<PAGE> 1
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): June 19, 1996
CLINTRIALS RESEARCH INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 33-69586 62-1406017
- ----------------------------- --------------------- -------------------
(State or Other (Commission File No.) (I.R.S. Employer
Jurisdiction of Incorporation Identification No.)
One Burton Hills Boulevard
Suite 210
Nashville, Tennessee 37215
- ---------------------------------------- ---------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (615) 665-9665
N/A
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On May 24, 1996, the Registrant announced a definitive Asset Purchase
Agreement with Bio-Research Laboratories Ltd., of Montreal
("Bio-Research"). In connection with the pending acquisition, the Registrant
files the attached documents, which the Registrant deems of importance to
security holders.
1. Consolidated Financial Statements of Bio-Research for the years ended
December 31, 1995 and 1994, including the Notes thereto.
2. Unaudited Pro Forma Condensed Combined Financial Statements,
including the Notes thereto, reflecting the pending acquisition
of Bio-Research by the Registrant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
2. Asset Purchase Agreement among Bio-Research, certain shareholders
thereof, and the Registrant*
23. Consent of Ernst & Young LLP
---------
* This exhibit contains a list of exhibits which are not being filed
herewith. The Registrant shall furnish supplementally a copy of any such
omitted exhibit to the Securities and Exchange Commission upon request.
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.
CLINTRIALS RESEARCH INC.
June 19, 1996 /s/ John W. Robbins
-------------------------
John W. Robbins
Chief Financial Officer
<PAGE> 3
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
BIO-RESEARCH LABORATORIES LTD. FINANCIAL STATEMENTS
Report of Independent Auditors........................................................ F-2
Balance Sheets as of December 31, 1994 and 1995; and March 31, 1996
(unaudited)......................................................................... F-3
Statements of Income for the years ended December 31, 1993, 1994 and 1995; and for the
three months ended March 31, 1995 and 1996 (unaudited).............................. F-4
Statements of Stockholders' Equity for the years ended December 31, 1993, 1994 and
1995; and for the three months ended March 31, 1995 and 1996 (unaudited)............ F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995; and for
the three months ended March 31, 1995 and 1996 (unaudited).......................... F-6
Notes to Financial Statements......................................................... F-7
CLINTRIALS RESEARCH INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 1996............. F-14
Notes to Unaudited Pro Forma Condensed Combined Balance Sheet......................... F-15
Unaudited Pro Forma Condensed Combined Statements of Income for the three months ended
March 31, 1996 and year ended December 31, 1995..................................... F-16
Notes to Unaudited Pro Forma Condensed Combined Statements of Income.................. F-18
</TABLE>
F-1
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
ClinTrials Research Inc.
We have audited the accompanying balance sheets of Bio-Research
Laboratories Ltd. as of December 31, 1995 and 1994, and the related statements
of income, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bio-Research Laboratories
Ltd. at December 31, 1995 and 1994, and the results of operations and cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Nashville, Tennessee
February 6, 1996,
except for Note 12, as to which the date is
May 24, 1996
F-2
<PAGE> 5
BIO-RESEARCH LABORATORIES LTD.
BALANCE SHEETS
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------ 1996
1994 1995 ------------
------- ------- (UNAUDITED --
NOTE 13)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,172 $ 5,699 $ 5,548
Accounts receivable....................................... 7,553 8,598 6,913
Tax credits receivable.................................... 2,536 1,136 1,331
Other current assets...................................... 620 676 1,422
------- ------- ------------
Total current assets.............................. 14,881 16,109 15,214
Property and equipment:
Land...................................................... 303 312 312
Buildings................................................. 13,407 13,918 14,154
Equipment................................................. 12,734 13,742 13,973
------- ------- ------------
26,444 27,972 28,439
Less accumulated depreciation............................. 10,049 11,238 11,639
------- ------- ------------
16,395 16,734 16,800
Other assets................................................ 149 238 --
------- ------- ------------
Total assets...................................... $31,425 $33,081 $ 32,014
======= ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 3,728 $ 3,365 $ 2,543
Advance billings.......................................... 1,887 2,940 2,189
Other current liabilities................................. 603 633 649
------- ------- ------------
Total current liabilities......................... 6,218 6,938 5,381
Stockholders' equity:
Common Stock, no par value -- unlimited shares authorized;
issued and outstanding 11,466,280 shares in 1994, 1995
and 1996, respectively................................. 3,128 3,128 3,128
Additional paid-in capital................................ 39 39 39
Retained earnings......................................... 24,225 24,403 24,941
Cumulative foreign currency translation adjustments....... (2,185) (1,427) (1,475)
------- ------- ------------
Total stockholders' equity........................ 25,207 26,143 26,633
------- ------- ------------
Total liabilities and stockholders' equity........ $31,425 $33,081 $ 32,014
======= ======= ==========
</TABLE>
See accompanying notes.
F-3
<PAGE> 6
BIO-RESEARCH LABORATORIES LTD.
STATEMENTS OF INCOME
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ---------------
1993 1994 1995 1995 1996
------- ------- ------- ------ ------
(UNAUDITED --
NOTE 13)
<S> <C> <C> <C> <C> <C>
Service revenue.................................. $22,418 $24,504 $26,342 $7,379 $6,324
Operating costs and expenses:
Direct costs................................... 12,942 13,184 14,408 3,536 3,658
Selling, general and administrative expenses... 7,176 7,804 8,024 2,135 1,954
Depreciation................................... 1,141 1,347 1,573 437 426
------- ------- ------- ------ ------
Income from operations........................... 1,159 2,169 2,337 1,271 286
Other income (expense):
Interest income................................ 110 139 325 100 75
Other income................................... 69 72 48 8 2
Interest expense............................... (47) (31) (10) (2) (1)
------- ------- ------- ------ ------
132 180 363 106 76
------- ------- ------- ------ ------
Income before income taxes....................... 1,291 2,349 2,700 1,377 362
Provision for income taxes....................... (1,117) (1,100) (1,026) (202) (176)
------- ------- ------- ------ ------
Net income....................................... $ 2,408 $ 3,449 $ 3,726 $1,579 $ 538
======= ======= ======= ====== ======
</TABLE>
See accompanying notes.
