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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 24, 1997
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PHARMAKINETICS LABORATORIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Maryland 000-11580 52-1067519
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(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
302 West Fayette Street
Baltimore, Maryland 21201
(Address of Principal Executive Offices)
(Zip Code)
Registrant's Telephone Number, Including Area Code: (410) 385-4500
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On October 24, 1997, PharmaKinetics Laboratories, Inc. (the
"Registrant") entered into an agreement in principle (the "Agreement") with
Aster-Cephac ("Aster-Cephac"), CAI Capital Corporation and Leslie B. Daniels,
on behalf of a group of investors led by CAI Advisors & Co.,(collectively,
the "Aster Group" or the "Purchasers"), which agreement could result in a
change of control of the Registrant. The Agreement contemplates, among other
things, a transaction in which the Registrant would raise $5,000,000 in cash
through the sale in a private placement to the Aster Group of (i) shares of a
newly created class of convertible preferred stock (the "Preferred Stock")
and (ii) warrants (the "Warrants") to purchase shares of the Registrant's
common stock, $0.001 par value per share (the "Common Stock"). The
Purchasers would acquire beneficial ownership of approximately 41% of the
Registrant's voting securities without giving effect to the possible exercise
of warrants or approximately 54% of the Registrant's voting securities if all
warrants are exercised. Such percentage ownership is calculated on the basis
of shares outstanding at June 30, 1997. In addition, the Purchasers would
have the right to representation on the Registrant's Board of Directors.
The Agreement provides that the Registrant would sell to the Purchasers
a total of 833,300 shares of Preferred Stock for $4,937,500. The Preferred
Stock would be convertible at any time into shares of Common Stock at a
conversion ratio of one share of Preferred Stock for ten shares of Common
Stock. The conversion ratio would be subject to adjustment under certain
circumstances to prevent dilution. In the event of the liquidation of the
Registrant, the holders of shares of Preferred Stock who do not convert their
shares into Common Stock would be entitled to receive $5.925 per share, prior
to any distributions being made to the holders of any other class or series
of the Registrant's capital stock. This liquidation preference also would be
available to the holders of shares of Preferred Stock upon the merger,
consolidation, sale of all or substantially all of the assets of the
Registrant or a similar transaction. Each share of the Preferred Stock would
be entitled to one vote for each share of Common Stock into which the
Preferred Stock is convertible. The Preferred Stock will vote together with
the Common Stock.
The Agreement further provides that the Registrant would sell to the
Purchasers, for $62,500, Warrants to purchase 6,250,000 shares of Common
Stock at an exercise price of $1.20 per share. The Warrants would be
exercisable for a period of three years from the date of issue, would contain
customary anti-dilution provisions and would not be transferrable without the
consent of the Registrant. Notwithstanding the foregoing, the Warrants would
not be exercisable until the Registrant amends its charter to increase the
number of its authorized shares of Common Stock to permit the issuance of
shares upon exercise of the Warrants. Such an amendment requires stockholder
approval and the Registrant intends as soon as practicable to take the
actions necessary to seek such stockholder approval. In the event
stockholder approval is not obtained by March 31, 1998, or the Registrant
fails to close the transactions contemplated by the Agreement by December 31,
1997 (or such later date as may be agreed upon by the parties), the Agreement
provides that the Registrant will issue to the Purchasers Warrants to
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purchase 2,750,000 shares of Common Stock at an exercise price of $0.60 per
share.
The Agreement also provides that so long as the Purchasers beneficially
own at least 10% of the issued and outstanding shares of Common Stock, the
Purchasers would have the right to designate that number of members of the
Registrant's board of directors which is in proportion to the proportion that
the number of shares of Common Stock beneficially owned by the Purchasers
bears to the total number of issued and outstanding shares of Common Stock.
Notwithstanding the foregoing, the Purchasers would have the right to
designate one-half of the members of the Registrant's board of directors so
long as the Purchasers beneficially own at least 35% of the issued and
outstanding shares of Common Stock.
The Purchasers would receive up to two demand registration rights and
unlimited "piggyback" registration rights with respect to the shares of
Common Stock underlying the Preferred Stock and the shares of Common Stock
issuable upon exercise of the Warrants. These registration rights would
terminate at such time as such shares of Common Stock are freely
transferable, without volume limitations, pursuant to Rule 144 promulgated
under the Securities Act of 1933.
The closing of the transactions contemplated by the Agreement is subject
to the satisfaction of customary closing conditions, including satisfactory
due diligence review by the Aster Group, the execution of definitive
transaction documents and obtaining all necessary consents and approvals.
