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): December 23, 1997
PHARMAKINETICS LABORATORIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
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Maryland 000-11580 52-1067519
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(State of Incorporation) (Commission File Number) (I.R.S. Employer Identification No.)
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302 West Fayette Street
Baltimore, Maryland 21201
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(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.
PharmaKinetics Laboratories, Inc. (the "Registrant") has received the
proceeds of the sale to investors including certain affiliates of Aster (bullet)
Cephac, S.A. ("Aster (bullet) Cephac") and CAI Advisors & Co. (collectively, the
"Purchasers") of (i) 833,300 shares of a newly created Class A Convertible
Preferred Stock (the "Preferred Stock") and (ii) warrants (the "Warrants") to
purchase 6,250,000 shares of the Registrant's common stock, $0.001 par value per
share (the "Common Stock"), and has entered into a Registration Rights Agreement
and Technology Sharing Agreement in connection therewith. The securities were
sold for an aggregate purchase price of $5,000,000 in a private placement
pursuant to a Preferred Share and Warrant Purchase Agreement dated as of
December 4, 1997 (the "Agreement"). The Purchasers beneficially own
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 were exercised. Such percentage ownership is
calculated on the basis of shares outstanding at November 30, 1997 and does not
give effect to the possible exercise of outstanding stock options.
The Agreement provides for the sale to the Purchasers of a total of
833,300 shares of Preferred Stock for $4,937,500. The Preferred Stock is
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 is
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 are 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 is 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 is
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 for the sale to the Purchasers, for
$62,500, of Warrants to purchase 6,250,000 shares of Common Stock at an exercise
price of $1.20 per share. The Warrants are exercisable for a period of three
years from the date of issue, contain customary anti-dilution provisions and are
not transferrable without the consent of the Registrant. Notwithstanding the
foregoing, the Warrants are not 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. In the event such
charter amendment is not effective by April 30, 1998, (or such later date as may
be agreed upon by the parties), the Agreement provides that the number of shares
of Common Stock issuable to the Purchasers upon exercise of the Warrants will be
reduced to 2,750,000 and the exercise price will be $0.60 per share.
So long as the Purchasers beneficially own at least 10% of the issued and
outstanding shares of Common Stock, the Purchasers 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 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.
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Pursuant to a Registration Rights Agreement, the Purchasers have up to two
demand registration rights and unlimited "piggyback" registration rights with
respect to the shares of Common Stock issuable upon the conversion of the
Preferred Stock and the shares of Common Stock issuable upon exercise of the
Warrants. These registration rights 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 Registrant, Aster-Cephac and Aster-Cephac's wholly-owned subsidiary,
Cephac, S.A., also have entered into a Technology Sharing Agreement pursuant to
which the parties will share certain methods for bioanalytical testing and
develop and implement cooperative marketing efforts.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
4.1 Articles Supplementary
4.2 Form of Warrant
4.3 Form of Stock Certificate for Class A Convertible
Preferred Stock
4.4 Registration Rights Agreement dated as of
December 23, 1997
99.1 Preferred Stock and Warrant Purchase Agreement dated
as of December 4, 1997
99.2 Technology Sharing Agreement dated as of December 23,
1997
99.3 Press Release dated December 23, 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: January 7, 1998 By: /s/ James K. Leslie
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James K. Leslie,
Chief Executive Officer and President
Exhibit 4.1
PHARMAKINETICS LABORATORIES, INC.
ARTICLES SUPPLEMENTARY
PharmaKinetics Laboratories, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article Sixth of the Charter of the Corporation, the Board of
Directors has duly classified 833,300 shares of the Preferred Stock of the
Corporation as a class designated "Class A Convertible Preferred Stock."
SECOND: A description of such Class A Convertible Preferred Stock,
including the preferences, conversion and other rights, voting powers,
restrictions, dividends, and qualifications, all as set by the Board of
Directors of the Corporation, is as follows:
1. DESIGNATION AND AMOUNT
A total of 833,300 shares of the Corporation's Preferred Stock shall be
designated the "Class A Convertible Preferred Stock."
2. VOTING RIGHTS
2.1 General. Each holder of Class A Convertible Preferred Stock shall be
entitled to vote on all matters submitted to a vote of the holders of the Common
Stock of the Corporation and, with respect to each such matter, shall be
entitled to that number of votes equal to the number of whole shares of Common
Stock into which such holder's shares of Class A Convertible Preferred Stock
could be converted, pursuant to the provisions of Section 5, on the record date
for the determination of stockholders entitled to vote on such matters, or if no
such record date is established, on the date such vote is taken. Except as
otherwise provided herein or otherwise required by law, the holders of shares of
Class A Convertible Preferred Stock and the holders of shares of Common Stock
shall vote together as a single class on all matters submitted to the
stockholders of the Corporation.
2.2 Director Election Rights.
(a) Definitions. For purposes of this Subsection 2.2:
"Affiliate", with respect to any person, shall mean any other person
that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with such person,
or any other person that is a partner of such person in any general or
limited partnership;
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"Conversion Shares" means the sum of (A) the number of whole shares of
Common Stock into which the outstanding shares of Class A Convertible Preferred
Stock are convertible pursuant to the provisions of Section 5, plus (B) the
number of shares of Common Stock owned of record by the Initial Holders,
regardless of how or when acquired.
"Initial Holders" means CAI Advisors & Co., Aster (bullet) Cephac S.A.,
and any Affiliate of CAI Advisors & Co. or Aster (bullet) Cephac S.A. or any
holder of Class A Convertible Preferred Stock or warrants to purchase Common
Stock that obtained such preferred stock or warrants by assignment from CAI
Advisors & Co. or Aster (bullet) Cephac S.A. pursuant to the terms of that
certain Preferred Stock and Warrant Purchase Agreement dated as of December 4,
1997 by and among the Corporation, CAI Advisors & Co., and Aster (bullet) Cephac
S.A. (the "Purchase Agreement");
"Total Shares Outstanding" means the sum of (A) the total number of shares
of Common Stock outstanding and (B) the number of whole shares of Common Stock
into which the outstanding shares of Class A Convertible Preferred Stock are
convertible pursuant to the provisions of Section 5.
(b) Director Election Rights of Holders. So long as the Conversion Shares
constitute at least ten percent (10%) of the Total Shares Outstanding, the
holders of Class A Convertible Preferred Stock, voting as a separate class,
shall have the right to elect that number of Directors to the Board of Directors
of the Corporation (the "Board") that bears the same proportion to the total
number of directors on the Board as the Conversion Shares bear to the Total
Shares Outstanding, rounded up to the next whole number; provided, however, that
so long as the Conversion Shares constitute at least thirty-five percent (35%)
of the Total Shares Outstanding, the holders of Class A Convertible Preferred
Stock shall have the right to elect at least fifty percent (50%) of the Board
members. For purposes of this Subsection 2.2(b), the number of Conversion Shares
shall be determined on the record date for the determination of stockholders
entitled to vote on the election of directors, or if no such record date is
established, on the date such vote is taken.
3. DIVIDENDS
If the Corporation declares a dividend on its Common Stock, each holder of
shares of Class A Convertible Preferred Stock shall be entitled to participate
in such dividend as if such holder was the holder of the number of whole shares
of Common Stock into which such holder's shares of Class A Convertible Preferred
Stock could be converted, pursuant to the provisions of Section 5, on the record
date for the determination of holders of Common Stock entitled to receive the
declared dividend.
4. LIQUIDATION, DISSOLUTION, OR WINDING-UP
4.1 Preference Right. Upon the liquidation, dissolution, or winding-up of
the Corporation, whether voluntary or involuntary, before any payment or
distribution shall be made to any holders of Common Stock or any other class or
series of capital stock of the Corporation designated to be junior to the Class
A Convertible Preferred Stock, the holders of Class A Convertible Preferred
Stock shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, whether from capital, surplus or
earnings (the "Proceeds"), an amount per share equal to the Preference Amount
(as defined in
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Subsection 4.2). If the Proceeds are insufficient to pay each holder of Class A
Convertible Preferred Stock an amount per share equal to the Preference Amount,
then each such holder shall share in the Proceeds in the same proportion that
the number of shares of Class A Convertible Preferred Stock registered in the
name of such holder bears to the total number of shares of Class A Convertible
Preferred Stock outstanding.
4.2 Preference Amount. The Preference Amount per share of Class A
Convertible Preferred Stock shall be Five and 92.5/100 Dollars ($5.925).
4.3 Merger, Consolidation, etc. Upon any merger, consolidation or other
corporate reorganization or combination to which the Corporation is a
non-surviving party (other than a merger into wholly-owned subsidiary of the
Corporation), or any sale of all or substantially all of the assets of the
Corporation, the holders of Class A Convertible Preferred Stock that have not
converted their shares to Common Stock pursuant to Section 5 shall be entitled
to receive the cash, securities or other property in the amount that they would
have received under Subsection 4.1 upon a liquidation.
5. CONVERSION.
5.1 Conversion Right and Conversion Rate. Any holder of Class A
Convertible Preferred Stock shall have the right, at the holder's option, to
convert at any time, or from time to time, any or all of the such holder's
shares of Class A Convertible Preferred Stock into fully-paid and nonassessable
shares of the Common Stock of the Corporation, subject to the terms and
conditions of this Section 5. The number of shares of Common Stock issuable for
each share of Class A Convertible Preferred Stock upon any such conversion
(herein called the "Conversion Rate") shall be 10 shares of Common Stock for
each share of Class A Convertible Preferred Stock; provided, however, that if
the application of the then current Conversion Rate to the aggregate number of
shares of Class A Convertible Preferred Stock surrendered by a single holder in
a single transaction would result in a fraction, then the next lower whole
number of shares of Common Stock shall be issuable upon such conversion. The
Conversion Rate shall be subject to adjustment from time to time in certain
instances as provided in Section 5.3. The Corporation shall make no payment or
adjustment on account of any dividends accrued on the Common Stock issuable upon
such conversion, or on account of the rounding down to the next lower whole
number of shares issuable upon any conversion.
5.2 Manner of Conversion. In order to convert shares of Class A
Convertible Preferred Stock into Common Stock, the record holder of such shares
shall surrender the certificate or certificates therefor, duly endorsed or
accompanied by duly executed stock powers, at the principal office of the
Corporation. Together with such certificates, the converting holder shall give a
written conversion notice to the Corporation of the election to convert a
specified number of shares of Class A Convertible Preferred Stock. The
converting holder shall state in its notice of conversion the name or names that
shall appear on the certificate or certificates for Common Stock issuable upon
such conversion. The Corporation shall, as soon as practicable thereafter, cause
to be issued and delivered to the converting holder, or to the converting
holder's designated transferees or nominees, if permitted by applicable law,
certificates for the number of full shares of Common Stock to which the
converting holder is entitled. If the converting holder has elected to convert
only a portion of the shares of Class A Convertible Preferred Stock represented
by the
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surrendered certificates, the Corporation shall issue, at its expense, a new
certificate representing the unconverted shares of Class A Convertible Preferred
Stock, registered in the name of the converting holder, or in the name or names
of the converting holder's designated transferees or nominees, if permitted by
applicable law. Shares of Class A Convertible Preferred Stock shall be deemed to
have been converted as of the close of business on the date when the surrender
of the certificates therefor and the giving of notice as required above has been
completed. The person or persons entitled to receive the Common Stock issuable
upon conversion shall be treated for all purposes as the record holder or
holders of such Common Stock at and after such time.
5.3. Adjustment to Conversion Rate.
(a) Generally. In order to prevent dilution of the conversion rights
granted under Section 5.1 hereof, the Conversion Rate in effect at any time
shall be subject to adjustment from time to time pursuant to this Section 5.3.
Any such adjustment shall be automatic and shall not require any further action
on the part of the Corporation (except for the preparation of an Adjustment
Certificate pursuant to Section 5.4) or of any registered owner of Class A
Convertible Preferred Stock.
(b) Sale or Issuance of Common Stock. If and whenever the Corporation
issues or sells, or in accordance with paragraph (c) of this Section 5.3 is
deemed to have issued or sold, any shares of its Common Stock for consideration
per share less than Fifty-Nine and 25/100 Cents ($0.5925) (hereafter, the
"Adjustment Trigger Price"), then immediately upon such issuance or sale (or
deemed issuance or sale) the Conversion Rate then in effect shall be increased
by multiplying such Conversion Rate by a fraction, the numerator of which shall
be the sum of (i) the number of shares of Common Stock outstanding immediately
prior to such issuance or sale (or deemed issuance or sale) plus (ii) the number
of shares of Common Stock so issued or sold (or deemed issued or sold), and the
denominator of which shall be the sum of (x) the number of shares of Common
Stock outstanding immediately prior to such issuance or sale (or deemed issuance
or sale) plus the number of shares of Common Stock that the aggregate
consideration received by the Corporation (or deemed received by the
Corporation) in connection with such issuance or sale (or deemed issuance or
sale), determined in accordance with Subsection 5.3(e) hereof, would purchase at
a price per share equal to the Adjustment Trigger Price. For purposes of this
Section 5.3, the term "Common Stock" shall include all securities of the
Corporation having characteristics substantially equivalent to those of the
Corporation's Common Stock.