F-4
<PAGE> 7
BIO-RESEARCH LABORATORIES LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
COMMON STOCK ADDITIONAL CURRENCY
------------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS TOTAL
---------- ------ ---------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993........... 11,466,280 $3,128 $ 39 $ 18,368 $(1,266) $20,269
Foreign currency translation
adjustments..................... -- -- -- 451 451
Net income......................... -- -- -- 2,408 -- 2,408
---------- ------ --- -------- ----------- -------
Balance at December 31, 1993......... 11,466,280 3,128 39 20,776 (815) 23,128
Foreign currency translation
adjustments..................... -- -- -- (1,370) (1,370)
Net income......................... -- -- -- 3,449 -- 3,449
---------- ------ --- -------- ----------- -------
Balance at December 31, 1994......... 11,466,280 3,128 39 24,225 (2,185) 25,207
Foreign currency translation
adjustments..................... -- -- -- 758 758
Payment of dividend................ -- -- -- (3,548) -- (3,548)
Net income......................... -- -- -- 3,726 -- 3,726
---------- ------ --- -------- ----------- -------
Balance at December 31, 1995
(Unaudited -- Note 13)............. 11,466,280 3,128 39 24,403 (1,427) 26,143
Foreign currency translation
adjustments..................... -- -- -- -- (48) (48)
Net income......................... -- -- -- 538 -- 538
---------- ------ --- -------- ----------- -------
Balance at March 31, 1996
(Unaudited -- Note 13)............. 11,466,280 $3,128 $ 39 $ 24,941 $(1,475) $26,633
========= ====== ======= ======= ========= =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 8
BIO-RESEARCH LABORATORIES LTD.
STATEMENTS OF CASH FLOWS
(ALL DOLLAR AMOUNTS ARE EXPRESSED IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------- ----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- ------
(UNAUDITED --
NOTE 13)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................ $ 2,408 $ 3,449 $ 3,726 $ 1,579 $ 538
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................... 1,141 1,347 1,573 437 426
Changes in operating assets and liabilities:
Accounts receivable.......................... (1,544) (230) (1,045) (6) 1,685
Advance billings............................. 1,140 (163) 1,053 (814) (751)
Accounts payable............................. 884 886 (363) (750) (822)
Taxes receivable............................. 425 (1,202) 1,400 809 (195)
Other current assets......................... (6) 11 (56) (298) (746)
Other current liabilities.................... 71 (310) 30 155 16
Other assets................................. -- (149) (89) 149 238
------- ------- ------- ------- ------
Net cash provided by operating
activities............................ 4,519 3,639 6,229 1,261 389
CASH FLOWS FROM INVESTING ACTIVITY
Purchases of property and equipment, net.......... (1,831) (2,217) (1,912) (253) (492)
CASH FLOWS FROM FINANCING ACTIVITY
Payment of dividend............................... $ -- $ -- $(3,548) $ -- $ --
Effect of exchange rate changes on cash........... 451 (1,370) 758 54 (48)
------- ------- ------- ------- ------
Increase (decrease) in cash and cash
equivalents..................................... 3,139 52 1,527 1,062 (151)
Cash and cash equivalents at beginning of
period.......................................... 981 4,120 4,172 4,172 5,699
------- ------- ------- ------- ------
Cash and cash equivalents at end of period........ $ 4,120 $ 4,172 $ 5,699 $ 5,234 $5,548
======= ======= ======= ======= ======
Supplemental cash flow information:
Interest paid................................... $ 47 $ 31 $ 10 $ 2 $ 1
======= ======= ======= ======= ======
Income tax payments (refunds)................... $(1,930) $ 280 $(2,480) $(1,182) $ --
======= ======= ======= ======= ======
</TABLE>
See accompanying notes.
F-6
<PAGE> 9
BIO-RESEARCH LABORATORIES LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION
Bio-Research Laboratories Ltd. ("Bio-Research"), located in Montreal,
Quebec, Canada, is an independent contract research laboratory providing
preclinical research services to clients in the pharmaceutical, biotechnology,
chemical and medical device industries, primarily serving the United States, the
Far East, Europe and Canada.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
TRANSLATION OF FINANCIAL STATEMENTS INTO U.S. DOLLARS
The functional currency of Bio-Research is Canadian dollars. Assets and
liabilities amounts of Bio-Research are translated into U.S. dollars at the
year-end rate of exchange, and the income statements amounts are translated at
the average rates of exchange for the period. Gains or losses from translating
financial statements are accumulated in a separate component of stockholders'
equity.