The closing also is subject to the Registrant and Aster-Cephac entering into
a technology sharing agreement pursuant to which each party will share with
the other certain methods for bioanalytical testing. The parties currently
anticipate closing on December 20, 1997, or as soon as practicable
thereafter.
CAI Advisors & Co. and its affiliates are investment funds with offices
in Montreal, New York, London and Paris, which have a history of making
investments in the contract research organization industry and the
pharmaceutical industry. Aster-Cephac, which is controlled by an affiliate
of CAI Advisors, is a leading contract research organization in France and
elsewhere in Europe. It specializes in providing clinical pharmacology
services to international pharmaceutical, biotechnology and medical device
firms. Leslie B. Daniels is a Principal of CAI Advisors and is a Director of
Aster-Cephac.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
99.1 Press Release dated October 28, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHARMAKINETICS LABORATORIES, INC.
Date: November 7, 1997 By: /s/ James K. Leslie
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James K. Leslie,
Chief Executive Officer and President
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EXHIBIT 99.1 PRESS RELEASE
Contact: James K. Leslie
President and
Chief Executive Officer
Taryn L. Kunkel
Vice President and
Chief Financial Officer
(410) 385-4500
FOR IMMEDIATE RELEASE
PHARMAKINETICS LABORATORIES, INC.
ANNOUNCES PROPOSED $5 MILLION CASH INVESTMENT
AND A TECHNOLOGY SHARING AGREEMENT
Baltimore, Maryland, October 28, 1997 -- PharmaKinetics
Laboratories, Inc. (OTCBB:PKLB) today announced that it has
signed a letter of intent to obtain a $5 million cash investment
from a group of investors which includes CAI Capital Corporation
and Aster.Cephac, a leading French contract research organization
headquartered in Paris.
PharmaKinetics intends to sell the investor group 833,300
Preferred Shares convertible into 8.333 million shares of Common
Stock plus warrants to purchase 6.25 million shares of Common
Stock, which will be exercisable for three years, at an exercise
price of $1.20 per share. PharmaKinetics also intends to reach a
definitive agreement with Aster.Cephac to share certain
bioanalytical testing methods and to develop and share software
for laboratory information management. Consummation of the
transaction is subject to certain conditions and completion of
the investor group's due diligence review.
CAI Capital Corporation is an investment fund with offices in
Montreal, New York, London and Paris which has a history of
successful investments in the CRO industry and the pharmaceutical
industry. Aster.Cephac, which is controlled by CAI, is a leading
CRO in France and Europe. It specializes in providing clinical
pharmacology services (Phase I and IIA studies) to international
pharmaceutical, biotechnology and medical device firms.
James K. Leslie, President and Chief Executive Officer of
PharmaKinetics, said, "I am truly delighted to be entering into
this relationship with the CAI group and, at the same time,
entering into a strategic partnership with Aster.Cephac, a firm
whose business parallels our own. PharmaKinetics has been
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seeking ways to permit the Company to strengthen its balance
sheet and to provide the funds which will allow us to pursue
aggressive growth in our selected market segments. I am looking
forward to working with this very experienced group of investors
and with our new colleagues at Aster.Cephac as we build a premier
CRO providing Phase I and bioanalytical laboratory capabilities
to pharmaceutical industry clients on both sides of the
Atlantic."
Dr. John Thebault, founder and Chief Executive Officer of
Aster.Cephac added "We have been looking to expand in North
America, not only to take advantage of the opportunity for
growth, but also to serve our customers better. We are excited
about this new alliance and look forward to expanding our
presence internationally."
Leslie B. Daniels, a partner of CAI and former Chairman of Zenith
Laboratories, a major generic drug manufacturer that was
purchased by IVAX Corporation in 1994 said "We believe the CRO
market provides an attractive investment opportunity with
significant growth potential. Given the reputation, experience
and knowledge of the individuals associated with PharmaKinetics,
Aster.Cephac and CAI, I am confident that all shareholders will
benefit from this transaction."
PharmaKinetics Laboratories, Inc. is a contract research
organization serving the pharmaceutical industry.
This press release contains forward-looking statements that
involve a number of risks and uncertainties. Actual results may
differ materially as a result of risks faced by the Company.
These risks include, but are not limited to, general economic
conditions, conditions affecting the pharmaceutical industry, and
other risks referred to in the Company's periodic reports filed
with the Securities and Exchange Commission. In addition, the
consummation of the transaction described in this press release
is subject to certain conditions. If all conditions are not
satisfied or waived, the transaction may not take place.
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