be pending. There shall not be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, which makes the consummation of the
Merger illegal.
6.2 Conditions to Obligations of CytRx and Merger Sub. The obligations
-------------------------------------------------
of CytRx and Merger Sub to effect the Merger are subject to the satisfaction of
the following conditions unless waived by CytRx and Merger Sub pursuant to
Section 9.13:
(a) Representations and Warranties. The representations and warranties
------------------------------
of GGC set forth in this Agreement shall be true and correct in all respects as
of the Effective Time as though made on or as of such time (ignoring for
purposes of this determination any materiality or Material Adverse Effect
qualifiers contained within individual representations and warranties), except
for (i) those representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time which need
only be true and correct as of such date or with respect to such period and (ii)
such failures to be true and correct as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect on GGC.
Notwithstanding the foregoing, the representations and warranties set forth in
Section 3.1(b) shall be true and correct in all respects as of the Effective
Time, except for inaccuracies
36
which are de minimis in amount. At Closing, GGC shall deliver an officer's
certificate certifying that the above is true as of the Closing Date.
(b) Performance of Obligations of GGC. GGC shall have performed and
---------------------------------
complied with all obligations required to be performed or complied with by it
under this Agreement at or prior to the Closing Date, and CytRx shall have
received a certificate signed on behalf of GGC by the President and Chief
Executive Officer of GGC and by the Chief Financial Officer of GGC to such
effect.
(c) Appraisal Rights. Dissenting Shares shall constitute less than five
----------------
percent (5%) of all Shares outstanding immediately prior to the Effective Time.
(d) Consents Under Agreements. GGC shall have obtained the consent or
-------------------------
approval of each Person whose consent or approval shall be required for
consummation of the Merger or for the prevention of any Default under or breach
of any Contract of any GGC Entity, except for those consents or approvals for
which failure to obtain such consents or approvals could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on GGC.
(e) Burdensome Condition. There shall not be any action taken, or any
--------------------
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any Regulatory Authority which, in connection with
the grant of a Requisite Regulatory Approval, imposes any requirement upon CytRx
or any GGC Entity which would materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement as to
render uneconomic the consummation of the Merger, or which would require CytRx
to dispose of any asset which is material to CytRx prior to the Effective Time.
(f) Material Adverse Effect. Since the date of this Agreement, there
-----------------------
shall not have occurred a Material Adverse Effect with respect to CytRx, GGC or
any other GGC Entity, and no facts or circumstances arising after the date of
this Agreement shall have occurred which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect with respect to
CytRx or the Surviving Corporation.
(g) Proceedings. All proceedings to be taken on the part of GGC in
-----------
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to CytRx, and CytRx shall have received copies of all such documents
and other evidences as CytRx may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
(h) No Action. No action, suit or proceeding shall have been
---------
instituted, or shall be pending or threatened (i) seeking to restrain in any
material respect or prohibit the consummation of the Merger, (ii) seeking to
obtain from any GGC Entity, CytRx or Merger Sub any damages which would result
in a Material Adverse Effect or (iii) seeking to impose the restrictions,
prohibitions or limitations referred to in subsection (e) above.
(i) Stock Options. All actions required to be taken pursuant to Section
-------------
2.4 with respect to GGC Stock Options (other than Converting Options) shall have
been taken.
(j) Closing Deliveries. CytRx shall have received the following:
------------------
37
(1) a legal opinion of outside counsel to GGC in substantially
the form attached hereto as Exhibit 6.2(j)(2);
(2) a copy of the final CytRx Business Plan;
(3) the Closing Liabilities Certificate; and
(4) the Escrow Agreement executed by GGC and the GGC
Shareholder Representative.
6.3 Conditions to Obligations of GGC. The obligation of GGC to effect
--------------------------------
the Merger is subject to the satisfaction of the following conditions unless
waived by GGC pursuant to Section 9.13:
(a) Representations and Warranties. The representations and warranties
------------------------------
of CytRx and Merger Sub set forth in this Agreement shall be true and correct in
all respects as of the Effective Time as though made on or as of such time
(ignoring for purposes of this determination any materiality or Material Adverse
Effect qualifiers contained within individual representations and warranties),
except for (i) those representations and warranties that address matters only as
of a particular date or only with respect to a specific period of time which
need only be true and correct as of such date or with respect to such period and
(ii) such failures to be true and correct as would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect on
CytRx. At Closing, CytRx will deliver an officer's certificate to GGC certifying
that the above is true as of the Closing Date.