Bio-Research enters into forward exchange contracts with banks to hedge
foreign currency transactions, and not to engage in currency speculation. Gains
and losses on forward exchange contracts to hedge future transactions are
deferred and accounted for as part of the cost of these transactions.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, cash and cash equivalents
include demand deposits and money market accounts held with a financial
institution. Bio-Research considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
REVENUE RECOGNITION
Revenue from contracts is recorded as costs are incurred and includes
estimated earned fees or profits calculated on the basis of the relationship
between costs incurred and total estimated costs (cost-to-cost type of
percentage-of-completion method of accounting). Certain contracts contain
provisions for price redetermination for cost overruns. Such redetermined
amounts are included in service revenue when realization is assured and the
amounts can reasonably be determined. Estimated amounts representing contract
change orders, claims or funding limitations are included in service revenue
only when realization is probable. In the period in which it is determined that
a loss will result from the performance of a contract, the entire amount of the
estimated ultimate loss is charged against income. Other changes in estimates of
service revenue, costs and profits are recognized using the cumulative catch-up
method of accounting. This method recognizes in the current period the
cumulative effect of the changes on current and prior periods. Hence, the effect
of the changes on future periods of contract performance is recognized as if the
revised estimates had been the original estimates.
UNBILLED RECEIVABLES AND ADVANCE BILLINGS
Unbilled receivables arise from those contracts under which billings can
only be rendered upon the achievement of certain negotiated performance
requirements or on a date-certain basis. Advance billings represent contractual
prebillings for services not yet rendered.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost.
Depreciation is provided on the straight-line method over the estimated
useful lives of the respective properties, which approximate three to forty
years.
F-7
<PAGE> 10
BIO-RESEARCH LABORATORIES LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NEWLY ISSUED ACCOUNTING STANDARDS
Bio-Research has considered the impact of newly issued financial accounting
pronouncements, principally Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," and does not believe that adoption of this and any other newly
issued pronouncements would have a significant impact on Bio-Research's
financial statements.
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995
------ ------
<S> <C> <C>
Trade:
Billed............................................................. $4,618 $5,491
Unbilled........................................................... 2,969 2,657
Reserve for doubtful accounts...................................... (814) (73)
------ ------
6,773 8,075
Other................................................................ 780 523
------ ------
$7,553 $8,598
====== ======
</TABLE>
4. UNBILLED RECEIVABLES AND ADVANCE BILLINGS
Unbilled receivables and advance billings on contracts were as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
-------- --------
<S> <C> <C>
Gross revenue recognized on uncompleted projects................. $ 17,691 $ 19,580
Less billings to date............................................ (16,609) (19,863)
-------- --------
$ 1,082 $ (283)
======== ========
Included in accompanying balance sheets under the following
captions:
Accounts receivable............................................ $ 2,969 $ 2,657
Advance billings............................................... (1,887) (2,940)
-------- --------
$ 1,082 $ (283)
======== ========
</TABLE>
5. LONG-TERM DEBT
Bio-Research has a credit facility in the amount of up to the lesser of
$3.7 million or the sum of 75% of trade accounts receivable and 25% of unbilled
receivables. On December 31, 1994 and 1995, there were no amounts outstanding on
the above credit facility.
Interest on any outstanding portion of the credit facility is at the bank's
prime lending rate (8.5% at December 31, 1995). The credit facility is
collateralized by all accounts receivable of Bio-Research.
At December 31, 1994 and 1995, Bio-Research was in compliance with all
covenants of the credit facility.
F-8
<PAGE> 11
BIO-RESEARCH LABORATORIES LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. OPERATING LEASES
Bio-Research leases various equipment items under operating leases.
Minimum rental commitments payable in future years under operating leases
having an initial or remaining noncancelable term of one year or more are as
follows (in thousands):
<TABLE>
<S> <C>
1996.......................................................................... $201
1997.......................................................................... 198
1998.......................................................................... 183
1999.......................................................................... 161
2000.......................................................................... 161
----
Total minimum rentals............................................... $903
====
</TABLE>
Total rent expense for all operating leases was approximately $210,000,
$211,000 and $182,000 for the years ended December 31, 1993, 1994 and 1995,
respectively.
7. INCOME TAXES
Significant components of Bio-Research's deferred tax liabilities and
assets as of December 31, 1994 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Research and development credit carryforward..................... $10,592 $10,036
Undeducted research and development expenditures................. 1,854 2,328
Other.............................................................. 399 327
------- -------
Total deferred tax assets................................ 12,845 12,691
Valuation allowance for deferred tax assets........................ (6,868) (6,758)
------- -------
Net deferred tax assets............................................ 5,977 5,933
Deferred tax liability:
Depreciation and amortization.................................... (5,487) (5,778)
Other............................................................ (490) (155)
------- -------
Net deferred tax assets.................................. $ -- $ --
======= =======
</TABLE>
At December 31, 1995, Bio-Research had unrealized research and development
tax credits, net of income tax effect, of $10,036. These credits expire in years
1997 through 2005. For financial reporting purposes, a valuation allowance of
$6,758 has been recognized to offset the deferred tax assets related to those
carryforwards. The net deferred tax asset reflects a decrease in the valuation
allowance of approximately $110.
Significant components of the provision for income taxes attributable to
income before income taxes, extraordinary item and cumulative effect of
accounting change are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Current:
Federal................................................. $ 314 $ 73 $ --
Provincial.............................................. (1,431) (1,173) (1,026)
Deferred.................................................. -- -- --
------- ------- -------
Provision for income taxes................................ $(1,117) $(1,100) $(1,026)
======= ======= =======
</TABLE>
F-9
<PAGE> 12
BIO-RESEARCH LABORATORIES LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Bio-Research's effective tax rate differed from the federal statutory rate
in Canada as set forth below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Federal statutory rate.................................... $ 372 $ 677 $ 785
Provincial income taxes................................... 151 322 246
Federal Research & Development Tax Credit, net of taxes... (419) (1,203) (987)
Quebec Research & Development Tax Credit, net of taxes.... (1,075) (970) (917)
Other..................................................... (146) 74 (153)
------- ------- -------
$(1,117) $(1,100) $(1,026)
======= ======= =======
</TABLE>
8. STOCK OPTION PLAN
During 1992, Bio-Research adopted a stock option plan for certain key
employees and outside directors to purchase common shares. The options issued
under this plan vest over a period of five years for key employees and over a
period of three years for outside directors.