(c) Deemed Sale or Issuance of Common Stock. For purposes of this Section
5.3, the following events shall be deemed an issuance or sale of Common Stock:
(i) Issuance of Rights, Warrants or Options. If the Corporation in
any manner grants any rights, warrants or options to subscribe for or to
purchase Common Stock (such rights, warrants or options being herein
called "Options") and the price per share for which Common Stock is
issuable upon the exercise of such Options is less than the Adjustment
Trigger Price, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options shall be deemed to have been
issued and sold by the Corporation upon the grant of such Options for such
price per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable" will be
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determined by dividing (x) the total amount, if any, received or
receivable by the Corporation as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such Options, by (B)
the total maximum number of shares of Common Stock issuable upon the
exercise of all such Options. No further adjustment of the Conversion Rate
shall be made when shares of Common Stock are actually issued upon the
exercise of such Options.
(ii) Issuance of Convertible Securities. If the Corporation in any
manner issues or sells any securities convertible into or exchangeable for
Common Stock (such convertible or exchangeable securities being herein
called "Convertible Securities") and the price per share for which Common
Stock is issuable upon such conversion or exchange is less than the
Adjustment Trigger Price, then the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of such Convertible
Securities shall be deemed to have been issued and sold by the Corporation
for such price per share upon the issuance or sale of such Convertible
Securities. For purposes of this paragraph, the "price per share for which
Common Stock is issuable" shall be determined by dividing (x) the total
amount received or receivable by the Corporation as consideration for the
issuance or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (y) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment of the
Conversion Rate shall be made when shares of Common Stock are actually
issued upon the conversion or exchange of such Convertible Securities.
(iii) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities without exercise
of the underlying option or right, provided such Options or Convertible
Securities are not reissued by the Corporation, the Conversion Rate then
in effect hereunder will be adjusted to the Conversion Rate that would
have been in effect at the time of such expiration or termination had such
Option or Convertible Security, to the extent outstanding immediately
prior to such expiration or termination, never been issued.
(iv) Integrated Transactions. In case any Option is issued in
connection with the issuance or sale of other securities of the
Corporation together comprising one integrated transaction in which no
specific consideration is allocated to such Option by the parties thereto,
the Option shall be deemed to have been issued for a consideration of One
Cent ($0.01).
(d) Certain Events Excepted. Notwithstanding the other provisions of this
Section 5.3, the following events shall not trigger an adjustment to the
Conversion Rate:
(i) the issuance or sale (or deemed issuance or sale) of Common Stock
reserved for issuance in connection with the Conversion of Class A
Convertible Preferred Stock;
(ii) the issuance or sale (or deemed issuance or sale) of Common
Stock reserved for issuance upon the exercise of warrants purchased under
the Purchase Agreement; and
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(iii) the grant of Options, or the issuance or sale (or deemed
issuance or sale) of Common Stock, to officers, employees, directors,
consultants or advisors of the Corporation pursuant to any stock option
plan or restricted stock purchase plan adopted by the Corporation.
(e) Calculation of Consideration Received. If any Common Stock, Option or
Convertible Security is issued or sold, or deemed to have been issued or sold,
for cash, the consideration received therefor shall be deemed to be the net
amount of cash received by the Corporation therefor. In case any Common Stock,
Option or Convertible Security is issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be the fair market value of such consideration. If any Common
Stock, Option or Convertible Security is issued in connection with any merger in
which the Corporation is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair market value of such portion of the net
assets and business of the non-surviving corporation as is attributable to such
Common Stock, Option or Convertible Security, as the case may be. The fair
market value of any consideration other than cash and securities shall be
determined by the Board of Directors of the Corporation.
(f) Dividend in Common Stock. If the Corporation pays a dividend in shares
of its Common Stock, the Conversion Rate shall be increased by multiplying the
Conversion Rate then in effect by a fraction, the numerator of which shall be
the sum of (A) the number of shares of Common Stock outstanding at the opening
of business on the date fixed for such dividend plus (B) the total number of
shares constituting such dividend, and the denominator of which shall be the
number of shares of Common Stock outstanding at the opening of business on the
date fixed for such dividend.
(g) Subdivision or Combination of Common Stock. If the Corporation at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) the outstanding shares of Common Stock into a greater number of
shares, the Conversion Rate and the Adjustment Trigger Price in effect
immediately prior to such subdivision will be, respectively, proportionately
increased and decreased. If the Corporation at any time combines (by reverse
stock split or otherwise) the outstanding shares of Common Stock into a smaller
number of shares, the Conversion Rate and the Adjustment Trigger Price in effect
immediately prior to such combination will be, respectively, proportionately
decreased and increased.
(h) Waiver of Automatic Adjustment. An automatic adjustment to the
Conversion Rate or the Adjustment Trigger Price pursuant to this Section 5.3 may
not be waived except by written notice to the Corporation executed by the
registered owners of 100 percent of then outstanding shares of Class A
Convertible Preferred Stock.
5.4 Adjustment Certificate. The Treasurer or Chief Financial Officer of
the Corporation shall compute all required adjustments to the Conversion Rate or
the Adjustment Trigger Price under this Section 5 and shall prepare a
certificate setting forth the adjusted Conversion Rate or Adjustment Trigger
Price and showing in detail the facts upon which the adjustment was based (the
"Adjustment Certificate"). The Treasurer or Chief Financial Officer shall
promptly file the Adjustment Certificate with the Transfer Agent, if any, for
the Class A Convertible Preferred Stock and shall promptly mail a copy of the
Adjustment Certificate to each record holder of Class A Convertible Preferred
Stock.
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5.5 Notice of Certain Events. In case:
(i) the Corporation shall declare a dividend payable in Common
Stock;
(ii) of any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation, consolidation or
merger of the Corporation with or into another corporation, or conveyance
of all or substantially all of the assets of the Corporation to another
corporation; or
(iii) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation;
then, and in any such case, the Corporation shall cause to be mailed to the
Transfer Agent, if any, for the Class A Convertible Preferred Stock and to the
record holders of the outstanding shares of Class A Convertible Preferred Stock,
at least twenty days prior to the record date for any such event, a notice
disclosing the event to occur and the record date for determination of the
stockholders entitled to participate in such event.
5.6 Common Stock Reserve. The Corporation shall at all times reserve and
keep available, out of its authorized but unissued Common Stock, solely for the
purpose of effecting the conversion of the shares of Class A Convertible
Preferred Stock, the full number of shares of Common Stock issuable upon the
conversion of all shares of Class A Convertible Preferred Stock from time to
time outstanding.
5.7 Taxes. The Corporation shall pay any and all issue taxes that may be
payable in respect of the issuance or delivery of shares of Common Stock upon
conversion of shares of Class A Convertible Preferred Stock.
6. RESTRICTIONS AND LIMITATIONS ON CORPORATE ACTION
The approval by vote of the holders of at least a majority of the
outstanding shares of Class A Convertible Preferred Stock, voting as a single
class, each share of Class A Convertible Preferred Stock to be entitled to one
vote in each instance, shall be required for any action by the Corporation or
any amendment to the corporate charter if such corporate action or amendment
would (i) change or limit any of the rights, preferences, or privileges of the
Class A Convertible Preferred Stock, or (ii) authorize, create, or issue, or
obligate the Corporation to authorize, create, or issue, additional shares of
Class A Convertible Preferred Stock or shares of any other class or series of
stock having rights, preferences, or privileges senior to or on a parity with
those of the Class A Convertible Preferred Stock.
7. NO IMPAIRMENT
The Corporation will not, by amendment of its corporate charter or through
any reorganization, transfer of capital stock or assets, consolidation, merger,
dissolution, issue or sale of securities, or through any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
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Class A Convertible Preferred Stock, but will at all times in good faith assist
in the carrying out of all such terms.
8. NO REISSUANCE OF CLASS A CONVERTIBLE PREFERRED STOCK;
TERMINATION
No share or shares of Class A Convertible Preferred Stock acquired by the
Corporation by reason of conversion or otherwise shall be reissued, and all such
shares shall be canceled, retired and eliminated from the shares which the
Corporation is authorized to issue. Upon the cancellation of all outstanding
shares of the Class A Convertible Preferred Stock, these charter provisions
regarding the Description and Designation of Class A Convertible Preferred Stock
shall terminate and have no further force and effect.
THIRD: Except as otherwise provided by express provisions of these
Articles Supplementary, nothing herein shall limit, by inference or otherwise,
the discretionary right of the Board of Directors to classify and reclassify and
issue any shares of Preferred Stock and to fix or alter all terms thereof to the
full extent provided in the Charter of the Corporation.
FOURTH: In addition to the above provisions with respect to the Class A
Convertible Preferred Stock, such Class A Convertible Preferred Stock shall be
subject to, and entitled to the benefits of, the provisions set forth in the
Corporation's Charter with respect to Preferred Stock generally.
FIFTH: The Board of Directors of the Corporation, at a regular meeting
duly called and held on November 24, 1997, duly authorized and adopted
resolutions classifying and designating the Class A Convertible Preferred Stock
as set forth in these Articles Supplementary.
IN WITNESS WHEREOF, PharmaKinetics Laboratories, Inc., has caused these
Articles of Supplementary to be signed and acknowledged in its name and on its
behalf by its President and corporate seal to be hereunto affixed and attested
by its Secretary on the 11th day of December, 1997.
ATTEST: PHARMAKINETICS LABORATORIES, INC.
/s/ Taryn L. Kunkel By: /s/ James K. Leslie (SEAL)
___________________ ___________________________________
Secretary President
The undersigned, President of PharmaKinetics Laboratories, Inc., who
executed on behalf of said Corporation the foregoing Articles Supplementary to
the Charter, of which this Certificate is made a part, hereby acknowledges, in
the name and on behalf of the Corporation, the foregoing Articles Supplementary
to be the corporate act of said Corporation, and further certifies that, to the
best of his knowledge, information and belief,
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the matters and facts set forth therein with respect to the authorization and
approval thereof are true under the penalties of perjury.
Dated December 11, 1997 /s/ James K. Leslie
__________________________
James K. Leslie, President
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Exhibit 4.2
FORM OF WARRANT
THE WARRANTS AND COMMON STOCK ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS.
THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT COVERING SUCH SECURITIES UNDER THE ACT AND ANY SUCH LAWS OR THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION THEREUNDER.
PHARMAKINETICS LABORATORIES, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance. For good and valuable consideration the receipt of which is
hereby acknowledged, PHARMAKINETICS LABORATORIES, INC., a Maryland corporation
(the "Company"), hereby grants to (the "Holder") the right to
purchase at any time and from time to time until 5:00 P.M. Eastern Standard Time
on December , 2000 (the "Expiration Date"), fully paid and
nonassessable shares of the Company's Common Stock, par value $0.001 per share
(the "Common Stock") at an exercise price of $1.20 per share (the "Exercise
Price"), subject to the limitation set forth in Section 2(b) and to adjustment
as set forth in Section 6.
2. Exercise. (a) The warrants represented by this Certificate (the
"Warrants") are exercisable, in whole or in part, by surrendering to the Company
(i) this Certificate, (ii) the attached form of notice of exercise of the
Warrants, and (iii) unless the Holder elects "cashless exercise" of the
Warrants, cash or a certified or official bank check in the amount of the
aggregate Exercise Price. In the event the Holder elects cashless exercise of
the Warrants, the Holder shall be entitled to receive a number of shares of
Common Stock equal in Market Value to the difference between the Market Value of
the shares of Common Stock issuable upon exercise of the Warrants and the
aggregate cash Exercise Price thereof. For purposes of this Section 2, "Market
Value" shall be an amount equal to the average of the closing sales price of a
share of Common Stock for the ten (10) days immediately preceding the Company's
receipt of the form of notice of exercise duly executed, via delivery or
facsimile, multiplied by the number of shares of Common Stock to be issued upon
exercise. Upon surrender of this Certificate and the notice of exercise form
duly executed, together with payment of the Exercise Price for the shares of
Common Stock purchased, the Company promptly shall send or cause to be sent to
the Holder a certificate or certificates representing the shares of Common Stock
purchased. Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company promptly shall send to the Holder a new Warrant
Certificate representing the unexercised portion of the Warrants.
(b) The Warrants shall not be exercisable until the Company shall have
filed with the State of Maryland Department of Assessments and Taxation (the
"Department") an amendment of the Company's charter increasing the number of
shares Common Stock that it is authorized to issue to at least 35 million
shares. If the Company has not filed such amendment with the Department by April
30,
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1998 (or such later date as may be unanimously agreed by the parties to that
certain Preferred Share and Warrant Purchase Agreement dated as of December 4,
1997 by and among the Company, CAI Advisors & Co. and Aster (bullet) Cephac S.A.
(the "Agreement")), the Warrants and the Holder's rights hereunder shall
terminate.
3. Reservation of Shares. The Company agrees that at all times during the
period of exercise of these Warrants there shall be reserved for issuance at
least that number of shares of Common Stock required to be issued upon exercise
of the Warrants (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
Certificate, and, in the case of loss, theft or destruction, receipt of
reasonably satisfactory indemnification, and, in the case of mutilation, upon
surrender and cancellation of this Certificate, the Company will execute and
deliver a new Warrant Certificate of like tenor and date and any such lost,
stolen, destroyed or mutilated Warrant Certificate shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant
Certificate and are not enforceable against the Company except to the extent set
forth herein.