(b) Performance of Obligations of CytRx and Merger Sub. CytRx and
--------------------------------------------------
Merger Sub shall have performed and complied with all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and GGC
shall have received a certificate signed on behalf of CytRx by the President and
Chief Executive Officer of CytRx to such effect.
(c) Legal Opinion. GGC shall have received the legal opinion of outside
-------------
counsel to CytRx in substantially the form attached hereto as Exhibit 6.3(c).
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of CytRx or the GGC Shareholders:
(a) by the mutual consent of CytRx and GGC in a written instrument,
whether or not the Merger has been approved by the stockholders of CytRx or the
GGC Shareholders;
(b) by CytRx on behalf of itself and Merger Sub, upon a material breach
of any representation, warranty, covenant or agreement on the part of GGC set
forth in this Agreement,
38
or if any representation or warranty of GGC shall have become untrue such that
the conditions set forth in Section 6.2, would be incapable of being satisfied
by July 31, 2002;
(c) by GGC, upon a material breach of any representation, warranty,
covenant or agreement on the part of CytRx or Merger Sub set forth in this
Agreement, or if any representation or warranty of CytRx or Merger Sub shall
have become untrue such that the conditions set forth in Section 6.3 would be
incapable of being satisfied by July 31, 2002;
(d) by either CytRx or GGC, if (i) any Consent of any Regulatory
Authority required for the consummation of the Merger and the other transactions
contemplated hereby shall have been denied by final nonappealable action of such
authority or if any action taken by such authority is not appealed within the
time limit for appeal, or (ii) any injunction or action by any Regulatory
Authority permanently restraining, enjoining or otherwise preventing the
consummation of the Merger shall have become final and nonappealable;
(e) by either CytRx or GGC if the Merger shall not have been
consummated on or prior to July 31, 2002 (or such later date as may be agreed to
in writing by GGC and CytRx) (other than due to the failure of the party seeking
to terminate this Agreement to perform its obligations under this Agreement
required to be performed at or prior to the Effective Time);
(f) by either CytRx or GGC, if any approval of the stockholders of
CytRx required for the consummation of the Merger shall not have been obtained
by reason of the failure to obtain the required vote at the CytRx Stockholders'
Meeting or at any adjournment thereof.
7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement and abandonment of the Merger by either GGC or CytRx as provided in
Section 7.1, this Agreement shall forthwith terminate and there shall be no
liability or obligation on the part of CytRx, Merger Sub or GGC or their
respective officers or directors except with respect to Sections 5.5, 5.10, 9.9
and 9.11; provided, however, that nothing herein shall relieve any party of
liability for any breach hereof. Notwithstanding the foregoing, termination of
this Agreement shall not affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Survival of Representations and Warranties; Survival of Fraud
-------------------------------------------------------------
Claims.
------
(a) The representations and warranties of the parties hereto contained
herein shall survive the Closing and Effective Time and shall remain in full
force and effect until the first anniversary of the Effective Time. Any right of
indemnification pursuant to this Article VIII with respect to a claimed breach
of (i) a representation or warranty shall expire on the first anniversary of the
Effective Time and (ii) any covenant or agreement shall expire one year after
the date on which performance of such covenant or agreement was required (in
each case, the "Indemnification Expiration Date"), unless in each case on or
-------------------------------
prior to the Indemnification
39
Expiration Date an Indemnification Claim (as defined below) has been delivered
to the Party from whom indemnification is sought. Provided that an
Indemnification Claim is timely made, such Indemnification Claim may continue to
be asserted beyond the Indemnification Expiration Date of the representation,
warranty, covenant or agreement to which such Indemnification Claim relates. An
"Indemnification Claim" means a written notice asserting a breach of a
---------------------
representation, warranty, covenant, agreement or obligation specified in this
Agreement, which shall reasonably set forth, in light of the information then
known to the party giving such notice, a reasonably detailed description of and
estimate (but only if then reasonable to make) of the amount involved in such
breach.
(b) Any right of a Party to bring a claim against another Party hereto
based on fraud in connection with this Agreement or the transactions
contemplated hereby must be brought on or before the second annual anniversary
of the Effective Time, or such claim shall be deemed to have expired and be
forever waived by the Party alleging such fraud.