The 1992 Stock Option Plan provides for the grant of options to purchase up
to 802,640 shares of Common Stock to directors, officers and other key persons.
Information with respect to the 1992 Stock Option Plan is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Options outstanding at January 1.......... 599,820 634,820 664,820
Granted................................. 35,000 30,000 55,500
Exercised............................... -- -- --
Canceled................................ -- -- --
-------------- -------------- --------------
Outstanding at December 31................ 634,820 664,820 720,320
============ ============ ============
Option price range at December 31......... $2.04 to $2.97 $2.04 to $2.97 $2.04 to $5.23
============ ============ ============
Options exercisable at December 31........ 153,455 281,669 448,674
============ ============ ============
</TABLE>
At December 31, 1993, 1994 and 1995, there were 167,820, 137,820 and 82,320
shares, respectively, available for grant.
9. EMPLOYEE BENEFITS
Bio-Research sponsors various noncontributory defined benefit plans
covering substantially all employees, including plans covering executive
administrative employees and all executive administrative employees who are
covered by a special top-hat pension agreement. Pension plan benefits are based
primarily on participants' compensation and years of service. Total pension
expense for 1993, 1994 and 1995 was approximately $278,000, $281,000 and
$167,000, respectively, and consists of the following (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Service cost on benefits earned during the year................ $ 253 $ 246 $ 197
Interest cost on projected benefit obligation.................. 244 266 246
Actual return on plan assets................................... (217) (228) (261)
Net amortization and deferral.................................. (2) (3) (15)
----- ----- -----
$ 278 $ 281 $ 167
===== ===== =====
</TABLE>
F-10
<PAGE> 13
BIO-RESEARCH LABORATORIES LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The actuarial present value of benefit obligations and funded status for
Bio-Research's defined benefit plans were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Projected benefit obligation......................................... $3,425 $3,627
Plan assets at fair value............................................ 3,119 3,799
------ ------
Projected benefit obligation (in excess) less than plan assets....... (306) 172
Unrecognized net loss (gain)......................................... 54 (389)
Unrecognized net transition obligation............................... (302) (277)
Unrecognized prior service cost...................................... 305 287
------ ------
Net pension liability................................................ $ (249) $ (207)
====== ======
</TABLE>
Assumptions used in developing the projected benefit obligation as of
December 31 were as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate..................................................... 8.0 % 8.0 % 8.0 %
Rate of increase in compensation.................................. 6.5 % 6.5 % 5.0 %
Rate of return on plan assets..................................... 8.0 % 8.0 % 8.0 %
</TABLE>
10. MAJOR CLIENTS
For the year ended December 31, 1993, one client accounted for 12% of
Bio-Research's service revenue. No single client accounted for more than 10% of
Bio-Research's service revenue for the year ended 1994 or 1995.
11. COMMITMENTS AND CONTINGENCIES
During 1995, Bio-Research entered into foreign exchange contracts to
deliver United States currency for the purpose of hedging its United States
currency cash flow. These contracts call for the delivery of $750,000 United
States Dollars per month for the period January 1996 through January 1997 at
exchange rates averaging $1.3821 Canadian Dollar per United States Dollar.
During 1993, Bio-Research undertook a project to upgrade its computer
systems, which it expects to implement in phases through 1997 at a cost of
approximately $4.8 million. Approximately $2.6 million of this amount was
incurred as of December 31, 1995.
In 1991, a customer commenced legal action against Bio-Research claiming
damages in the amount of $5.2 million, plus interest and costs, resulting from
statistical errors in carrying out two clinical research studies. An amount of
$220,000 has been provided for in the accounts with respect to this claim. Based
on applicable insurance coverage and an indemnification agreement from a former
stockholder in favor of Bio-Research in respect of any liability in excess of
the amount provided for, management is of the opinion that the outcome of this
matter will not have any further impact upon the financial position of
Bio-Research.
Also, in the ordinary course of business, Bio-Research is involved in
certain claims and litigation. Management is of the opinion, based on
information presently available to it, that the eventual outcome of these
matters will not have a material adverse effect upon the financial position of
Bio-Research.
12. SUBSEQUENT EVENT
On May 24, 1996, Bio-Research announced the signing of a definitive
agreement to sell the assets of Bio-Research to ClinTrials Research Inc., a
Nashville, Tennessee based clinical research organization, for approximately $65
million plus the assumption of certain liabilities.
F-11
<PAGE> 14
BIO-RESEARCH LABORATORIES LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
13. UNAUDITED INTERIM FINANCIAL INFORMATION
The balance sheet as of March 31, 1996, the related statements of income
and cash flows for the three months ended March 31, 1995 and 1996, and the
statement of stockholders' equity for the three months ended March 31, 1996
(interim financial statements) have been prepared by Bio-Research and are
unaudited. The interim financial statements include all adjustments consisting
of only normal recurring adjustments necessary for a fair statement of the
results of the interim periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the interim financial statements. The
interim financial statements should be read in conjunction with Bio-Research's
December 31, 1995 audited financial statements appearing herein. The results for
the three months ended March 31, 1996 may not be indicative of operating results
for the full year.