6. Protection Against Dilution. The number of shares of Common Stock that
the Holder is entitled to purchase upon exercise of the Warrants and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Adjustment for Subdivision. If the Company at any time subdivides
(by any stock split, stock dividend, recapitalization or otherwise) the
outstanding shares of Common Stock into a greater number of shares, the number
of shares that the Holder is entitled to purchase upon exercise of the Warrants
shall be proportionately increased and the Exercise Price in effect immediately
prior to such subdivision shall be proportionately reduced, and if the Company
at any time combines (by reverse stock split or otherwise) the outstanding
shares of Common Stock into a smaller number of shares, the number of shares
that the Holder is entitled to purchase upon exercise of the Warrants shall be
proportionately decreased and the Exercise Price in effect immediately prior to
such combination and the number of shares of Common Stock to be received by the
Holder pursuant to the Warrants shall be proportionately increased.
(b) Adjustment for Reorganization. Any capital reorganization,
reclassification, consolidation, merger or sale of all or substantially all of
the Company's assets with or into another person or entity that is effected in
such a manner that holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Stock shall be referred to herein as an
"Organic Change." Prior to the consummation of any Organic Change, the Company
shall make appropriate lawful provisions to ensure that the Holder shall
thereafter have the right to acquire and receive upon exercise of the Warrants
during the period specified herein and upon payment of the Exercise Price then
in effect such shares of stock, securities or assets as the Holder would have
received in connection with such Organic Change if the Holder had exercised the
Warrants immediately prior to such Organic Change.
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7. Transfer Complies with Securities Act. The Warrants have not been
registered under the Securities Act of 1933, as amended, (the "Securities Act")
and have been issued to the Holder for investment and not with a view to the
distribution of either the Warrants or the Warrant Shares. Neither the Warrants
nor any of the Warrant Shares may be sold, transferred, pledged or hypothecated
in the absence of an effective registration statement under the Securities Act
relating to such security or an opinion of counsel reasonably satisfactory to
the Company that registration is not required under the Securities Act. Each
Certificate for the Warrants and the Warrant Shares shall contain a legend on
the face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section 7.
8. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission,
or, if mailed, two days after the date of deposit in the United States mails, as
follows:
If to the Company, to:
PharmaKinetics Laboratories, Inc.
302 West Fayette Street
Baltimore, MD 21201
Attention: James K. Leslie, President
Telephone: (410) 385-4500
Facsimile: (410) 385-1957
with a copy to:
Ober, Kaler, Grimes & Shriver
120 E. Baltimore Street
Baltimore, MD 21202
Attention: Melissa A. Warren, Esquire
Telephone: (410) 347-7684
Facsimile: (410) 547-0699
If to Holder, to:
[Aster (bullet) Cephac S.A.]
[c/o] CAI Advisors & Co.
767 Fifth Avenue, 5th Floor
New York, NY 10153
Attention: Leslie B. Daniels
Telephone: (212) 319-2525
Facsimile: (212) 319-0232
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with a copy to:
Dyer Ellis & Joseph PC
600 New Hampshire Ave., N.W.
Washington, DC 20037
Attn: Michael Joseph
Telephone: (202) 944-3000
Facsimile: (202) 944-3068
Any party may designate another address or person for receipt of notices
hereunder by notice given to the other parties in accordance with this Section
8.
9. Transfer. The Holder shall not transfer the Warrants without the prior
written consent of the Company except to parties to whom the rights to purchase
the Shares (as that term is defined in the Agreement) or the Warrants have been
assigned pursuant to Section 1.1 of the Agreement.
10. Governing Law. This Warrant Certificate shall be governed by and
construed in accordance with the laws of the state of Maryland.
11. Supplements and Amendments. This Warrant Certificate may be amended or
supplemented only by an instrument in writing signed by the parties hereto.
12. Counterparts. This Warrant Certificate may be executed in any number
of counterparts and each such counterpart shall for all purposes be deemed to be
an original, and all such counterparts shall together constitute one and the
same instrument.
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IN WITNESS WHEREOF, PharmaKinetics Laboratories, Inc. has caused this
Warrant certificate to be executed as of the day of December 1997.
PHARMAKINETICS LABORATORIES, INC.
By:
______________________________
James K. Leslie
President
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NOTICE OF EXERCISE OF WARRANTS
The undersigned hereby irrevocably elects to exercise the right,
represented by the attached Common Stock Purchase Warrant Certificate dated as
of (the "Certificate") to purchase shares of the Common
Stock, par value $0.001 per share, of PharmaKinetics Laboratories, Inc. and
either (i) tenders herewith payment in accordance with said Certificate or (ii)
elects "cashless exercise" in accordance with the Certificate, as indicated
below.
The undersigned hereby confirms and acknowledges that the undersigned will
not offer, sell or otherwise dispose of any shares of Common Stock received upon
exercise of the Warrants except pursuant to an effective registration statement
under the Securities Act of 1933, as amended, and applicable state securities
laws or pursuant to an exemption form registration in accordance with such Act
and laws.
Please issue in the name of the undersigned a new Common Stock Purchase
Warrant Certificate representing the unexercised portion of the Warrants
represent by the attached Certificate.
Please issue the stock certificate(s) in the names and denominations and
deliver them to the addresses set forth below:
Dated:______________________
By:_________________________
[ ] CASH: $ _______________________
[ ] CASHLESS EXERCISE
Exhibit 4.3
FRONT OF STOCK CERTIFICATE
Incorporated Under the Laws of the State of Maryland
Number Shares
- ------ ------
PharmaKinetics Laboratories, Inc.
833,300 Shares of Class A Convertible Preferred Stock Authorized
This certifies that ________________ is the registered holder of
__________________ shares of Class A Convertible Preferred Stock transferable
only on the books of the Corporation by the holder hereof in person or by
Attorney upon surrender of this Certificate properly endorsed.
In witness whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its corporate seal to be hereunto
affixed this ____ day of December 1997.
_____________________________ ____________________________
James K. Leslie, President Taryn L. Kunkel, Secretary
Shares without par value each.
<PAGE>
BACK OF STOCK CERTIFICATE
The securities represented by this certificate have been purchased pursuant to
an investment representation on the part of the holder hereof and shall not be
sold, pledged, hypothecated or otherwise transferred, by the holder except upon
the issuance to the Corporation of an opinion of counsel and/or the submission
to the Corporation of such other evidence as may be satisfactory to counsel for
the Corporation, to the effect that any such transfer shall not be in violation
of the Securities Act of 1933, as amended, and applicable state securities laws.
The Corporation will furnish to any stockholder on request and without charge a
full statement of the designations and any preferences, conversion or other
rights, voting powers, restrictions, limitation as to dividends, qualifications,
and terms and conditions of redemption of the stock of each class which the
corporation is authorized to issue; the differences in the relative rights and
preferences between the shares of any series of preferred or special class of
stock and the authority of the board of directors to set the relative rights and
preferences of subsequent series; and restrictions on transferability.
For value received, _________ hereby sell, assign, and transfer unto
_________________________ ________________ shares represented by the within
Certificate, and do hereby irrevocably constitute and appoint _____________
attorney to transfer the said shares on the books of the within named
corporation with full power of substitution in the premises.
Dated__________________
In the presence of _______________________ ____________________
Exhibit 4.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into on this 23rd
day of DECEMBER 1997, by and among PHARMAKINETICS LABORATORIES, INC. a
corporation organized under the laws of the state of Maryland (the "Company"),
CAI ADVISORS & CO., a partnership organized under the laws of Quebec, Canada
("CAI"), and ASTER (bullet) CEPHAC S.A., a company organized under the laws of
France ("Aster") (CAI, Aster and any successors and assigns permitted pursuant
to Section 7(c) each being referred to herein as a "Stockholder" and
collectively as the "Stockholders").
RECITALS
A. The Company, CAI and Aster are parties to a Preferred Stock and Warrant
Purchase Agreement dated December 4, 1997 (the "Purchase Agreement") pursuant to
which CAI and Aster or their assigns will purchase an aggregate of 833,300
shares of PharmaKinetics Class A Convertible Preferred Stock convertible into
8,333,000 shares of PharmaKinetics Common Stock, par value $.001 per share (the
"Shares") and warrants to purchase an aggregate of 6,250,000 shares of
PharmaKinetics Common Stock with an exercise price of $1.20 per share (the
"Warrants").
B. The execution of this Agreement is a condition precedent to the
obligations of CAI and Aster under the Purchase Agreement to consummate the
purchase of the Shares and the Warrants.
NOW, THEREFORE, in consideration of the Purchase Agreement and the
conditions and agreements hereinafter set forth, the parties agree as follows:
SECTION 1. DEMAND REGISTRATION RIGHTS
(a) Request for Registration. A Stockholder or Stockholders holding
Shares, Warrants, Contingent Warrants and/or Conversion Shares that in the
aggregate represent at least 50% of the Underlying Shares then held by the
Stockholders shall have the right on two occasions to request the Company, in
writing, to effect the registration of Conversion Shares with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Act of 1933,
as amended (the "Securities Act"); provided, however, that the Stockholders may
not demand registration on more than one occasion within the twelve-month period
following the Closing. Such written request shall specify the number of
Conversion Shares to be registered and the intended method of disposition of
such Conversion Shares. For purposes of this Section 1(a), "Underlying Shares"
shall include the shares of Common Stock underlying the Shares, the Warrants,
and the Contingent Warrants, as well as any Conversion Shares.
(b) Notice to Stockholders. Upon receipt of the written request referred
to in Section 1(a), the Company shall (i) within five days give notice of the
requested registration to all other Stockholders (including information
regarding the intended method of disposition of the Conversion Shares), who may
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then elect to participate in such registration by giving the Company notice of
such election within 20 days after notice of the requested registration is
received, and (ii) use its best efforts to effect the registration on Form S-3
(or other appropriate form) of the Conversion Shares for which the Stockholders
have requested registration.
(c) Limitation on Rights. Notwithstanding any other provisions of this
Section 1, the Company shall not be obligated to register Conversion Shares if
(i) all of the Conversion Shares for which the Stockholders have requested
registration are eligible for sale pursuant to Rule 144 under the Securities Act
without regard to the volume limitations set forth in Rule 144 and Company
causes its agents promptly to transfer shares eligible for sale under Rule 144,
or (ii) the aggregate proceeds of the offering of the Conversion Shares so
registered (after deduction of underwriting discounts and selling commissions)
will not exceed $150,000.
Notwithstanding any other provisions of this Section 1, the Stockholders
shall not demand registration of the Conversion Shares in the event that the
Board of Directors of the Company has approved the filing of a registration
statement covering securities issued for the Company's account in a firm
commitment underwritten public offering and has notified the Stockholders of
such proposed filing, beginning 60 days prior to the intended date of such
filing as set forth on such notice and ending upon the earlier of (i) such
intended filing date, if such registration statement has not then been filed, or
(ii) 60 days following the effective date of such registration statement;
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective; and provided,
further, that the Stockholders may include or could have included the Conversion
Shares in such registration statement pursuant to Section 2.
Notwithstanding any other provisions of this Section 1, if, at the time of
any request to register Conversion Shares pursuant to this Section 1, the
Company is engaged or intends to engage in any acquisition, disposition, merger,
business combination, corporate reorganization, or other transaction or
development that has not been publicly disclosed and which, in the good faith
determination of the Company's Board of Directors, would be adversely affected
by the requested registration, then the Board of Directors may direct that such
request be delayed until such transaction or development is publicly disclosed
or has been abandoned, but in any event for a period not to exceed 60 days. In
such event, the Stockholders shall be deemed to have withdrawn their request for
registration and such request shall not be counted as a demand registration to
which such Stockholders are entitled pursuant to this Section 1.
The Company shall not be entitled to invoke its rights set forth in this
Section 1(c) more than one time in any 12-month period.
(d) Underwriting. In the event the Stockholders requesting registration
intend to distribute the Conversion Shares by means of an underwriting, the
right of any Stockholders to be included in such registration shall be
conditioned upon such Stockholders' agreement to pay their pro rata share of the
underwriting discounts and commissions.
The Company and the Stockholders holding the Conversion Shares to be
registered shall enter into an underwriting agreement with an underwriter
selected by the Stockholders and approved by the Board of Directors of the
Company (which approval shall not be unreasonably withheld) requesting the
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<PAGE>
registration under Section 1(a). Such agreement shall contain the
representations, warranties, and covenants and other terms as are customarily
contained in agreements of that type and shall be reasonably satisfactory in
form and substance to Company and the Stockholders holding the Conversion Shares
being registered.
Notwithstanding any other provisions of this Section 1, if such
underwriter advises the Company in writing that marketing factors require a
reduction in the number of Conversion Shares to be underwritten, then the
Company shall so advise the Stockholders holding the Conversion Shares to be
registered, and the number of Conversion Shares that are included in the
registration statement shall be reduced in accordance with such requirements pro
rata among Stockholders in accordance with the number of Conversion Shares being
registered. The written notification from such underwriter to the Company shall
include a reasonable basis for such underwriter's advice.
The Company shall not include or permit the inclusion of any securities
other than the Conversion Shares in any registration statement filed pursuant to
the provisions of this Section 1 without the prior written consent of the
holders of the Conversion Shares being registered.