8.2 Indemnification.
---------------
(a) After the Effective Time and until the applicable Indemnification
Expiration Date, CytRx or the CytRx Representative, on behalf of CytRx, may
deliver an Indemnification Claim to the GGC Shareholder Representative on behalf
of GGC and the GGC Escrowees for all Damages asserted against, imposed upon or
incurred by CytRx by reason of or resulting from (i) a breach of any
representation, warranty, covenant or agreement of GGC contained in this
Agreement or any certificate delivered pursuant hereto or (ii) the termination
by GGC of the GGC Stock Options as contemplated by Section 2.4.
(b) After the Effective Time and until the applicable Indemnification
Expiration Date, the GGC Shareholder Representative on behalf of GGC and the GGC
Escrowees may deliver an Indemnification Claim to CytRx and the CytRx
Representative on behalf of CytRx for all Damages asserted against, imposed upon
or incurred by GGC by reason of or resulting from a breach of any
representation, warranty, covenant or agreement of CytRx contained in this
Agreement or any certificate delivered pursuant hereto.
8.3 Third Party Claims. Indemnification Claims made in respect of any
------------------
claims made or asserted by a third party ("Third Party Claims") shall be
------------------
governed in accordance with the following procedures:
(a) The Party making the Indemnification Claim through its respective
Representative (the "Indemnified Party") shall give the GGC Shareholder
-----------------
Representative or CytRx Representative, as the case may be, (the "Indemnifying
------------
Party") written notice as promptly as reasonably practicable after the written
-----
assertion of any Third Party Claim describing in reasonable detail the nature of
the Third Party Claim to the extent then known to the Indemnified Party (a
"Third Party Claim Notice").
------------------------
(b) Upon receipt of any Third Party Claim Notice from the Indemnified
Party, (i) the CytRx Representative, on behalf of CytRx, or (ii) the GGC
Shareholder Representative, on behalf of GGC and the GGC Escrowees, as the case
may be, may (unless the anticipated
40
Damages exceed the maximum amount of indemnification under Section 8.4)
undertake the defense, compromise and settlement thereof by representatives of
its own choosing reasonably acceptable to the Indemnified Party, the expenses,
fees and costs of which shall be added to the Damages amount included in the
Recoverable Amount pursuant to Section 8.5 of (i) GGC if the CytRx
Representative undertakes such defense or (ii) CytRx if the GGC Shareholder
Representative undertakes such defense. The assumption of the defense,
compromise and settlement of any such Third Party Claim by a Representative will
not be an acknowledgment by an Indemnifying Party of the obligation to indemnify
the Indemnified Party with respect to such claim. If, however, a Representative
fails or refuses to undertake the defense of such Third Party Claim within ten
business days after notice of such Third Party Claim has been given to the
Representative, the Indemnified Party will have the right to undertake the
defense, compromise and settlement of such claim with counsel of its own
choosing. If an Indemnifying Party undertakes the defense of a Third Party Claim
and if in the reasonable opinion of counsel to the Indemnified Party there may
exist defenses available to the Indemnified Party that are different from or in
addition to those available to the Indemnifying Party or if the Indemnified
Party otherwise believes that its interests would be adversely affected by the
Indemnifying Party assuming sole control of the defense of such Third Party
Claim, the Indemnified Party shall be entitled to retain separate counsel to
participate in the defense of such Third Party Claim at its sole expense.
(c) No settlement of a Third Party Claim involving the asserted
liability of the Indemnifying Party under this Section shall be made without the
prior written consent by the respective Representative on behalf of such the
Indemnifying Party. If the Indemnifying Party assumes the defense of a Third
Party Claim, (i) no compromise or settlement thereof may be effected by the
Indemnifying Party without the Indemnified Party's prior written consent unless
(A) there is no finding or admission of any violation of law by or on behalf of
the Indemnified Party, (B) the sole relief provided is monetary damages that are
paid in full by the Indemnifying Party and (C) the compromise or settlement
includes, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnified Party of a release, in form and substance
reasonably satisfactory to the Indemnified Party, from all liability in respect
of such Third Party Claim, and (ii) the Indemnified Party shall have no
liability with respect to any compromise or settlement thereof affected without
its consent.
(d) Each Party will provide the other Party with access to all records,
documents and personnel of such Party to the extent reasonably related to any
Third Party Claim.