F-12
<PAGE> 15
CLINTRIALS RESEARCH INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined statements of income for the
year ended December 31, 1995 and for the three months ended March 31, 1996 gives
effect to the Acquisition as if it had occurred on January 1, 1995. The
unaudited pro forma condensed combined balance sheet as of March 31, 1996, gives
effect to the Acquisition as if it had occurred on March 31, 1996.
The unaudited pro forma condensed combined financial statements give effect
only to the reclassifications and adjustments set forth in the accompanying
Notes to unaudited pro forma condensed combined financial statements. The pro
forma financial information is provided as additional information only and is
not necessarily indicative of actual results that would have been achieved had
the Acquisition been consummated at the beginning of the periods presented or of
future results.
These statements have been prepared from the consolidated financial
statements of the Company and the financial statements of Bio-Research and
should be read in conjunction with such statements and the related Notes. The
financial statements of Bio-Research are included elsewhere herein. The
consolidated financial statements of the Company are incorporated herein by
reference. See "Incorporation of Certain Documents By Reference."
F-13
<PAGE> 16
CLINTRIALS RESEARCH INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------------------------------------------------------------------
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS
AS REPORTED AS REPORTED TO REFLECT TO REFLECT COMBINED
CLINTRIALS BIO-RESEARCH ACQUISITION SUBTOTAL OFFERING PRO FORMA
----------- ------------ ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents............. $16,831 $ 5,548 $ -- $ 22,379 $ 103,149(2) $ 60,528
(65,000)(2)
Accounts receivable....... 25,407 6,913 32,320 32,320
Other current assets...... 4,515 2,753 7,268 7,268
----------- ------------ ----------- -------- ----------- ---------
Total current assets........ 46,753 15,214 61,967 38,149 100,116
Property and equipment.... 13,387 28,439 41,826 41,826
Less accumulated
depreciation and
amortization............ 5,491 11,639 17,130 17,130
----------- ------------ ----------- -------- ----------- ---------
7,896 16,800 24,696 24,696
Excess of purchase price
over net assets
acquired.................. 6,965 38,367(1) 45,332 45,332
Other assets................ 38 38 38
----------- ------------ ----------- -------- ----------- ---------
$61,652 $ 32,014 $ 38,367 $132,033 $ 38,149 $170,182
=========== ============ =========== ========= =========== =========
Liabilities and
Stockholders' Equity
Current liabilities:
Accounts payable and
accrued expenses........ $ 8,143 $ 3,192 $ -- $ 11,335 $ -- $ 11,335
Advance billings.......... 21,167 2,189 23,356 23,356
Payable to stockholders of
Bio-Research............ 65,000(1) 65,000 (65,000)(2) --
----------- ------------ ----------- -------- ----------- ---------
Total current liabilities... 29,310 5,381 65,000 99,691 (65,000) 34,691
Deferred income taxes....... 234 234 234
Stockholders' equity:
Common stock.............. 88 3,128 (3,128)(1) 88 26(2) 114
Additional paid-in
capital................. 40,180 39 (39)(1) 40,180 103,123(2) 143,303
Retained earnings......... (8,229) 24,941 (24,941)(1) (8,229) (8,229)
Cumulative foreign
currency translation
adjustments............. 69 (1,475) 1,475(1) 69 69
----------- ------------ ----------- -------- ----------- ---------
Total stockholders'
equity.................... 32,108 26,633 (26,633) 32,108 103,149 135,257
----------- ------------ ----------- -------- ----------- ---------
$61,652 $ 32,014 $ 38,367 $132,033 $ 38,149 $170,182
=========== ============ =========== ========= =========== =========
</TABLE>
See notes to unaudited pro forma condensed combined balance sheet.
F-14
<PAGE> 17
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED BALANCE SHEET
(1) To record the purchase of the net assets (including the recording of excess
of purchase price over net assets acquired) and eliminate the stockholders'
equity of Bio-Research. No estimate of any purchase accounting adjustments
to record property and equipment at fair value has been made at this time.
ClinTrials expects to obtain and record a valuation of Bio-Research's
property and equipment within six months following the Acquisition. It is
not expected that the reclassification between excess of purchase price
over net assets acquired and property and equipment will be significant to
the combined balance sheet. The pro forma adjustments reflect a temporary
payable to the stockholders of Bio-Research to effect the purchase of
Bio-Research. The temporary payable would be satisfied from the proceeds of
the offering referred to in pro forma adjustment (2).
(2) To record the net proceeds from the completion of the offering of 2,600,000
shares of ClinTrials Common Stock at an assumed price of $42.00 per share.
Gross proceeds of $109.2 million, less estimated issuance costs of $6.1
million, provides net proceeds of $103.1 million. A portion of the net
proceeds would be utilized to retire the temporary payable to the
stockholders of Bio-Research referred to in pro forma adjustment (1).
F-15
<PAGE> 18
CLINTRIALS RESEARCH INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT FOR EARNINGS PER SHARE)
<TABLE>
<CAPTION>
AS REPORTED AS REPORTED PRO FORMA COMBINED PRO
CLINTRIALS BIO-RESEARCH ADJUSTMENTS FORMA(1)
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net service revenue........................ $17,670 $6,324 $ -- $ 23,994
Operating costs:
Direct costs............................. 10,526 3,658 14,184
Selling, general and administrative
costs................................. 4,750 1,954 6,704
Depreciation and amortization............ 700 426 240(2) 1,366
----------- ------------ ----------- ------------
Income from operations..................... 1,694 286 (240) 1,740
Other income (expense):
Interest income.......................... 215 77 --(3) 292
Interest expense......................... (14) (1) (15)
----------- ------------ ----------- ------------
Income before income taxes................. 1,895 362 (240) 2,017
Provision for income taxes................. (782) 176 --(4) (606)
----------- ------------ ----------- ------------
Net income................................. $ 1,113 $ 538 $ (240) $ 1,411
========= ========= ========= ==========
Weighted average common shares............. 9,185 1,692(5) 10,877
========= ========= ==========
Earnings per common and common equivalent
share.................................... $ 0.12 $ 0.13
========= ==========
</TABLE>
See notes to unaudited pro forma condensed combined statement of income.