SECTION 2. PIGGYBACK REGISTRATION RIGHTS
(a) Request for Registration. If the Company proposes to register any of
its securities under the Securities Act on Form S-1, S-2 or S-3 (or any
equivalent general registration form then in effect not relating to employee
benefit plans or transactions covered by Rule 145 under the Securities Act), the
Company shall: (i) promptly give written notice of such registration to each
Stockholder, and (ii) include in such registration the Conversion Shares
specified in any written requests received from such Stockholders within 20 days
following delivery of such notice.
(b) Limitation on Rights. Notwithstanding any other provisions of this
Section 2, the Company shall have the right at any time after it has given
notice of the filing of a registration pursuant to this Section 2 to elect not
to proceed with such registration.
Notwithstanding any other provisions of this Section 2, the Company shall
not be obligated to register Conversion Shares if such Conversion Shares are
eligible for sale pursuant to Rule 144 under the Securities Act without regard
to the volume limitations set forth in Rule 144.
Notwithstanding any other provisions of this Section 2, if the Company's
managing underwriter advises the Company in writing that the number of
Conversion Shares requested to be included in the registration statement exceeds
the number of such Conversion Shares that can be sold in an orderly manner in
the offering or that the inclusion of such Conversion Shares would adversely
affect the offering, then the Company shall be required to include only that
number of Conversion Shares that would not exceed such number or have such
adverse effect. The written notification from such underwriter to the Company
shall include a reasonable basis for such underwriter's advice. In the event
that it is necessary to reduce the number of Conversion Shares to be included in
the registration statement, such reduction shall be made pro rata among
Stockholders in accordance with the number of Conversion Shares being
registered. Notwithstanding the other provisions of this Section 2, no reduction
in the number of Conversion Shares being registered shall be effected unless the
Conversion Shares represent the only securities held by any selling shareholders
covered by the
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registration statement. To the extent that following the date of this Agreement
the Company grants rights to any person or entity to participate in any
registration statement, the agreement setting forth such rights shall provide
that such rights shall in all respects be subordinate to the rights set forth in
this Agreement.
SECTION 3. INFORMATION PROVIDED BY STOCKHOLDERS
Any Stockholder whose Conversion Shares are included in any registration
statement hereunder shall furnish to the Company such information regarding such
Stockholder and the intended method of distribution of the Conversion Shares as
the Company may request in writing.
SECTION 4. EXPENSES OF REGISTRATION
All fees and expenses in connection with any registration hereunder,
including registration fees, printing expenses, blue sky fees and expenses and
the Company's legal and accounting fees and expenses shall be borne by the
Company. Underwriting discounts and selling commissions and legal counsel fees
shall be borne by the Stockholders pro rata in accordance with the number of
Conversion Shares being registered.
SECTION 5. REGISTRATION PROCEDURES
Whenever the Company shall be required to register any Conversion Shares
hereunder, the Company shall, as expeditiously as possible:
(a) Filings. Prepare and file with the Commission, and use its best
efforts to cause to be declared and remain continuously effective for a period
of time not exceeding 120 days, the registration statement and any amendments
and supplements thereto and the prospectus used in connection therewith as may
be necessary to keep the registration statement current and to comply with the
provisions of the Securities Act with respect to the disposition of Conversion
Shares covered by the registration statement. Notwithstanding the other
provisions of this Section 5(a), in the event the registration statement is
filed on Form S-3 (or a successor form that permits incorporation by reference),
the Company shall use its best efforts to cause such registration statement to
remain continuously effective for a period of time not exceeding two years;
provided, however, that the rules under the Securities Act permitting the
incorporation by reference of information contained in periodic reports filed
under the Securities Exchange Act of 1934, as amended, are not repealed or
amended in a manner so as to materially limit the amount of such information
that may be so incorporated by reference and the rules under the Securities Act
permitting offerings on a continued or delayed basis are not repealed.
(b) Copies of Documents. Furnish to each Stockholder participating in the
offering and each underwriter, if any, copies of the registration statement and
each amendment and supplement thereto and copies of the prospectus included
therein (including each summary, preliminary, final, amended or supplemented
prospectus) in conformity with the requirements of the Securities Act and copies
of such other documents as each such Stockholder and underwriters, if any, shall
reasonably require in order to facilitate the disposition of the Conversion
Shares, but only while the Company is required under the provisions hereof to
keep the registration statement current.
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(c) Blue Sky Compliance. Use its best efforts to register or qualify the
Conversion Shares covered by the registration statement under such other
securities or blue sky laws of such jurisdictions in the United States as the
Company or the managing underwriter, if any, determine is reasonably necessary
to enable each participating Stockholder to consummate the disposition of the
Conversion Shares owned by it in compliance with the laws of such jurisdiction;
provided, however, that the Company shall not be required to subject itself to
any suit (other than suits arising in connection with the sale of the Conversion
Shares) in any jurisdiction where it has not theretofore done so.
(d) Experts. Furnish to each underwriter participating in the offering (i)
an opinion of counsel to the Company dated the effective date of such
registration statement and the date of the closing under the underwriting
agreement, and (ii) a "cold comfort" letter dated the effective date of such
registration statement and the date of the closing under the underwriting
agreement signed by the independent public accountants who have issued a report
on the Company's financial statements included in such registration statement,
in each case covering the matters agreed upon by the parties to the underwriting
agreement.
(e) Material Information. Immediately (i) notify each Stockholder
participating in the offering and the managing underwriter, if any, of any event
that results in the prospectus included in the registration statement, as then
in effect, including any untrue statement of a material fact or omitting to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances then existing, not
misleading, and (ii) amend or supplant such prospectus as may be necessary so
that such prospectus shall not include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances then existing, not
misleading, and so that such prospectus will comply with applicable law.
(f) Other Compliance With Law. Otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission.
(g) Transfer Agent and Registrar. Provide a transfer agent and registrar
(which may be the same entity) for the Conversion Shares.
SECTION 6. INDEMNIFICATION
(a) The Company will indemnify each Stockholder whose Conversion Shares
are included in any registration hereunder and each of its officers, directors,
and partners and each person controlling such Stockholders within the meaning of
Section 15 of the Securities Act, and each underwriter, if any, and each of its
officers, directors and partners, and each person who controls any underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
claims, losses, damages and liabilities (and actions in respect thereof
commenced or threatened), arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement or prospectus, or any amendment or supplement thereto, incident to any
such registration, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company and will
reimburse each such Stockholder, each of its officers, directors,
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and partners, and each person controlling such Stockholder, each such
underwriter, each of its officers, directors, and partners and each person who
controls any such underwriter, for any legal expenses and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability, or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability, or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with information furnished to the Company by such Stockholder or
underwriter for use therein. The indemnity agreement contained in this Section
6(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent has not been unreasonably withheld).
(b) Each Stockholder whose Conversion Shares are included in such
registration will indemnify the Company, and each of its directors and officers,
each underwriter, if any, and each of its officers, directors, and partners, and
each person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (and actions in respect thereof commenced or threatened) arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement or prospectus, or any
amendment or supplement thereto, incident to any such registration, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading, and
will reimburse the Company and such underwriters, directors, officers, partners,
or control persons for any legal expenses for any other expenses reasonably
incurred in connection with investigation or defending any such claim, loss,
damage, liability, or action, in each case to the extent that such untrue
statement (or alleged untrue statement) or omission (or alleged omission)
resulted from the Company's reliance upon information furnished by such
Stockholder. The indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the each
Stockholder (which consent has not been unreasonably withheld).
(d) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after the Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom provided that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or any litigation resulting
therefrom shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6, to the extent such
failure is not prejudicial. No Indemnifying Party in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to the entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing as shall be reasonably required in connection with
the defense of such claim and litigation resulting therefrom.
(d) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the
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indemnifying party agrees to make the maximum contribution with respect to any
amounts for which it would otherwise be liable under this Section 6 to the
fullest extent permitted by law; provided, however, that contribution by any
seller of the Conversion Shares shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Conversion Shares.
SECTION 7. GENERAL
(a) Defined Terms. Capitalized terms not defined herein shall have
the meanings attributed to them in the Purchase Agreement.
(b) Notices. Any notice or other communication required or which may
be given hereunder shall be in writing and shall be deemed to have been duly
given on the date delivered if delivered personally or sent by facsimile to the
persons identified below, one business day following deposit with a reputable
overnight courier, or three business days after deposit in the U.S. mail if
mailed by certified or registered mail, return receipt requested, addressed as
follows:
If to the Company, to:
PharmaKinetics Laboratories, Inc.
302 West Fayette Street
Baltimore, MD 21201
Attention: James K. Leslie, President
Telephone: (410) 385-4500
Facsimile: (410) 385-1957
with a copy to:
Ober, Kaler, Grimes & Shriver
120 E. Baltimore Street
Baltimore, MD 21202
Attention: Melissa A. Warren, Esquire
Telephone: (410) 347-7684
Facsimile: (410) 547-0699
If either Stockholder, to:
CAI Advisors & Co.
767 Fifth Avenue, 5th Floor
New York, NY 10153
Attention: Leslie B. Daniels
Telephone: (212) 319-2525
Facsimile: (212) 319-0232
7
<PAGE>
with a copy to:
Dyer Ellis & Joseph PC
600 New Hampshire Ave., N.W.
Washington, DC 20037
Attn: Michael Joseph
Telephone: (202) 944-3000
Facsimile: (202) 944-3068
Any party may change its address to which notices or other communications are to
be sent by giving written notice of any such change in the manner provided
herein for giving notice.
(c) Assignment. The Stockholders' rights to have the Company register
the Conversion Shares pursuant to this Agreement automatically shall be assigned
to any party to whom the rights to purchase the Shares and the Warrants have
been assigned pursuant to Section 1.1 of the Purchase Agreement if: (a) the
Company is, within a reasonable time after such transfer, furnished with written
notice of (i) the name and address of such transferee and (ii) a description of
the securities transferred.
(d) Lockup Agreement. If requested by the Company and its underwriter
in connection with the registration of Conversion Shares in a firmly
underwritten public offering, each holder of Conversion Shares being registered
shall agree not to sell, transfer or otherwise dispose of any Conversion Shares
or other securities of the Company held by such holder (other than those being
registered) for a period following the effective date of the registration
statement identified by the Company and such underwriter not to exceed 60 days.
(e) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties hereto relating to the subject matter
hereof and supersedes any prior letters of intent, agreements, and
understandings relating to the subject matter hereof.
(f) Modification or Waiver. This Agreement may be amended, modified,
or superseded at any time by a written instrument executed by the Company and
each Stockholder, and any of the terms, covenants, representations, warranties,
or conditions hereof may be waived by the party intended to be benefited hereby.
No waiver of any nature, in any one or more instances, shall be deemed to be or
construed as a further or continued waiver of any condition or any breach of any
other term, representation, or warranty in this Agreement.
(g) Counterparts. Separate copies of this Agreement may be signed by
the parties hereto, with the same effect as though all of the parties had signed
one copy of this Agreement.
(h) Severability. If any provision of this Agreement shall be held
invalid under any applicable law, such invalidity shall not affect any other
provision of this Agreement that can be given effect without the invalid
provision and, to this end, the provisions hereof are severable.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the state of Maryland.
8
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IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
as of the date first above written.
PHARMAKINETICS LABORATORIES, INC.
By: /s/ James K. Leslie
______________________________
James K. Leslie
President
CAI ADVISORS & CO.
By: /s/ Leslie B. Daniels
______________________________
Leslie B. Daniels
Partner
ASTER (bullet) CEPHAC S.A.
By: /s/ John J. Thebeault
______________________________
John J. Thebeault
Chief Executive and President
9
Exhibit 99.1
PREFERRED SHARE AND WARRANT PURCHASE AGREEMENT
BY AND AMONG
PHARMAKINETICS LABORATORIES, INC.,
CAI ADVISORS & CO.
AND
ASTER (bullet) CEPHAC S.A.