8.4 Limitation of Liability.
-----------------------
(a) No Indemnification Claim may be made by any Party unless the
aggregate amount of Damages indemnified against hereunder exceeds $25,000 in the
aggregate, after which the Party may make an Indemnification Claim for the
entire amount of Damages (including the first $25,000).
(b) In no event may the CytRx Representative on behalf of CytRx recover
Damages under this Article VIII in excess of the Secondary Merger Consideration.
41
(c) In no event may the GGC Shareholder Representative on behalf of GGC
and the GGC Escrowees recover Damages under this Article VIII in excess of the
number of shares of CytRx Common Stock comprising the Secondary Merger
Consideration at the Effective Time.
8.5 Payment of Indemnification Claims.
---------------------------------
(a) All Damages recovered under this Article VIII shall be recovered in
shares of CytRx Common Stock as set forth below. Although Indemnification Claims
may be delivered at any time prior to the applicable Indemnification Expiration
Date (subject to Section 8.4 above), no recovery of Damages shall be made by
either party hereto until the first business day after the first anniversary
date of the Effective Time (the "Recovery Date"). Upon the Recovery Date, or if
any Indemnification Claim is still pending on the Recovery Date, on the first
business day after final resolution of all pending Indemnification Claim(s), the
parties shall add the aggregate amount of Damages recoverable by each party
pursuant to Indemnification Claims properly made and resolved under this Article
VIII (each a "Recoverable Amount"). The Party with the greater Recoverable
Amount shall be entitled to recover an amount equal to the excess of such
Party's Recoverable Amount minus the other Party's Recoverable Amount (the
"Final Recoverable Amount").
(b) If CytRx has a greater Recoverable Amount on the Recovery Date,
CytRx shall, in accordance with the Escrow Agreement, cancel a number of shares
of CytRx Common Stock included in the Secondary Merger Consideration that when
multiplied by the Average Closing Price equals the Final Recoverable Amount. For
purposes of this Section 8.5(b), all fractional shares shall be rounded up to
the nearest whole share. The remaining shares of CytRx Common Stock included in
the Secondary Merger Consideration held in escrow, if any, shall be distributed
to the GGC Escrowees in accordance with the Escrow Agreement.
(c) If the GGC Escrowees have a greater Recoverable Amount on the
Recovery Date, CytRx shall issue a number of additional shares of CytRx Common
Stock to the GGC Escrowees equal to the quotient of (A) the Final Recoverable
Amount, divided by (B) the Average Closing Price (as defined below) of the CytRx
Common Stock (the "Additional Merger Consideration"). No fractional shares will
-------------------------------
be issued as Additional Merger Consideration. All such fractional shares shall
be rounded up to the nearest whole share. Each GGC Escrowee will receive a
percentage of the Additional Merger Consideration, which percentage shall be
calculated by dividing (i) the number of shares of CytRx Common Stock included
in the Initial Merger Consideration that were received by such GGC Escrowee by
(ii) the total number of shares of CytRx Common Stock included in the Initial
Merger Consideration that were received by all GGC Escrowees. No fractional
shares will be issued to the GGC Escrowees. Each fractional share less than
one-half of share shall be rounded down to the nearest whole share and each
fractional share equal to or greater than one-half of a share shall be rounded
up to the nearest whole share. In no event will the shares of CytRx Common Stock
issued to the GGC Escrowees after such rounding exceed the number of shares
calculated above as the Additional Merger Consideration. The "Average Closing
---------------
Price" means the average of the daily last sale prices for the shares of the
-----
CytRx Common Stock on the Nasdaq National Market (as reported by Bloomberg's
Financial Service) for the twenty consecutive trading days ended on the trading
day immediately prior to the date of this Agreement.
42
8.6 Exclusive Remedy. After the Effective Time, except for Claims
----------------
relating to actual fraud and except for equitable remedies, the remedies
provided in this Article VIII constitute the sole and exclusive remedies between
the parties for Damages or any other Claims arising under this Agreement,
including Claims based upon the inaccuracy, untruth, incompleteness or breach of
any representation or warranty contained in this Agreement or based upon the
failure to perform any covenant, agreement or undertaking contained in this
Agreement.