F-16
<PAGE> 19
CLINTRIALS RESEARCH INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT FOR EARNINGS PER SHARE)
<TABLE>
<CAPTION>
AS REPORTED AS REPORTED PRO FORMA COMBINED
CLINTRIALS BIO-RESEARCH ADJUSTMENTS PRO FORMA(1)
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net service revenue............................. $57,846 $ 26,342 $ -- $ 84,188
Operating costs:
Direct costs.................................. 34,850 14,408 49,258
Selling, general and administrative costs..... 15,209 8,024 23,233
Depreciation and amortization................. 2,287 1,573 959(2) 4,819
----------- ------------ ----------- ------------
Income from operations.......................... 5,500 2,337 (959) 6,878
Other income (expense):
Interest income............................... 744 373 --(3) 1,117
Interest expense.............................. (79) (10) (89)
----------- ------------ ----------- ------------
Income before income taxes...................... 6,165 2,700 (959) 7,906
Provision for income taxes...................... (2,564) 1,026 --(4) (1,538)
----------- ------------ ----------- ------------
Net income...................................... $ 3,601 $ 3,726 $ (959) $ 6,368
========= ========= ========= ==========
Weighted average common shares.................. 9,088 1,692(5) 10,780
========= ========= ==========
Earnings per common and common equivalent
share......................................... $ 0.40 $ 0.59
========= ==========
</TABLE>
See notes to unaudited pro forma condensed combined statement of income.
F-17
<PAGE> 20
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENTS OF INCOME
(1) The pro forma condensed combined statements of income do not give effect to
any overhead reductions or cost savings, if any, which may be realized
after the consummation of the Acquisition.
(2) To adjust amortization expense. The excess of purchase price over net assets
acquired related to the Acquisition will be amortized over 40 years using
the straight line method. The amounts for the year ended December 31, 1995
and the three months ended March 31, 1996 were $959 and $240, respectively.
No estimate of any purchase accounting adjustments to record property and
equipment at fair value has been made at this time. ClinTrials expects to
obtain and record a valuation of Bio-Research's property and equipment
within six months following the Acquisition. It is not expected that any
reclassification between excess of purchase price over net assets acquired
and property and equipment would significantly affect amortization expense.
(3) Interest income as a result of the cash proceeds received in excess of the
cash used to acquire Bio-Research and for costs of the Offering is not
reflected in the pro forma condensed combined statements of income. The
Company is presently earning a 4.11% yield on tax exempt investments. The
following table summarizes the total effect on the pro forma condensed
combined statements of income as if the interest had been earned on the
excess cash.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, 1995 ENDED MARCH 31, 1996
----------------- --------------------
<S> <C> <C>
Excess cash invested.................................. $38,149 $ 38,149
============= ================
Pro forma income, as stated........................... 6,368 1,411
Estimated tax exempt interest income.................. 1,568 392
----------------- ----------
Pro forma income with excess cash invested............ $ 7,936 $ 1,803
============= ================
Pro forma weighted average shares outstanding for
entire offering..................................... 11,688 11,785
============= ================
Pro forma earnings per share after consideration of
investment of excess funds.......................... $ 0.68 $ 0.15
============= ================
</TABLE>
(4) The pro forma amortization adjustment (Note 2) does not affect the income
tax provision as such tax benefit of the amortization adjustment would
merely increase the federal and Quebec research and development tax credits
to be carried forward to future periods. The pro forma condensed combined
statements of income do not provide for deferred United States taxes on the
income earned by Bio-Research in Canada as ClinTrials intends to
permanently reinvest any earnings outside the United States.
(5) The weighted average common shares outstanding in the pro forma columns
include the 1,692,000 shares of Common Stock offered hereby that will be
used to fund the $65 million cost of the Acquisition. The calculation of
these shares is based on an offering price of $42.00 per share, net of
offering costs.
F-18
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Numbered Page
------- ----------- -------------
<S> <C> <C>
2. Asset Purchase Agreement among Bio-Research,
certain shareholders thereof, and the Registrant*
23. Consent of Ernst & Young LLP
</TABLE>
---------
* This exhibit contains a list of exhibits which are not being filed
herewith. The Registrant shall furnish supplementally a copy of any such
omitted exhibit to the Securities and Exchange Commission upon request.
<PAGE> 1
EXHIBIT 2
Execution Draft
ASSET PURCHASE AGREEMENT
among
BIO-RESEARCH LABORATORIES LTD.
the Seller
CAISSE DE DEPOT ET PLACEMENT DU QUEBEC,
CAI CAPITAL CORPORATION
CAI CAPITAL PARTNERS AND COMPANY LIMITED PARTNERSHIP
CAI PARTNERS AND COMPANY LIMITED PARTNERSHIP
and
ONTARIO TEACHERS' PENSION PLAN BOARD
the Shareholders
and
CLINTRIALS RESEARCH INC.