DECEMBER 4, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 1 PURCHASE AND SALE OF SHARES AND WARRANTS.............................1
1.1 Purchase and Sale of Shares and Warrants.............................1
1.2 Purchase Price.......................................................2
1.3 Delivery of Certificates and Payment.................................2
1.4 The Closing..........................................................2
Section 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................2
2.1 Organization and Standing of the Company.............................2
2.2 Corporate Action.....................................................2
2.3 Compliance with Certain Instruments..................................3
2.4 Validity of Shares and Conversion Shares.............................3
2.5 Capitalization; Status of Capital Stock..............................3
2.6 Governmental Approvals...............................................4
2.7 Securities Laws......................................................4
2.8 Financial Information................................................4
2.9 Litigation...........................................................4
2.10 Compliance with Law..................................................4
2.11 Good Laboratory and Clinical Practices...............................5
2.12 Licenses and Permits.................................................5
2.13 Certain Agreements of Officers and Employees.........................5
2.14 Transactions with Affiliates.........................................6
2.15 Assumptions or Guaranties of Indebtedness............................6
2.16 Investments..........................................................6
2.17 Title to Assets......................................................6
2.18 Material Contracts...................................................7
2.19 ERISA................................................................8
2.20 Insurance............................................................8
2.21 Registration Rights..................................................8
2.22 Absence of Certain Developments......................................8
2.23 Books and Records....................................................9
2.24 Disclosure...........................................................9
2.25 Brokers or Finders..................................................10
Section 3 REPRESENTATIONS AND WARRANTIES OF PURCHASERS........................10
3.1 Investment Representations..........................................10
3.2 Access to Information...............................................10
3.3 Sophistication and Knowledge........................................10
3.4 Power...............................................................10
Section 4 COVENANTS...........................................................11
4.1 Use of Proceeds.....................................................11
4.2 Best Efforts Cooperation............................................11
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.3 General Covenants...................................................11
4.4 Public Announcements................................................12
4.5 Confidentiality.....................................................12
4.6. Charter Amendments..................................................12
4.7 Sales and Use Taxes.................................................12
4.8 Validity of Warrants................................................12
Section 5 CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS TO
PURCHASE THE SHARES AND THE WARRANTS................................13
5.1 Representations and Warranties......................................13
5.2 Technology Sharing Agreement........................................13
5.3 Registration Rights Agreement.......................................13
5.4 Articles Supplementary..............................................13
5.5 Documentation at Closing............................................13
5.6 No Actions or Proceedings...........................................13
5.7 Business Combination Act Opt-out....................................14
Section 6 CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS TO SELL THE
SHARES AND THE WARRANTS.............................................14
6.1 Representations and Warranties......................................14
6.2 Technology Sharing Agreement........................................14
6.3 Documentation at Closing............................................14
6.4 No Actions or Proceedings...........................................14
Section 7 CONTINGENT WARRANTS.................................................14
7.1 Contingent Warrants.................................................14
7.2 Opinion of Counsel..................................................15
7.3 Cancellation of Warrants............................................15
Section 8 MISCELLANEOUS.......................................................15
8.1 Survival of Representations and Warranties..........................15
8.2 Expenses............................................................15
8.3 Notices.............................................................15
8.4 Modification or Waiver..............................................16
8.5 Binding Effect and Assignment.......................................17
8.6 Governing Law.......................................................17
8.7 Section Headings....................................................17
8.8 Further Assurances..................................................17
8.9 Entire Agreement....................................................17
8.10 No Third Party Beneficiaries........................................17
8.11 Counterparts........................................................17
8.12 Severability........................................................17
8.13 Termination.........................................................18
</TABLE>
<PAGE>
SCHEDULES
Schedule 1.1A Purchasers
Schedule 1.1B Description and Designation of Class A Convertible Preferred
Stock
Schedule 1.1C Form of Warrants
Schedule 2.3 Compliance with Certain Instruments
Schedule 2.5 Agreements Concerning Capital Stock
Schedule 2.9 Litigation
Schedule 2.10 Hazardous Materials
Schedule 2.12 Permits
Schedule 2.13 Agreements with Officers and Employees
Schedule 2.14 Transactions with Affiliates
Schedule 2.16 Investments
Schedule 2.17 Title to Assets
Schedule 2.18 Material Contracts
Schedule 2.19 ERISA
Schedule 2.22 Certain Developments
Schedule 5.2 Form of Technology Sharing Agreement
Schedule 5.3 Form of Registration Rights Agreement
Schedule 5.5(a) Form of Opinion of Ober, Kaler, Grimes & Shriver
<PAGE>
PREFERRED SHARE AND WARRANT PURCHASE AGREEMENT
THIS PREFERRED SHARE AND WARRANT PURCHASE AGREEMENT is made and entered
into on this 4th day of DECEMBER 1997, by and among PHARMAKINETICS LABORATORIES,
INC. a corporation organized under the laws of the state of Maryland (the
"Company"), CAI ADVISORS & CO., a partnership organized under the laws of
Quebec, Canada ("CAI"), and ASTER (bullet) CEPHAC S.A., a company organized
under the laws of France ("Aster") (CAI and Aster, each referred to herein as a
"Purchaser" and together as the "Purchasers").
RECITALS
A. The Company desires to issue and sell to the Purchasers, and the
Purchasers desire to purchase from the Company, an aggregate of 833,300 shares
(the "Shares") of the Company's authorized but unissued shares of Class A
Convertible Preferred Stock (the "Preferred Stock"), initially convertible into
8,333,000 shares of the Company's Common Stock, par value $.001 per share (the
"Common Stock").
B. The Company desires to issue and sell to the Purchasers, and the
Purchasers desire to purchase from the Company, warrants to purchase an
aggregate of 6,250,000 shares of the Company's Common Stock at an exercise price
of $1.20 per share and with a term of three years (the "Warrants").
NOW, THEREFORE, in consideration of the representations, warranties,
conditions, and agreements hereinafter set forth, the parties hereto agree as
follows:
SECTION 1 PURCHASE AND SALE OF SHARES AND WARRANTS.
1.1 Purchase and Sale of Shares and Warrants. The Company agrees to
issue and sell to the Purchasers at the Closing (as hereinafter defined) and the
Purchasers agree to purchase, severally but not jointly, the Shares and the
Warrants, in the quantities set forth opposite each Purchaser's name in Schedule
1.1A. The terms of the Shares and the form of the Warrants are set forth in
Schedules 1.1B and 1.1C, respectively. The Company shall not be obligated to
issue and sell any of the Shares and the Warrants unless all of the Shares and
Warrants are purchased.
The Purchasers may assign their rights to purchase all or a portion of
the Shares and Warrants to one or more Affiliates (as defined below) or
unaffiliated third parties; provided, however, that any such assignees shall be
accredited investors as defined in Regulation D under the Securities Act of
1933, as amended (the "Securities Act"), and shall make representations to the
Company identical to the representations made by the Purchasers in Section 3;
and provided, further, that the Purchasers must obtain the written consent of
the Company prior to assigning their rights to any unaffiliated third parties,
which consent shall not be unreasonably withheld. Prior to any assignment
hereunder, the Purchasers shall identify and provide such information regarding
each assignee as the Company may reasonably request for purposes of confirming
that the assignee is an accredited investor and of complying with applicable
federal and state securities laws. For purposes of this Section 1.1,
"Affiliates" means any person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with
either Purchaser, or any person that is a partner of either
<PAGE>
Purchaser in any general or limited partnership.
1.2 Purchase Price. The aggregate purchase price for the Shares and the
Warrants shall be $5,000,000 (the "Aggregate Purchase Price") payable in cash,
of which $4,937,500 shall be allocated as the purchase price for the Shares and
$62,500 shall be allocated as the purchase price for the Warrants.
1.3 Delivery of Certificates and Payment. At the Closing (as
hereinafter defined), the Company shall issue and deliver to the Purchasers
certificates representing the Shares and Warrants, and the Purchasers shall pay
the Aggregate Purchase Price by means of a wire transfer of funds to the account
of the Company.
1.4 The Closing. The closing of the purchase and sale of the Shares and
the Warrants shall take place by telephone conference call on December 19, 1997,
or by such other means or such other date as the Purchasers and the Company may
unanimously agree (the "Closing").
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser as of the
Closing as follows:
2.1 Organization and Standing of the Company. The Company is a duly
organized and validly existing corporation in good standing under the laws of
the State of Maryland and is duly qualified and in good standing as a foreign
corporation authorized to do business in all jurisdictions wherein the character
of the property owned or leased or the nature of the activities conducted by it
makes such qualification necessary, except where the failure to be so qualified
would not have a material adverse effect on the business, operations or
financial condition of the Company. The Company has no subsidiaries with active
business operations.
2.2 Corporate Action. This Agreement, the Technology Sharing Agreement
set forth as Schedule 5.2, and the Registration Rights Agreement set forth as
Schedule 5.3 (the Technology Sharing Agreement and the Registration Rights
Agreement, along with the Warrants, being collectively herein referred to as the
"Ancillary Agreements"), and all of the transactions contemplated hereby and
thereby have been duly authorized by all required corporate action, and as of
the Closing will be duly executed and delivered, and each will constitute the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms. As of the date hereof, the
Company has not obtained the stockholder approval required to increase the
number of shares of Common Stock that the Company is authorized to issue in
order to reserve a sufficient number of shares of Common Stock to cover the
shares of Common Stock issuable upon exercise of the Warrants.
2.3 Compliance with Certain Instruments. Except as listed on Schedule
2.3, the Company is in compliance in all material respects with the terms and
provisions of its Charter and Bylaws, each as amended and/or restated to date,
and all mortgages, indentures, leases, agreements, judgments, decrees, orders
and other instruments by which it is bound or to which it or any of its
properties or assets are subject. Neither the execution, delivery and
performance of this Agreement or the Ancillary Agreements nor the consummation
of any transaction contemplated hereby or thereby
2
<PAGE>
has constituted, or with the passage of time or giving of notice will
constitute, a material default or violation of or conflict with any term or
provision of any of the foregoing documents, instruments, laws, statutes, rules
or regulations.
2.4 Validity of Shares and Conversion Shares. The Shares and the Common
Stock issuable upon conversion of the Shares and exercise of the Warrants and
the Contingent Warrants (as defined in Section 7.1) (such shares of Common
Stock, collectively, the "Conversion Shares") when issued, sold and delivered in
accordance with the terms of this Agreement will be validly issued, fully paid
and nonassessable with no personal liability attaching to the ownership thereof
and will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company, except as set forth in
applicable state and federal securities laws. The Company has reserved for
issuance a number of shares sufficient to enable the Purchasers to convert the
Shares and to exercise the Contingent Warrants.
2.5 Capitalization; Status of Capital Stock. As of November 30, 1997,
the authorized capital stock of the Company consisted of (i) 25,000,000 shares
of Common Stock, par value $.001 per share, and (ii) 1,500,000 shares of
Preferred Stock, without par value, of which 12,195,819 shares of Common Stock
were issued and outstanding and 1,670,425 shares reserved for issuance (not
including shares reserved for issuance in connection with the transactions
contemplated hereby) and no shares of Preferred Stock were issued or
outstanding. All the outstanding shares of capital stock of the Company have
been duly authorized, and are validly issued, fully paid and non-assessable.
With the exception of the Shares, the Warrants, the Contingent
Warrants, options to purchase 1,385,825 shares of Common Stock granted to
directors, officers and other employees of the Company, options to purchase
284,600 shares of Common Stock granted to the former Chief Executive Officer of
the Company and certain consultants of the Company, and options to purchase
1,591,200 shares of Common Stock authorized but not granted under the Company's
stock option plans, no options, warrants, subscriptions or rights of any nature
to acquire from the Company, or commitments of the Company to issue, or
securities convertible into, shares of capital stock or other securities are
authorized, issued or outstanding. None of the Company's outstanding securities
or authorized capital stock are subject to any rights of redemption, repurchase,
rights of first refusal, preemptive rights or other similar rights, whether
contractual, statutory or otherwise, for the benefit of the Company, any
stockholder, or any other person. To the Company's knowledge, and except as
contemplated by this Agreement and as set forth in Schedule 2.5, there are no
agreements, understandings, trusts or collaborative arrangements or
understandings concerning the voting or transfer of the capital stock of the
Company. The offer and sale of all capital stock and other securities of the
Company issued prior to the Closing complied with or were exempt from all
applicable federal and state securities laws and no stockholder has a right of
rescission or damages with respect thereto.
2.6 Governmental Approvals. Except for the filing of (i) the Articles
Supplementary (as defined in Section 5.4), (ii) a charter amendment providing
for an increase in the number of authorized shares of Common Stock, (iii) the
approval of the Maryland Industrial Development Financing Authority, which
approval has been granted, and (iv) any notice that may be required under
applicable state and/or federal securities laws (which, if required, shall be
filed on or before the Closing), no authorization, consent, approval, license,
qualification, exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or
3
<PAGE>
foreign, is or will be necessary in connection with (i) the execution and
delivery by the Company of this Agreement or the Ancillary Agreements, (ii) the
offer, issuance, sale, execution or delivery of the Shares, the Warrants and the
Contingent Warrants, (iii) the issuance, sale, execution or delivery of the
Conversion Shares, or (iv) the performance by the Company of its obligations
under this Agreement or the Ancillary Agreements.
2.7 Securities Laws. The Company has complied with all applicable
federal and state securities laws, including the Securities Act, in connection
with the offer, issuance and sale of the Shares, the Warrants, and the
Contingent Warrants.
2.8 Financial Information. The financial statements of the Company
included in the Company's 10-K for the year ended June 30, 1997 and 10-Q for the
three months ended September 30, 1997 (the "Financial Statements") present
fairly the financial position and results of operations of the Company as of the
dates and for the periods indicated therein and have been prepared in accordance
with generally accepted accounting principles consistently applied. Except as
set forth or reserved against in the Financial Statements, the Company did not
have as of the date of the Financial Statements any material liability or
obligation of any nature, whether accrued, absolute, contingent, or otherwise
and whether due or to become due.
2.9 Litigation. Except as disclosed in Schedule 2.9, neither the
Company nor any director or officer of the Company is subject to any order,
writ, injunction or decree, of any court, commission, board or other government
agency. Except as set forth in Schedule 2.9, there are no actions, suits,
investigations or proceedings pending or threatened (nor does the Company have
any knowledge of any basis therefor) that could reasonably be expected to
result, either in any case or in the aggregate, in a material adverse change in
the business, operations, affairs or financial condition of the Company or in
any of its properties or assets, or which could reasonably be expected to call
into question the validity of this Agreement, the Ancillary Agreements, or any
action contemplated hereby or thereby.