8.7 Representatives.
---------------
(a) CytRx and the CytRx Representative are entitled to rely upon all
actions taken and documents provided by the GGC Shareholder Representative as
the actions of GGC and the GGC Escrowees and neither CytRx nor the CytRx
Representative shall have any liability or obligation to GGC or the GGC
Escrowees other than as provided in this Article VIII.
(b) GGC and the GGC Shareholder Representative are entitled to rely
upon all actions taken and documents provided by the CytRx Representative as the
actions of CytRx and neither GGC nor the GGC Shareholder Representative shall
have any liability or obligation to CytRx other than as provided in this Article
VIII.
8.8 Dispute Resolution. Except for Claims (i) relating to temporary,
------------------
preliminary or emergency injunctive or other equitable relief pending resolution
of an arbitration proceeding hereunder and (ii) enforcing the provisions of this
Section 8.8 or an arbitration award, if the Parties are unable to resolve any
disputes hereunder, such dispute shall be submitted to final and binding
arbitration before JAMS, or its successor, pursuant to the United States
Arbitration Act, 9 U.S.C. Sec. 1 et seq. Either Party may commence the
arbitration process called for in this Agreement by filing a written demand for
arbitration with JAMS, with a copy to the other Parties. The arbitration will be
conducted in accordance with the provisions of JAMS' Streamlined Arbitration
Rules and Procedures in effect at the time of filing of the demand for
arbitration. The Parties will cooperate with JAMS and with one another in
selecting an arbitrator from JAMS' panel of neutrals, and in scheduling the
arbitration proceedings. The Parties covenant that they will participate in the
arbitration in good faith, and that they will share equally in its costs. The
provisions of this Section 8.8 may be enforced by any court of competent
jurisdiction, and the Party seeking enforcement shall be entitled to an award of
all Damages to be paid by the Party against whom enforcement is ordered.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or overnight courier to the Persons at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to CytRx or Merger Sub, to:
43
CytRx Corporation
154 Technology Parkway
Suite 200
Norcross, Georgia 30092
Attention: Chief Executive Officer
Facsimile: (770) 368-0622
With a copy to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Steven L. Pottle
Facsimile: (404) 881-7777
(b) if to the CytRx Representative, to:
Jack J. Luchese
3915 River Hollow Run
Duluth, Georgia 30092
With a copy to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Attention: Steven L. Pottle
Facsimile: (404) 881-7777
(c) if to GGC, to:
GGC
11726 San Vicente Boulevard
Suite 650
Los Angeles, California 90049
Attention: ____________
Facsimile: (310) 826-5529
With a copy to:
Wasserman, Comden, Casselman & Pearson LLP
11755 Wilshire Boulevard
Suite 1230
Los Angeles, California 90025
Attention: Jeffrey L. Davidson and/or Clifford Pearson
Facsimile: (310) 473-0158
44
(d) if to the GGC Shareholder Representative, to:
Steven A. Kriegsman
c/o Kriegsman Capital Group LLC
11726 San Vicente Blvd., Suite 650
Los Angeles, California 90049
Facsimile: (310) 826-5529
With a copy to:
Wasserman, Comden, Casselman & Pearson LLP
11755 Wilshire Boulevard
Suite 1230
Los Angeles, California 90025
Attention: Jeffrey L. Davidson and/or Clifford Pearson
Facsimile: (310) 473-0158
9.2 Certain Definitions.
-------------------
(a) For purposes of this Agreement:
"Affiliate" of a Person means: (i) any other Person directly,
or indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
"Assets" of a Person means all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person, and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.
"Blizzard" means Blizzard Genomics, Inc.
"Consent" means any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person pursuant to
any Contract, Law, Order, or Permit.
"Contract" means any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, license,
obligation, plan, practice, restriction, understanding, or undertaking of any
kind or character, or other document to which any Person is a party or that is
binding on any Person or its capital stock, Assets or business.
"CytRx Common Stock" means the $0.001 par value common stock
of CytRx.
45
"CytRx Entities" means, collectively, CytRx and all CytRx
Subsidiaries.
"CytRx Rights" means the Equity Rights issued pursuant to the
CytRx Rights Agreement.
"CytRx Rights Agreement" means that certain Shareholder
Protection Rights Agreement, dated April 16, 1997, between CytRx and American
Stock Transfer and Trust Company as Rights Agent.
"Damages" means all past, present and future demands, claims,
suits, actions or causes of action, assessments, losses, damages, liabilities,
fines, judgments, costs and expenses, including interest, penalties and
reasonable attorneys' and consultants' fees, disbursements and expenses.