the Buyer
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3. Assumed Contracts, Leases and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2. RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1. Collection of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1. Purchase Price; Current Liabilities Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2. Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1. Organization, Qualification and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2. Absence of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4. Operations Since December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5. Absence of Certain Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6. Employment Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.7. Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8. Compliance with Zoning, Land Use and Other Laws; Easements . . . . . . . . . . . . . . . . . . . . . 12
4.9. Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.10. Leases and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.11. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.12. Miscellaneous Representations Relating to Real Estate . . . . . . . . . . . . . . . . . . . . . . . 16
4.13. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.14. Seller's Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.15. Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.17. Broker's or Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.18. [Deleted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.19. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.20. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.21. Motor Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.22. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.23. Bulk Sales Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.24. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.25. Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.26. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.27. No Omissions or Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1. Organization, Qualification and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2. Absence of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3. Broker's or Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 6. COVENANTS OF PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1. Preservation of Business and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.2. Absence of Material Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.3. Access to Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4. Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.5. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.6. Preserve Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 25
6.7. Maintain Books and Accounting Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.8. Indebtedness; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.9. Compliance with Laws and Regulatory Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.10. Maintain Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.11. Current Return Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.12. No Sale, Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.13. Hart-Scott-Rodino Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.14. Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.15. [Deleted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.16. Contracts to be Assigned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.17. Continued Employment of Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.18. Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 7. TITLE AND SURVEYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1. Title Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2. Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3. Defects and Cure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4. Environmental and Engineering Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 8. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 9. SELLER'S AND SHAREHOLDERS' CONDITIONS TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.1. Representations and Warranties True at Closing; Compliance with
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.2. No Action/Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.3. Order Prohibiting Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 10. BUYER'S CONDITIONS TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1. Representations and Warranties True at Closing; Compliance with
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.2. Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.3. No Action/Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.4. Inspection of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.5. Order Prohibiting Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.6. Confidentiality and Non-Compete Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.7. Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.8. Updated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.9. Value of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.10. Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.11. [Deleted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.12. [Deleted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.13. "Back Log" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 11. OBLIGATIONS OF SELLER AND SHAREHOLDERS AT
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.1. Documents Relating to Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.2. [Deleted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.3. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.4. Corporate Good Standing and Corporate Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.5. Closing Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.6. Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.7. Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.8. Confidentiality and Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 12. OBLIGATIONS OF BUYER AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.2. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.3. Corporate Good Standing and Board Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.4. Closing Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.5. Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 13. OPINION OF BUYER'S COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 14. SURVIVAL OF PROVISIONS AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
14.1. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
14.2. Indemnification by Seller and Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14.3. Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14.4. Rules Regarding Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE 15. RESTRICTIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.1. Restrictive Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.2. Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 16. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.1. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.2. Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
16.4. Confidentiality; Prohibition on Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
16.5. Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
16.6. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
16.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.8. Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.9. Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.10. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.11. Post Closing Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16.12. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.13. Interpretation; Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.14. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.15. Legal Fees and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
16.16. English Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), is made on May ___,
1996, by and among BIO-RESEARCH LABORATORIES LTD., a Quebec corporation
("Seller"), CAISSE DE DEPOT ET PLACEMENT DU QUEBEC, CAI CAPITAL CORPORATION,
CAI CAPITAL PARTNERS AND COMPANY LIMITED PARTNERSHIP, CAI PARTNERS AND COMPANY
LIMITED PARTNERSHIP and ONTARIO TEACHERS' PENSION PLAN BOARD (the
"Shareholders"), and CLINTRIALS RESEARCH INC., a Delaware corporation
("Buyer").
R E C I T A L S:
WHEREAS, Seller owns and operates a pre-clinical research service
business that provides services to pharmaceutical, chemical and biotechnology
companies (the "Business"); and
WHEREAS, Shareholders own all of the issued and outstanding shares in
the capital stock of Seller; and