2.10 Compliance with Law. The Company is in compliance in all material
respects with all applicable federal, state, local and foreign laws, statutes,
rules and regulations, orders, judgments, injunctions, decrees, and similar
instruments, including those relating to the environment or occupational safety
and health. The Company has no knowledge of any pending legislation, rules or
regulations that would be likely to have a material adverse effect on the
Company's business or results of operations. The Company has not caused,
suffered or permitted any hazardous materials, oil or other petroleum products
to be generated, stored, handled, disposed or, released, spilled or discharged
at, on, from or onto the Company's premises, except as disclosed on Schedule
2.10.
2.11 Good Laboratory and Clinical Practices. The Company is in
compliance in all material respects with all "good laboratory practices" and
with all "good clinical practices," to the extent such practices are applicable
to the Company's operations, in accordance with the provisions of Title 21 of
the Code of Federal Regulations, and the Company is not the object of any notice
of insufficiency or of deficiency or of any notice of material corrective action
to be taken, from any applicable federal or state governmental agency or
regulatory body, including the U.S. Food and Drug Administration.
2.12 Licenses and Permits. The Company has all local, state, federal
and foreign licenses, permits, registrations, certificates, accreditations and
approvals (collectively, the "Permits") necessary
4
<PAGE>
for the Company to operate and conduct its business as presently conducted, and
there do not exist any waivers or exemptions relating thereto. The Company is in
compliance in all material respects with, and there exist no grounds for
revocation, suspension or limitation of any of, the Permits. No notices have
been received by the Company with respect to any threatened, pending, or
possible revocation, termination, suspension or limitation of the Permits. To
the Company's knowledge, each employee of the Company has all Permits required
to perform such employee's designated functions and duties for the Company in
connection with conducting the business of the Company as presently conducted,
and, to the Company's knowledge, there exist no waivers or exemptions relating
thereto. To the Company's knowledge, there is no default under, nor does there
exist any grounds for revocation, suspension or limitation of, any such Permits.
The Permits are listed on Schedule 2.12.
2.13 Certain Agreements of Officers and Employees.
Neither the Company nor, to the Company's knowledge, any officer,
employee, agent, representative or consultant of the Company is in violation of
any term of any employment or consulting contract, confidential or proprietary
information agreement, noncompetition agreement, nonsolicitation agreement, or
any similar contract or agreement or any restrictive covenant relating to the
right of any such person to be employed or engaged by the Company, whether the
Company is party to such agreement or not. All of such agreements, and all
severance and similar agreements, to which the Company is a party are listed on
Schedule 2.13 and copies have been provided or made available to the Purchasers
or their representatives.
No officer, consultant or employee of the Company whose termination,
either individually or in the aggregate, could have a material adverse effect on
the Company, has been terminated or has terminated his or her employment with
the Company since January 1, 1997, and no such officer, consultant or employee
of the Company has, to the Company's knowledge, the intention of terminating
such person's employment or engagement with the Company.
Schedule 2.13 sets forth each officer, employee, consultant and
contractor of the Company whose involvement, either individually or in
conjunction with others, in the design or development of property or information
proprietary to the Company, in the past two years has been, or in the future is
expected to be, material to the operations and prospects of the Company.
2.14 Transactions with Affiliates. Except as set forth in Schedule 2.13
or Schedule 2.14, there are no loans, leases, royalty agreements, guarantee
agreements or other agreements between (i) the Company or any of its customers
or suppliers and (ii) any officer, employee, consultant or director of the
Company or any person owning five percent or more of the capital stock of the
Company or, to the Company's knowledge, any member of the immediate family of
such officer, employee, consultant, director or stockholder or any corporation
or other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder, and, except as set forth on Schedule 2.14,
since June 30, 1997, the Company has not repaid any principal amount of any
loans from any such person.
2.15 Assumptions or Guaranties of Indebtedness. The Company has not
assumed, guaranteed, endorsed or otherwise become directly, indirectly or
contingently liable for any indebtedness of any other person.
5
<PAGE>
2.16 Investments. Except as set forth in Schedule 2.16, the Company has
not made any loans or advances to any person that are outstanding on the date of
this Agreement in excess of $50,000 in the aggregate, nor is it committed or
obligated to make any such loan or advance, nor does the Company own any equity
securities, assets comprising the business of, obligations of, or any interest
in, any person.
2.17 Title to Assets. The Company has a ninety-nine percent interest in
a limited partnership that has good and marketable title in fee to the real
property on which the Company's principal executive offices are located and the
Company enjoys peaceful and undisturbed possession of its real and personal
property under all leases under which it is operating. The limited partnership
agreement relating to such interest and all of such leases are valid and in full
force and effect, and the Company is in material compliance with such limited
partnership agreement and all such leases, which are set forth on Schedule 2.17.
The Company has good and merchantable title to all of its other assets. All of
such assets are free of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except those set forth in Schedule 2.17.
The Company has taken reasonable measures to protect and preserve the
security and confidentiality of its analytical methods, trade secrets and other
confidential information (the "Proprietary Information"). All employees and
consultants of the Company involved in the design, review, evaluation or
development of Proprietary Information have executed valid nondisclosure
agreements. None of the Proprietary Information, to the Company's knowledge, has
been used, divulged or appropriated for the benefit of any person or otherwise
to the detriment of the Company. To the Company's knowledge, no employee or
consultant of the Company has used the intellectual property, proprietary
property or information, trade secrets or other confidential information of any
other person in the course of their work for the Company, and the conduct of the
Company's business as currently operated and as proposed to be operated does not
and will not conflict with or infringe upon such property, information or trade
secrets. Except pursuant to the terms of any licenses or other agreements set
forth in Schedule 2.18, the Company has no obligation to compensate any person
to use, license or sell any such property, information or trade secrets and the
Company has not granted any person any license or other right to the Proprietary
Information, whether requiring payment of royalties or not.
2.18 Material Contracts. Except as set forth in Schedule 2.18 or
Schedules 2.13, 2.14, 2.15 or 2.16, the Company is not a party to any contract,
agreement, instrument, commitment, obligation, plan or arrangement (i) that
would be required to be disclosed in or filed as an exhibit to a Registration
Statement on Form S-1 filed with the Securities and Exchange Commission, or (ii)
with any customer or supplier providing for payments in excess of $50,000 (all
such contracts, agreements, instruments, commitments, obligations, plans and
arrangements collectively being referred to herein as "Contracts"). The Company
has made available to the Purchasers or their representatives true, correct and
complete copies of all written Contracts. Schedule 2.18 contains a list of all
written Contracts and an accurate and complete description of all Contracts that
are not in writing.
Except as set forth in Schedule 2.18, all of the Contracts are in full
force and effect, the Company and each other party to each of the Contracts has
performed all the obligations required to be performed by it to date, and there
is not under any of the Contracts any existing default, or any failure of the
Company to perform, which failure, with notice or lapse of time or both, would
constitute such a default. The Company has no present expectation or intention
of not fully performing all its
6
<PAGE>
obligations under each of the Contracts and has no knowledge of any breach or
anticipated breach by any other party to any of the Contracts. Except as set
forth in Schedule 2.18, none of the Contracts has been terminated or notice of
termination given with respect thereto, no notice has been given by an party
thereto of any alleged default thereunder by any party thereto, and the Company
is aware of no intention or right of any party to any Contract to declare a
default by another party to any Contract. There exists no actual or threatened
termination, cancellation, or limitation of the business relationship of the
Company with any party to any Contract. Except as set forth in Schedule 2.18, no
customer of the Company has notified the Company that it intends to terminate or
change its business relationship with the Company following the consummation of
the transactions contemplated hereby.
As of the dates of the Company's Financial Statements, the Company did
not have any material liability or commitment, contingent or otherwise, arising
out of any Contract and not adequately reflected in or reserved against in the
Financial Statements. Except as set forth on Schedule 2.18, none of the
Contracts contain noncompetition, exclusivity or other provisions that in any
manner restrict or in the future could restrict the Company's operations. The
Company has not recorded on its Financial Statements for any period revenue
attributable to services to be provided under any Contract that had not been
performed by the Company during such period. As of October 3, 1997, the Company
had been engaged to perform approximately $6.479 million of services for which
revenue had not been recorded on the Financial Statements, which is consistent
with the Company's experience during the last three fiscal years. The Company
has not incurred material losses in connection with any Contract that have not
been recorded on the Company's Financial Statements, other than as set forth on
Schedule 2.18.
2.19 ERISA. Except as set forth on Schedule 2.19, the Company makes no
contributions to, and has no present intention to make contributions to, any
employee pension benefit plans for its employees which are subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The
Company has never contributed to or been required to contribute to any
multi-employer plan which is subject to ERISA.
2.20 Insurance. The Company carries insurance covering its properties
and business adequate and customary for the type and scope of the properties,
assets and business, and similar to companies of comparable size and condition
similarly situated in the same industry in which the Company operates, but in
any event in amounts sufficient to prevent the Company from becoming a coinsurer
or self-insurer, with provision for reasonable deductible amounts.
2.21 Registration Rights. Except for the rights granted to the
Purchasers pursuant to the Registration Rights Agreement, no person has demand
or other rights to cause the Company to file any registration statement under
the Securities Act relating to any securities of the Company or any right to
participate in any such registration statement.
2.22 Absence of Certain Developments. Except as provided in Schedule
2.22 attached hereto, since September 30, 1997, there has been no material
adverse change in the business, assets, operations, affairs, prospects or
financial condition of the Company, and the Company has not:
(a) entered into any transaction, agreement or commitment
other than in the ordinary course of business;
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(b) entered into or agreed to enter into any transaction,
agreement or commitment or suffered the occurrence of any event or events that
has interfered or is reasonably likely to interfere with the usual operations of
the business or that, singly or in the aggregate, has or is reasonably likely to
have a material adverse effect on the Company's business or results of
operations;
(c) issued, repurchased or redeemed or agreed to issue,
purchase or redeem any stock, bonds or other corporate securities or any rights,
options or warrants with respect thereto, or paid any dividends on any shares of
the Company's capital stock;
(d) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities in the ordinary
course of business comparable in nature and amount to current liabilities
incurred in the ordinary course of business during the comparable portion of its
prior fiscal year, as adjusted to reflect the current nature and volume of the
Company's business, or discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(e) mortgaged or pledged any of its assets, tangible or
intangible, or subjected them to any liens, charge or other encumbrance, except
liens for current property taxes not yet due and payable;
(f) sold, assigned or transferred any assets, except in the
ordinary course of business;
(g) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(h) made capital expenditures or commitments therefor that
aggregate in excess of $50,000; or
(i) incurred any material liability, obligation or commitment,
contingent or otherwise, including those arising out of any Contract, or
incurred any material losses in connection with any Contract.
2.23 Books and Records. The books of account, order books, records and
documents of the Company accurately and completely reflect all material
information relating to the business of the Company, the location and collection
of its assets, and the nature of all transactions giving rise to the obligations
or accounts receivable of the Company.
2.24 Disclosure. Neither this Agreement, the Financial Statements nor
any other agreement, document, or certificate furnished to any of the Purchasers
or their counsel by or on behalf of the Company in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
made or contained herein or therein, in light of the circumstances in which
made, not misleading. This section does not relate or refer to any predictions,
projections, forecasts or estimates of future operations provided by or on
behalf of the Company, except that all such predictions, projections, forecasts
and estimates provided by the Company to the Purchasers were prepared in good
faith. There is no fact
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known to the Company that has not been disclosed herein or in writing to the
Purchasers and that materially adversely affects, or that the Company believes
is reasonably likely in the future to materially adversely affect, the business,
operations, properties, assets or condition, financial or otherwise, of the
Company.
2.25 Brokers or Finders. Except for Pennsylvania Merchant Group Ltd.,
which shall receive a fee of $ 227,500 paid by the Company, no person has or
will have, as a result of the transactions contemplated by this Agreement, any
right, interest or claim against or upon the Company for any commission, fee or
other compensation as a finder or broker because of any action by the Company or
its agents.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF PURCHASERS.
Each of the Purchasers hereby represents and warrants, severally but
not jointly, to the Company as follows:
3.1 Investment Representations. Each Purchaser intends to acquire the
Shares, the Warrants, the Contingent Warrants, and the Conversion Shares for its
own account. The Shares, the Warrants, the Contingent Warrants, and the
Conversion Shares are being acquired by it for investment and not with a view to
distribution or resale thereof. Each Purchaser understands and agrees that,
until registered under the Securities Act or transferred pursuant to Rule 144
under the Securities Act, all certificates representing the Shares, the
Warrants, any Contingent Warrants and the Conversion Shares shall bear a legend
reading substantially as follows:
The securities represented by this certificate have not been registered
under the Securities Act of 1933 or applicable state securities laws.
These securities may not be offered for sale, sold, delivered after
sale, transferred, pledged or hypothecated in the absence of an
effective registration statement covering such securities under the Act
and any applicable state securities laws, or the availability of an
exemption from registration thereunder.
3.2 Access to Information. Purchasers or their representatives have had
the opportunity to ask questions of and receive answers from management of the
Company concerning the Company's business, assets, financial condition, results
of operations, and liabilities.
3.3 Sophistication and Knowledge. Each Purchaser is an accredited
investor as defined in Regulation D under the Securities Act. Purchasers or
their representatives have the requisite knowledge and experience in financial
and business matters to render them fully capable of evaluating the merits and
risks of the purchase of the Shares and the Warrants. Each Purchaser can bear
the economic risks of its investment and can afford a complete loss of its
investment.