"Default" means (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii)
any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right of any Person to exercise any
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or
modify or change the current terms of, or renegotiate, or to accelerate the
maturity or performance of, or to increase or impose any Liability under, any
Contract, Law, Order, or Permit, where, in any such event, such Default is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on GGC or CytRx, as applicable.
"Designated GGC Shareholders" means the following holders of
Shares, who in the aggregate own a majority of the voting interests of GGC:
Steven A. Kriegsman, Corporate Consulting International Group, Michael R.
Hayden, Clifford H. Pearson, Steve K. Wasserman, David B. Casselman, Leonard J.
Comden, Leonard Ruiz, Jr., Elliott J. Cody and Wasserman, Comden, Casselman &
Pearson LLP.
"DGCL" means the Delaware General Corporation Law.
"Employee Benefit Plan" means each pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
share purchase, severance pay, vacation, bonus, retention, change in control or
other incentive plan, medical, vision, dental or other health plan, any life
insurance plan, flexible spending account, cafeteria plan, vacation, holiday,
disability or any other employee benefit plan or fringe benefit plan, including
any "employee benefit plan," as that term is defined in Section 3(3) of ERISA
and any other plan, fund, policy, program, practice, custom understanding or
arrangement providing compensation or other benefits, whether or not such
Employee Benefit Plan is or is intended to be (i) covered or qualified under the
Code, ERISA or any other applicable Law, (ii) written or oral, (iii) funded or
unfunded, (iv) actual or contingent or (v) arrived at through collective
bargaining or otherwise.
"Environmental Laws" means all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata) including the
Comprehensive Environmental Response
46
Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"),
the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq.
("RCRA"), and other Laws relating to emissions, discharges, releases, or
threatened releases of any Hazardous Material, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of any Hazardous Material.
"Equity Rights" means all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings, warrants, or
other binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of its
capital stock or other Equity Rights.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any entity which together with a GGC
Entity would be treated as a single employer under Code Section 414.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GGC Entities" means, collectively, GGC, all GGC Subsidiaries
and Blizzard.
"GGC Escrowees" means the holders of Shares who surrender
Certificates for Shares in the Merger and receive Merger Consideration, but
shall not include any holder of Shares who exercised his/her appraisal rights
under the CCC and received consideration for his/her Dissenting Shares in
accordance with the CCC.
"GGC Shareholders Meeting" means the meeting of the holders of
the Shares that has been called by GGC to vote on whether to approve the Merger.
"Hazardous Material" means (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil,
asbestos-containing materials and any polychlorinated biphenyls.
"Intellectual Property" means copyrights, patents, trademarks,
service marks, service names, trade names, domain names, together with all
goodwill associated therewith, registrations and applications therefor,
technology rights and licenses, computer software (including any source or
object codes therefor or documentation relating thereto), trade secrets,
franchises, know-how, inventions, and other intellectual property rights.
"Knowledge" as used with respect to any Party means the actual
knowledge of such Party's chairman, president, chief financial officer,
treasurer or any senior, executive or other vice president or any other
executive officer of such party. In addition, with respect to GGC, "Knowledge"
shall also include the actual knowledge of Steven A. Kriegsman, Elliott J. Cody
and Leonard Ruiz, Jr.
47
"Law" means any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable to a
Person or its Assets, Liabilities, or business, including those promulgated,
interpreted or enforced by any Regulatory Authority.
"Liability" means any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of notes,
bills, checks, and drafts presented for collection or deposit in the ordinary
course of business) of any type, whether accrued, absolute or contingent,
liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" means any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, and (ii) Liens which do not materially impair the use of or title
to the Assets subject to such Lien.
"Litigation" means any action, arbitration, cause of action,
lawsuit, claim, complaint, criminal prosecution, governmental or other
examination or investigation, audit (other than regular audits of financial
statements by outside auditors), compliance review, inspection, hearing,
administrative or other proceeding relating to or affecting a Party, its
business, its records, its policies, its practices, its compliance with Law, its
actions, its Assets (including Contracts related to it), or the transactions
contemplated by this Agreement.
"Material" or "material" for purposes of this Agreement shall
be determined in light of the facts and circumstances of the matter in question;
provided that any specific monetary amount stated in this Agreement shall
determine materiality in that instance.