3.4 Power. Each Purchaser has full power and authority to make the
foregoing representations and to enter into and to perform this Agreement and
the Ancillary Agreements in accordance with their terms. CAI is a duly organized
and validly existing partnership in good standing under the laws of Quebec,
Canada. Aster is a duly organized and validly existing corporation in good
standing under the laws of France. Each Purchaser has obtained each required
authorization, consent,
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approval, license, qualification, exemption of or filing or registration with
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, necessary in connection with (i) the
execution and delivery by such Purchaser of this Agreement or the Ancillary
Agreements, (ii) its purchase of the Shares, the Warrants and the Contingent
Warrants, and (iii) its performance of its obligations under this Agreement or
the Ancillary Agreements.
Each Purchaser hereby acknowledges that the Company is relying on the
representations and warranties made by such Purchaser in this Section 3 in
connection with the Company's representation herein that it has complied with
all applicable federal and state securities laws, including the Securities Act,
in connection with the offer, issuance and sale of the Shares, the Warrants, and
the Contingent Warrants.
SECTION 4 COVENANTS.
4.1 Use of Proceeds. The Company shall use the proceeds from the sale
of the Shares and the Warrants to acquire instruments and software identified by
management and approved by the Board of Directors, to fund the Company's
expansion, and for working capital and general corporate purposes, including
acquisitions.
4.2 Best Efforts Cooperation. Until the Closing, the Company and
Purchasers shall use their best efforts in good faith to perform and fulfill all
conditions and obligations to be fulfilled or performed by them hereunder, to
the end that the transactions contemplated hereby will be fully and timely
consummated.
4.3 General Covenants. The Company and Purchasers agree:
(a) if any event should occur, either within or without the control of
any party, that would prevent fulfillment of the conditions to the obligations
of any party hereto to consummate the transactions contemplated by this
Agreement or the Ancillary Agreements, to use its or their reasonable efforts to
cure the same as expeditiously as possible;
(b) to cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions that may be reasonable and necessary
to obtain the consent of any governmental instrumentality, or any third party to
accomplish the transactions contemplated by this Agreement and the Ancillary
Agreements;
(c) to deliver such other instruments, certificates, consents,
endorsements, assignments, assumptions, and other documents or instruments, in
form reasonably acceptable to the parties and their counsel, as may be
reasonably necessary to carry out and/or to comply with the terms of this
Agreement and the Ancillary Agreements and the transactions contemplated herein
and therein; and
(d) to confer on a regular basis with each other, report on material
operational matters and promptly advise each other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen, could
have a material adverse effect on the business or operations of the Company or
which would cause or constitute a material breach of any of the representations,
warranties or covenants of any party contained herein.
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4.4 Public Announcements. No public announcements shall be made by
either party without prior consent of the other with respect to this Agreement
or the transactions contemplated hereby, which consent shall not be unreasonably
withheld.
4.5 Confidentiality. CAI and their representatives shall keep
confidential all confidential information of the Company consistent with the
terms of the confidentiality agreement dated November 10, 1997 between CAI and
the Company, and Aster and their representatives shall keep confidential all
confidential information of the Company consistent with the terms of the
confidentiality agreement dated November 6, 1997 between Aster and the Company.
Any party to whom the Purchasers may assign their rights to purchase all or a
portion of the Shares and Warrants pursuant to Section 1.1 shall be required to
enter into a similar confidentiality agreement with the Company.
4.6. Charter Amendments. The Company shall use its best efforts to
obtain prior to April 30, 1998 the approval of its stockholders to amend the
Company's Charter (i) to increase the number of shares of Common Stock that the
Company is authorized to issue to a number at least sufficient to allow
Purchasers to acquire the number of shares of Common Stock to which Purchasers
would be entitled upon exercise of the Warrants, and (ii) to provide that prior
to the declaration by the Corporation of any dividend on any class of the
capital stock of the Corporation, such dividend shall have been approved by a
vote of those members of the Board of Directors elected exclusively by the
holders of the Company's Class A Convertible Preferred Stock. The Purchasers
each agree that the Shares shall be voted in favor of such Charter amendments.
Upon the approval of such a charter amendment, the Company shall deliver to each
Purchaser an opinion of counsel concerning the validity and effectiveness of the
charter amendment and otherwise substantially in the same form as the opinion
provided pursuant to Section 5.5(a).
4.7 Sales and Use Taxes. The Company shall pay any sales and use taxes
that may be imposed or due in connection with the consummation of any of the
transactions contemplated by this Agreement.
4.8 Validity of Warrants. The Company hereby covenants that it shall
not at any time assert any claim, and that it shall promptly indemnify and hold
harmless the Purchasers against any losses, damages or expenses (including legal
expenses) that any Purchaser may incur or suffer in connection with the
assertion by any third party of any claim, that the Warrants have not been
authorized by all required corporate action, have not been duly executed and
delivered, or are not legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms. In the event any
such claim is asserted by any party, each Purchaser shall have the option of
electing to accept, and the Company shall issue, the Contingent Warrants pro
rata based upon the number of shares underlying Warrants held by such Purchaser.
This election shall be in addition to and not in lieu of any rights such
Purchaser may have at law or in equity as the result of a breach of this Section
4.8.
SECTION 5 CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS TO PURCHASE
THE SHARES AND THE WARRANTS.
The obligations of each Purchaser to purchase the Shares and the
Warrants are subject to the satisfaction, or waiver by the Purchasers, of the
following conditions, at or prior to the Closing:
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5.1 Representations and Warranties. Each of the representations and
warranties of the Company set forth in Section 2 hereof shall be true, accurate
and correct on the date of the Closing.
5.2 Technology Sharing Agreement. Aster and the Company shall have
entered into a Technology Sharing Agreement substantially in the form of
Schedule 5.2.
5.3 Registration Rights Agreement. The Purchasers and the Company shall
have entered into a Registration Rights Agreement substantially in the form of
Schedule 5.3.
5.4 Articles Supplementary. The Company shall have duly filed with the
Maryland State Department of Assessments and Taxation ("Department") articles
supplementary including the terms of the Shares set forth in Schedule 1.1B (the
"Articles Supplementary") and the Articles Supplementary will have been accepted
by the Department and will be effective.
5.5 Documentation at Closing. The Purchasers shall have received prior
to or at the Closing each of the following documents:
(a) The opinion of Ober, Kaler, Grimes & Shriver, counsel for the
Company, in form and substance reasonably satisfactory to counsel for the
Purchasers, covering the matters set forth in Schedule 5.5(a).
(b) A certificate of the President and the Chief Financial Officer of
the Company stating that the representations and warranties of the Company
contained in Section 2 hereof and otherwise made by the Company in writing in
connection with the transactions contemplated hereby are true and correct as of
the Closing and that all conditions required to be performed prior to or at the
Closing have been performed or waived.
(c) Any consents or waivers of governmental entities or third parties
required to be obtained at or prior to the Closing to execute and deliver this
Agreement and the Ancillary Agreements and to carry out the transactions
contemplated hereby and thereby.
5.6 No Actions or Proceedings. There shall not be any action or
proceeding by or before any court or other governmental body that shall seek to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement.
5.7 Business Combination Act Opt-out. The Board of Directors of the
Company shall have adopted a resolution under Section 3-603(c)(1)(ii) of the
Maryland General Corporation Law ("MGCL") pursuant to which the Company shall
have opted out of the requirements of Section 3-602 of the MGCL with respect to
any business combination (as defined in the MGCL) involving either of the
Purchasers or their permitted assignees under Section 1.1 of this Agreement.
SECTION 6 CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS TO SELL THE
SHARES AND THE WARRANTS.
The obligations of the Company to sell the Shares and the Warrants are
subject to the satisfaction, or waiver by the Company, of the following
conditions, at or prior to the Closing:
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6.1 Representations and Warranties. Each of the representations and
warranties of each of the Purchasers set forth in Section 3 hereof shall be
true, accurate and correct on the date of the Closing.
6.2 Technology Sharing Agreement. Aster and the Company shall have
entered into a Technology Sharing Agreement substantially in the form of
Schedule 5.2.
6.3 Documentation at Closing. The Company shall have received prior to
or at the Closing a certificate of authorized officers of each Purchaser stating
that the representations and warranties of such Purchaser contained in Section 3
hereof and otherwise made by such Purchaser in writing in connection with the
transactions contemplated hereby are true and correct as of the Closing and that
all conditions required to be performed prior to or at the Closing have been
performed or waived.
6.4 No Actions or Proceedings. There shall not be any action or
proceeding by or before any court or other governmental body that shall seek to
restrain, prohibit, or invalidate the transactions contemplated by this
Agreement.
SECTION 7 CONTINGENT WARRANTS.
7.1 Contingent Warrants. In the event that (i) the Company shall not by
April 30, 1998 have filed an amended charter with the Secretary of State of
Maryland increasing the number of shares of the Company's Common Stock that it
is authorized to issue by at least 10 million shares and reserved such shares
for issuance upon exercise of the Warrants, or (ii) the Company shall have
failed to consummate the sale of the Shares or the Warrants by December 31, 1997
(or such later date as may be unanimously agreed by the parties hereto) for any
reason other than a breach or default of this Agreement by the Purchasers,
including a failure to pay the Aggregate Purchase Price, or the failure by the
Purchasers to satisfy a condition set forth in Section 6 hereof, then, in either
such event, the Company shall, for no additional consideration, issue to the
Purchasers warrants to purchase an aggregate of 2,750,000 shares of the Common
Stock of the Company at an exercise price of $0.60 per share and otherwise
having terms substantially identical to the terms of the Warrants (the
"Contingent Warrants"). The Contingent Warrants shall be issued to the
Purchasers pro rata based upon the number of Shares held by each Purchaser or
the number of Shares that each Purchaser would have acquired but for the failure
of the Company to consummate the transactions contemplated by this Agreement, as
the case may be.
7.2 Opinion of Counsel. Simultaneously with the issuance of Contingent
Warrants, the Company will deliver to each Purchaser an opinion of counsel in
form and substance reasonably satisfactory to such Purchaser concerning the
validity of the Contingent Warrants and otherwise substantially in the same form
as the opinion provided pursuant to Section 5.5 (a).
7.3 Cancellation of Warrants. Each Purchaser shall deliver the Warrants
to the Company for cancellation promptly upon receipt of Contingent Warrants
issued as a result of failure of the Company to amend its charter as set forth
in Section 7.1.
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SECTION 8 MISCELLANEOUS.
8.1 Survival of Representations and Warranties. Every representation
and warranty of each of the parties set forth in this Agreement and all of the
rights and remedies of the other parties related to misrepresentations and
inaccuracies related thereto shall survive, and not be deemed waived by, the
Closing, and shall be effective regardless of any investigation that may have
been made at any time by or on behalf of any party or its directors, officers,
employees, or agents.
8.2 Expenses. The parties shall pay their respective expenses
(including the fees, disbursements, and expenses of their respective attorneys
and accountants) in connection with the negotiation and preparation of this
Agreement and the consummation of the transactions contemplated hereby.
8.3 Notices. Each party hereto shall promptly give written notice to
the other parties upon becoming aware of the occurrence of, or any impending or
threatened occurrence of, any event that would cause or constitute a breach of
any of its representations, warranties, or covenants contained in this
Agreement, and such party shall use its best efforts to prevent or promptly
remedy the same. Any notice or other communication required or which may be
given hereunder shall be in writing and shall be deemed to have been duly given
on the date delivered if delivered personally or sent by facsimile to the
persons identified below, one business day following deposit with a reputable
overnight courier, or three business days after deposit in the U.S. mail if
mailed by certified or registered mail, return receipt requested, addressed as
follows:
If to the Company, to:
PharmaKinetics Laboratories, Inc.
302 West Fayette Street
Baltimore, MD 21201
Attention: James K. Leslie, President
Telephone: (410) 385-4500
Facsimile: (410) 385-1957
with a copy to:
Ober, Kaler, Grimes & Shriver
120 E. Baltimore Street
Baltimore, MD 21202
Attention: Melissa A. Warren, Esquire
Telephone: (410) 347-7684
Facsimile: (410) 547-0699
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If to either Purchaser, to:
CAI Advisors & Co.
767 Fifth Avenue, 5th Floor
New York, NY 10153
Attention: Leslie B. Daniels
Telephone: (212) 319-2525
Facsimile: (212) 319-0232
with a copy to:
Dyer Ellis & Joseph PC
600 New Hampshire Ave., N.W.
Washington, DC 20037
Attn: Michael Joseph
Telephone: (202) 944-3000
Facsimile: (202) 944-3068
Any party may change its address to which notices or other communications are to
be sent by giving written notice of any such change in the manner provided
herein for giving notice.
8.4 Modification or Waiver. This Agreement may be amended, modified, or
superseded at any time by a written instrument executed by the Company and each
Purchaser, and any of the terms, covenants, representations, warranties, or
conditions hereof may be waived by the party intended to be benefited hereby. No
waiver of any nature, in any one or more instances, shall be deemed to be or
construed as a further or continued waiver of any condition or any breach of any
other term, representation, or warranty in this Agreement.
8.5 Binding Effect and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
8.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the state of Maryland.
8.7 Section Headings. The Section headings contained in this Agreement
are inserted for convenience of reference only and shall not affect the meaning
or interpretation of this Agreement.
8.8 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper, or advisable under applicable laws and regulations to
consummate the purchase and sale of the Shares and Warrants in accordance with
the terms of this Agreement. In case at any time any further action is necessary
or desirable to carry out the purposes of this Agreement, the appropriate
officers of each party to this Agreement are hereby directed and authorized to
use their best efforts to effectuate all such action.
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8.9 Entire Agreement. This Agreement and the Ancillary Agreements
embody the entire agreement and understanding between the parties hereto
relating to the subject matter hereof and supersede any prior letters of intent,
agreements, and understandings relating to the subject matter hereof, other than
confidentiality agreements executed by the parties.
8.10 No Third Party Beneficiaries. Nothing expressed or referred to in
this Agreement is intended or shall be construed to give any person other than
the parties to this Agreement or their respective successors or permitted
assigns any legal or equitable right, remedy, or claim under or in respect of
this Agreement or any provision contained herein, it being the intention of the
parties to this Agreement that this Agreement shall be for the sole and
exclusive benefit of such parties or such successors and assigns and not for the
benefit of any other person.
8.11 Counterparts. Separate copies of this Agreement may be signed by
the parties hereto, with the same effect as though all of the parties had signed
one copy of this Agreement.
8.12 Severability. If any provision of this Agreement shall be held
invalid under any applicable law, such invalidity shall not affect any other
provision of this Agreement that can be given effect without the invalid
provision and, to this end, the provisions hereof are severable.
8.13 Termination. In the event that the Company shall have failed to
consummate the sale of the Shares and the Warrants by December 31, 1997 (or such
later date as may be unanimously agreed by the parties hereto), and the Company
has, as a result, duly issued the Contingent Warrants, then the obligations of
both parties hereunder shall terminate. In the event that the Purchasers shall
have determined not to purchase the Shares and the Warrants and shall have
provided written notice to that effect to the Company, then the obligations of
the Company hereunder shall terminate.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement as of the date first above written.
PHARMAKINETICS LABORATORIES, INC.
By: /s/ James K. Leslie
__________________________________
James K. Leslie
President
CAI ADVISORS & CO.
By: /s/ Leslie B. Daniels
__________________________________
Leslie B. Daniels
Partner
ASTER-CEPHAC
By: /s/ John J. Thebeault
__________________________________
John J. Thebeault
Chief Executive and President
17
Exhibit 99.2
TECHNOLOGY SHARING AGREEMENT
THIS TECHNOLOGY SHARING AGREEMENT is made and entered into on this 23rd
day of DECEMBER 1997, by and among PHARMAKINETICS LABORATORIES, INC. a
corporation organized under the laws of the state of Maryland
("PharmaKinetics"), CEPHAC S.A., a company organized under the laws of France
("Cephac"), and ASTER (bullet) CEPHAC S.A., a company organized under the laws
of France ("Aster (bullet) Cephac").
RECITALS
A. PharmaKinetics, Aster (bullet) Cephac S.A, the owner of all of the
outstanding shares of Cephac and CAI Advisors & Co. ("CAI"), are parties to a
Preferred Stock and Warrant Purchase Agreement dated December 4, 1997
(the"Purchase Agreement") pursuant to which CAI and Aster (bullet) Cephac (or
their permitted assigns) will purchase an aggregate of 833,300 shares of
PharmaKinetics Class A Convertible Preferred Stock convertible into 8,333,000
shares of PharmaKinetics Common Stock, par value $.001 per share (the "Shares"),
and warrants to purchase an aggregate of 6,250,000 shares of PharmaKinetics
Common Stock with an exercise price of $1.20 per share (the "Warrants").
B. The execution of this Agreement is a condition precedent to the
obligations of PharmaKinetics, Aster (bullet) Cephac, and CAI under the Purchase
Agreement to consummate the purchase and sale of the Shares and the Warrants.
C. PharmaKinetics and Cephac wish to facilitate the productive exchange
of methods for bioanalytical testing, technology and technical capabilities.
NOW, THEREFORE, in consideration of Purchase Agreement and the
conditions and agreements hereinafter set forth, the parties agree as follows:
SECTION 1 EXCHANGE OF METHODS FOR BIOANALYTICAL TESTING.
1.1 Methods Exchanged. Cephac shall provide to PharmaKinetics the
methods for bioanalytical testing developed by Cephac set forth on Schedule 1.1A
and PharmaKinetics shall provide to Cephac the methods for bioanalytical testing
developed by PharmaKinetics set forth on Schedule 1.1B. Any method for
bioanalytical testing provided hereunder shall remain the property of the party
providing such method. Nothing herein shall be deemed to give the party to whom
a method is provided hereunder any right to transfer, assign, license or
otherwise provide such method to any third party, except with the prior written
consent of the party providing the method.
1.2 Procedures for Exchange. The two methods first set forth on each of
Schedule 1.1A and 1.1B will be the two methods first exchanged by PharmaKinetics
and Cephac. The exchange of these methods will be used to develop procedures for
exchange of the other methods and to evaluate the difficulty of transferring the
other methods. PharmaKinetics and Cephac shall use their best efforts to
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(i) develop procedures to validate the methods, (ii) develop procedures for
transferring standard operating procedures related to the methods, (iii) provide
personnel knowledgeable with the methods and standard operating procedures to
assist in their transfer, and (iv) take such other actions as may be required to
transfer the methods and standard operating procedures. Each party shall bear
the cost of (i) travel expenses of its employees who are sent to the other
party's facilities and (ii) housing and living expenses of the other party's
employees who are visiting its facilities.
1.3 Fees. Each party shall pay to the other party a fee (the "Fee")
based upon the net revenues generated by services provided by such party that
utilize a method of bioanalytical testing provided by the other party pursuant
to Section 1.1. (the "Net Revenues"). The initial Fee with respect to each
method provided shall be 2% of Net Revenues. Fees accruing during each calendar
quarter shall be due and payable within 30 days after the end of each such
calendar quarter. For each calendar quarter while this Agreement is in effect,
PharmaKinetics and Cephac shall evaluate the fairness and appropriateness of the
Fee with respect to each method of bioanalytical testing provided pursuant to
Section 1.1, and shall by mutual agreement fix the Fee payable by each party
during such calendar quarter. In the absence of agreement relating to a Fee or
Fees for a particular calendar quarter, the Fee or Fees agreed upon for the
prior quarter shall continue to be applicable.
SECTION 2 EXCHANGE OF OTHER METHODS AND TECHNOLOGY.
2.1 Exchange of Other Methods for Bioanalytical Testing. If the
exchange of methods for bioanalytical testing set forth on Schedules 1.1A and
1.1B is successful (or if PharmaKinetics and Cephac are unable to exchange any
such method), PharmaKinetics and Cephac shall cooperate with each other to
explore the possibility of exchanging additional or alternative methods.
2.2 Standardized Method of Bioanalytical Testing. PharmaKinetics and
Cephac shall cooperate with each other to evaluate the costs and benefits of
developing a standardized method of bioanalytical testing in order to facilitate
the exchange of technology hereunder.
2.3 LIMS System. PharmaKinetics and Cephac shall provide each other
with information regarding their respective requirements for a LIMS computer
software system and information regarding such systems obtained from vendors,
and shall evaluate the costs and benefits of developing a compatible system.
SECTION 3 MISCELLANEOUS.
3.1 Confidentiality. Neither party or its employees or agents shall
disclose to any third party any information regarding the methods for
bioanalytical testing exchanged hereunder or any other proprietary or
confidential information of the other party obtained in connection with the
transfer of such methods or the other transactions contemplated by this
Agreement, and each party shall take all precautions reasonably necessary to
prevent such disclosure.
3.2 Good Faith Negotiations. PharmaKinetics and Cephac recognize that
the costs and benefits associated with exchanging the methods for bioanalytical
testing and undertaking the other projects set forth in this Agreement are
difficult to ascertain. PharmaKinetics and Cephac agree to renegotiate the terms
of this Agreement in good faith if such costs and benefits vary substantially
from
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expectations. For example, if a 2% license fee is inadequate to cover the costs
associated with transferring a particular method within a reasonable period of
time, PharmaKinetics and Cephac shall negotiate to reach agreement with respect
to an increased fee.
3.3 Term and Termination. The initial term of this Agreement shall
commence on the date hereof and shall continue until December 31, 1998.
Following the initial term, this Agreement shall be renewed automatically for
successive one year terms, provided that either party may terminate the
Agreement effective as of the end of the then current term by providing written
notice of termination at least 30 days prior to the termination date.
3.4 Indemnification. Each party (hereafter, the "Indemnifying Party")
shall indemnify and hold harmless the other party and its successors and assigns
(hereafter, the "Indemnified Party") against any and all liability whatsoever
that the Indemnified Party may sustain arising out of or based upon any claim or
assertion by a third party that the Indemnifying Party does not own or have the
right to exchange a method of bioanalytical testing provided to the Indemnified
Party pursuant to this Agreement. The Indemnifying Party shall not be liable for
profits that are not realized by the Indemnified Party as the result of any such
claim or assertion.
3.5 Covenant of Aster (bullet) Cephac. Aster (bullet) Cephac covenants
and agrees that it shall take no action that would limit or restrict the ability
of Cephac to fulfill, or would render Cephac unable to fulfill, its obligations
under this Agreement. Aster (bullet) Cephac further covenants and agrees that it
shall pay to PharmaKinetics any fees due to PharmaKinetics under Section 1.3 of
this Agreement and not paid when due by Cephac.
3.6 Assignment. This Agreement shall not be assigned by either party
without the written consent of the other.
3.7 Counterparts. Separate copies of this Agreement may be signed by
the parties hereto, with the same effect as though all of the parties had signed
one copy of this Agreement.
IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement as of the date first above written.
PHARMAKINETICS LABORATORIES, INC.
By: /s/ James K. Leslie
_____________________________
James K. Leslie
President
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<PAGE>
CEPHAC S.A.
By: /s/ John J. Thebeault
_____________________________
John J. Thebeault
President
ASTER (bullet) CEPHAC S.A.
By: /s/ John J. Thebeault
_____________________________
John J. Thebeault
Chief Executive and President
4
Exhibit 99.3
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 COMPLETION OF $5 MILLION CASH INVESTMENT
AND STRATEGIC PARTNERSHIP
Baltimore, Maryland, December 23, 1997 -- PharmaKinetics Laboratories, Inc.
(OTCBB:PKLB) announced today that the $5 million dollar cash investment and
strategic partnership transaction with a group of investors led by CAI Advisors
& Co. and Aster (bullet) Cephac S.A. (Aster) - a leading French contract
research organization headquartered in Paris - has been successfully completed.
Under the terms of the transaction PharmaKinetics sold to the investor group,
for a total cash payment of $5 million, 833,300 shares of Class A Convertible
Preferred Stock 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 executed a Technology Exchange Agreement with Aster under
which the two companies will develop and implement plans for cooperative
marketing efforts in the United States and Europe. In addition, under this
agreement the companies have already begun to exchange bioanalytical testing
methods which will enhance each firm's service offering.
The preferred stock purchased by the investor group, if converted to common
stock, would constitute approximately 41% of PharmaKinetics' outstanding stock.
The addition of the shares issuable upon exercise of the warrants would result
in the investor group owning 51% of the Company's stock on a fully diluted
basis. If PharmaKinetics does not file a charter amendment by April 30, 1998 to
increase the number of authorized shares, the investor group will receive
warrants to purchase only 2.75 million shares of common stock at an exercise
price of $.60 per share.
The investor group will have representation on PharmaKinetics' Board of
Directors and certain rights to register shares with the Securities and Exchange
Commission.
CAI Advisors & Co. is an investment company with offices in Montreal, New York,
London and Paris which has a history of successful investments in the CRO
industry and the pharmaceutical industry.
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Aster, 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,
"By completing this transaction PharmaKinetics has been able to create the
balance sheet strength which has been lacking for the past several years. These
new funds will be put to work to acquire the resources necessary to enhance our
technical and scientific capabilities. Further, in the very short time we have
been working with Aster it has become abundantly clear that the operational and
marketing synergies between the two firms are likely to be even more meaningful
than was first envisioned. In addition, I am confident that the knowledge and
advice of CAI and their representatives on our Board of Directors will be of
significant value as we move the Company forward towards meeting our goal of
becoming a premier provider of contract research services to the worldwide
pharmaceutical and biotechnology industries."
Dr. John Thebault, founder and Chief Executive Officer of Aster (bullet) Cephac
S.A. added, "We have been looking to expand in North America in order to serve
our customers better. We are looking forward to working closely with our
colleagues at PharmaKinetics to grow our business in the future."
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 industry represents an attractive investment
opportunity. Combining the excellent resources and global reach of Aster
(bullet) Cephac and PharmaKinetics will create a unique organization which will
be ideally positioned to become an industry leader."
PharmaKinetics Laboratories, Inc. is a contract research organization serving
the pharmaceutical and biotechnology industries.
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, the
extent to which the Company can successfully deploy its capital to enhance its
capabilities, the extent to which the Company and Aster (bullet) Cephac S.A. are
able to identify and take advantage of marketing and operating synergies,
general economic conditions, conditions affecting the pharmaceutical and
biotechnology industries, and other risks referred to in the Company's periodic
reports filed with the Securities and Exchange Commission.