"Material Adverse Effect" means:
(i) with respect to CytRx, an event, change or occurrence
which, individually or together with any other event, change or occurrence, has
a material adverse impact on (1) the financial position, business, or results of
operations of CytRx and its Subsidiaries, taken as a whole, or (2) the ability
of CytRx to perform its obligations under this Agreement or to consummate the
Merger or the other transactions contemplated by this Agreement, provided that
"Material Adverse Effect" with respect to CytRx shall not be deemed to include
the impact of (A) changes in Laws of general applicability or interpretations
thereof by courts or governmental authorities, (B) changes in generally accepted
accounting principles, (C) actions and omissions of CytRx (or any of its
Subsidiaries) taken with the prior informed written Consent of GGC in
contemplation of the transactions contemplated hereby, (D) the direct effects of
compliance with this Agreement on the operating performance of CytRx, including
expenses incurred by CytRx in consummating the transactions contemplated by this
Agreement, (E) effects demonstrably shown to have been proximately caused by the
public announcement of, and the response or reaction of customers, vendors,
licensors, licensees, investors or employees of CytRx to, this Agreement or any
of the transactions contemplated by this Agreement, (F) failure of CytRx to meet
the revenue or earnings predictions of equity analysts (as reflected in the
First Call consensus estimate), or
48
any other published revenue or earnings predictions or expectations, for any
period ending on or after the date of this Agreement, (G) changes in the market
price or trading volume of CytRx Common Stock, or (H) delisting of CytRx Common
Stock from the Nasdaq National Market; and
(ii) with respect to GGC, an event, change or occurrence
which, individually or together with any other event, change or occurrence, has
a material adverse impact on (1) the financial position, business, or results of
operations of GGC and its Subsidiaries, taken as a whole, or (2) the ability of
GGC to perform its obligations under this Agreement or to consummate the Merger
or the other transactions contemplated by this Agreement, provided that
"Material Adverse Effect" with respect to GGC shall not be deemed to include the
impact of (A) changes in Laws of general applicability or interpretations
thereof by courts or governmental authorities, (B) actions and omissions of GGC
(or any of its Subsidiaries) taken with the prior informed written Consent of
CytRx in contemplation of the transactions contemplated hereby, or (C) the
direct effects of compliance with this Agreement on the operating performance of
GGC, including expenses incurred by GGC in consummating the transactions
contemplated by this Agreement.
"Operating Property" means any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in which such
Party or Subsidiary holds a security interest or other interest (including an
interest in a fiduciary capacity), and, where required by the context, includes
the owner or operator of such property, but only with respect to such property.
"Order" means any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"Party" means either any of GGC, Merger Sub or CytRx, and
"Parties" means GGC, Merger Sub and CytRx.
"Permit" means any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its securities,
Assets, or business.
"Person" means a natural person or any legal, commercial or
Regulatory Authority, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
limited liability partnership, trust, business association, group acting in
concert, or any person acting in a representative capacity
"Regulatory Authorities" means, collectively, the SEC, the
Nasdaq National Market, and all other federal, state, county, local or other
governmental or regulatory agencies, authorities (including taxing and
self-regulatory authorities), instrumentalities, commissions, boards or bodies
having jurisdiction over the Parties and their respective Subsidiaries.
"SEC" means the United States Securities and Exchange
Commission.
49
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Laws" means the Securities Act, the Exchange Act,
the Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Subsidiary" means all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly or
through an unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its parent
(provided, there shall not be included any such entity the equity securities of
which are owned or controlled in a fiduciary capacity), (ii) in the case of
partnerships, serves as a general partner, (iii) in the case of a limited
liability company, serves as a managing member, or (iv) otherwise has the
ability to elect a majority of the directors, trustees or managing members
thereof.
"Tax" or "Taxes" means any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
recording license, payroll, franchise, severance, documentary, stamp,
occupation, windfall profits, environmental, federal highway use, commercial
rent, customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added, alternative or add-on
minimum, estimated, or other tax or governmental fee of any kind whatsoever,
imposed or required to be withheld by the United States or any state, county,
local or foreign government or subdivision or agency thereof, including any
interest, penalties, and additions imposed thereon or with respect thereto.
"Tax Return" means any report, return, information return, or
other information required to be supplied to a Regulatory Authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
(b) Any accounting term that is used in the context of describing or
referring to an accounting concept and that is not specifically defined herein
shall be construed in accordance with GAAP.
9.3 Interpretation. The captions contained in this Agreement are for
--------------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement shall be deemed made in and
shall be construed in accordance with the laws of the state of Delaware without
giving effect to its provisions on the conflicts of Law.
9.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which shall be considered originals and together shall be
one and the same agreement.
9.5 Entire Agreement; No Third Party Beneficiaries. This Agreement
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(including the documents and the instruments referred to herein) constitutes the
entire agreement and, except for the Confidentiality Agreement, supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. Nothing in this Agreement expressed
or implied, is intended to confer upon any Person, other than the parties
50
hereto or their respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, other than (i) as provided in
Section 5.5 hereto, (ii) with respect to Eligible CytRx Directors regarding
Sections 5.12, 5.14, 9.12 and 9.13, (iii) with respect to the CytRx
Representative regarding Sections 5.14 and Article VIII and (iv) with respect to
the GGC Shareholder Representative regarding Sections 5.13 and Article VIII.
9.6 [INTENTIONALLY OMITTED]
9.7 Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
9.8 Publicity. Except as otherwise required by any applicable law or
---------
rules or regulations promulgated thereunder, so long as this Agreement is in
effect, neither GGC nor CytRx shall, or shall permit their respective
Subsidiaries, Affiliates, employees, directors, officers or agents to, issue or
cause the publication of any press release or other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other Party, which consent shall not be unreasonably withheld.
9.9 Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of Law or otherwise) without the prior written consent of the other
Party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
9.10 Adjustment. All dollar amounts and share numbers set forth herein,
-----------
including without limitation the Merger Consideration, shall be subject to
equitable adjustment in the event of any stock split, stock dividend, reverse
stock split or similar event between the date of this Agreement and the
Effective Time, to the extent appropriate.
9.11 Fees, Expenses and Other Payments. Except as otherwise provided in
----------------------------------
this Agreement, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, fees and disbursements of counsel,
financial advisors and accountants) shall be borne solely and entirely by the
Party which has incurred such costs and expenses.
9.12 Amendments. To the extent permitted by Law and subject to the last
-----------
sentence of this Section 9.12, this Agreement may be amended by a subsequent
writing signed by each Party hereto upon the approval of each Party, whether
before or after GGC Shareholder approval of the Merger or CytRx stockholder
approval of the issuance of the Merger Consideration has been obtained;
provided, that after any such approval by the GGC Shareholders, there shall be
made no amendment that reduces or modifies in any material respect the
consideration to be received by the GGC Shareholders without the further
approval of such shareholders; and further
51
provided, that after any such approval by the holders of CytRx Common Stock, the
provisions of this Agreement relating to the manner or basis in which shares of
GGC capital stock will be exchanged for shares of CytRx Common Stock shall not
be amended after the CytRx Stockholders' Meeting in a manner adverse to the
holders of CytRx Common Stock without any requisite approval of the holders of
the issued and outstanding shares of CytRx Common Stock entitled to vote
thereon. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the Parties hereto. Notwithstanding any of the
above, after the Effective Time, CytRx may not amend this Agreement (including
this provision) or take any actions inconsistent with this Agreement, unless a
majority of the Eligible CytRx Directors then serving on the CytRx board of
directors approves in advance of such amendment or action.
9.13 Extension; Waiver. At any time prior to the Effective Time, the
-----------------
Parties hereto, by action taken or authorized by their respective boards of
directors may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a Party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such Party. After the
Effective Time, any such waiver or extension must be approved by a majority of
the Eligible CytRx Directors then serving on the CytRx board of directors.
52
IN WITNESS WHEREOF, CytRx, Merger Sub and GGC have caused this
Agreement, to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
CYTRX CORPORATION GLOBAL GENOMICS CAPITAL, INC.
By: /s/ Jack J. Luchese By: /s/ Steven A. Kriegsman
------------------------ ---------------------------------
Name: Jack J. Luchese Name: Steven A. Kriegsman
---------------------- -------------------------------
Title: President & CEO Title: Chairman
--------------------- ------------------------------
GGC MERGER CORPORATION
By: /s/ Jack J. Luchese
------------------------
Name: Jack J. Luchese
----------------------
Title: President & CEO
---------------------
Dates Referenced Herein and Documents Incorporated by Reference
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