WHEREAS, Seller and Shareholders desire to sell and transfer the
Assets (as such term is defined herein) of the Business to Buyer, and Buyer
desires to purchase the same from Seller and Shareholders, subject to the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained in this Agreement, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties,
intending to be legally bound hereby, agree as follows:
ARTICLE 1. PURCHASE AND SALE
1.1. Purchase and Sale. Seller agrees to sell, transfer, assign,
convey and deliver to Buyer, and Buyer agrees to purchase from Seller all
right, title and interest in all assets (except the Excluded Assets, as defined
below) of Seller of every kind and type, tangible or intangible, moveable or
immoveable, real and personal (collectively, the "Assets"), free and clear of
all encumbrances, mortgages, pledges, liens, hypothecs (movable and immovable),
security interests, obligations and liabilities other than the Assumed
Liabilities (as defined in Section 1.3) and such other immaterial exceptions as
are acceptable to Buyer and listed on the attached Exhibit 1.1 (herein, the
"Permitted Exceptions"), which Assets include, without limitation, the
following:
<PAGE> 7
(1) All right, title and interest of Seller in and to all
of the immoveable property owned or leased by Seller as listed in Exhibit
1.1(1) attached hereto and in and to all structures, improvements, fixed assets
and fixtures including fixed machinery and fixed equipment situated thereon or
forming a part thereof and all servitudes, appurtenances, easements and
rights-of-way related thereto (collectively, the "Real Estate");
(2) All tangible personal property, moveable property,
equipment, machinery, data processing hardware and software, furniture,
furnishings, appliances, vehicles and other tangible personal property of every
description and kind wherever situated and all replacement parts therefor owned
by Seller (collectively, the "Equipment and Furnishings");
(3) All inventory of goods and supplies of Seller
(collectively, the "Inventory");
(4) The right, title and interest of Seller in and to all
accounts and notes receivables, book debts and other debts due or accruing to
Seller as of the Closing Date (as defined in Section 8.1) (the "Receivables"),
including but not limited to those reflected on the Financial Statements (as
defined in Section 4.3), and the full benefit of all security for such
Receivables;
(5) All cash, bank accounts (as listed by name and
address of banking institution, account name and account and routing numbers on
Exhibit 1.1(5) attached hereto), money market accounts, other accounts,
certificates of deposit and other investments of Seller (the "Cash and Cash
Equivalents");
(6) To the extent permitted by applicable law, all
customer, operations, personnel and other records of Seller (including both
hard and microfiche copies), and all manuals, books and records used by Seller,
including, without limitation, operations manuals, training manuals, study
protocols and case reports, personnel policies and files and manuals,
accounting records, and computer software;
(7) To the full extent transferable, all licenses,
permits, registrations, certificates, consents, accreditations and approvals
held by Seller, together with all waivers which Seller currently has, if any,
of any requirements pertaining to such licenses, permits, registrations,
certificates, consents, accreditations and approvals;
(8) All goodwill of the Business, and, to the extent
assignable by Seller, all warranties (express or implied) and rights and claims
related to the Assets or the operation of the Business including the benefits
of any insurance claims and all of Seller's right, title and interest in and to
the name "Bio-Research" or "Bio-Recherche" or any variation thereof;
2
<PAGE> 8
(9) All prepaid expenses and unbilled research in
progress, including those reflected on the Financial Statements;
(10) The full benefit of all unfilled orders received by
Seller and all right, title and interest in and to the contract and leasehold
rights, interests and commitment pursuant to all client contracts, contracts
for purchase or lease of personal property, contracts for purchase, sale or
lease of equipment, goods or services currently furnished or to be furnished in
connection with the Business, whether oral or written;
(11) All intangible or intellectual property owned,
leased, licensed or possessed by Seller, including without limitation, the
names "Bio-Research Laboratories Ltd." and "Laboratories Bio-Recharches Ltee"
and derivatives thereof;
(12) All Seller's right, title and interest in any
partnerships, joint ventures or similar arrangements; and
(13) All of Seller's rights with respect to Seller's
Benefit Plans and Pension Plans listed in Exhibits 4.22(1) and (2),
respectively, including any rights of Seller in any surplus thereunder.
1.2. Excluded Assets. Seller is not selling and Buyer is not
purchasing or assuming obligations with respect to Seller's corporate records
(including minute books) and fiscal records and other records that Seller is
required by law to retain in its possession.
1.3. Assumed Contracts, Leases and Liabilities. At Closing, Buyer
hereby agrees to assume, discharge, satisfy, perform and fulfill, as part of
the consideration for the Assets, in addition to the payment of the Purchase
Price in accordance with Section 3.1(a), only the following (collectively, the
"Assumed Liabilities"):
(1) All liabilities and obligations of Seller, existing
on or arising after the Closing, with respect to all of Seller's employees,
including, without limitation, all liabilities and obligations of Seller in
connection with all Benefit Plans and Pension Plans listed in Exhibits 4.22(1)
and 4.22(2).
(2) Seller's Current Liabilities existing or arising
prior to Closing (herein so called), as further defined in Exhibit 1.3(2).
(3) Those liabilities and obligations of Seller arising
under the Leases and Contracts (as defined in Section 4.10) (or any other
contracts of Seller) existing on or arising after the Closing Date.
(4) All liabilities and obligations of Seller under the
litigation claims listed in Exhibit 4.13 (including the defense or settlement
of such claims).
3
<PAGE> 9
(5) All liabilities and obligations of Seller
specifically disclosed in the 1994 Audit and Study (as hereinafter defined).
Except for the Assumed Liabilities, it is expressly agreed and
understood by each of the parties to this Agreement that Buyer does not assume,
and shall not be liable for, any debt, liability or obligation of Seller or
Shareholders, of any type or description whatsoever, whether related or
unrelated to the Assets, the Business or the transactions contemplated within
this Agreement and that Seller shall remain liable and responsible for the
payment or performance, as the case may be, of all debts, liabilities,
obligations, contracts, leases, notes payable, accounts payable, commitments,
agreements, suits, claims, indemnities, mortgages, taxes, contingent
liabilities and other obligations of Seller not assumed by Buyer hereunder.
ARTICLE 2. RECEIVABLES
2.1. Collection of Receivables. At Closing, Seller will take all
appropriate action necessary to vest in Buyer all right, title and interest in
the Receivables, and Buyer will use its reasonable efforts to collect the
Receivables following Closing. In the event that any Receivable cannot be
transferred to Buyer, then Seller will use its reasonable efforts to collect
the Receivable, as Buyer's agent for the limited purpose of such collection,
and shall immediately deliver to Buyer the gross proceeds of such collection.
Seller shall have no obligation to institute suit to collect any Receivables.
Buyer shall not compromise any Receivables without Seller's consent. If,
within 180 days following Closing, Buyer has collected less than the amount of
the Receivables as reflected in the Final Closing Statement (as defined in
Section 3.1), net of reserves in the amount of Canadian $100,000.00, Seller
shall pay to Buyer the amount of the net uncollected Receivables (the net
amount of such uncollected Receivables being the "Net Uncollected Receivables")
within ten (10) days of the written calculation thereof by Buyer. Upon payment
to Buyer of the full amount of the Net Uncollected Receivables, Buyer hereby
agrees to assign to Seller the Net Uncollected Receivables. If, after
assignment of such Receivables, Buyer receives a payment on account of such
Receivables, Buyer shall forthwith pay over the amount of such payment to
Seller.
4
<PAGE> 10
ARTICLE 3. PURCHASE PRICE
3.1. Purchase Price; Current Liabilities Adjustment.
(a) The purchase price payable by Buyer to Seller for the
Assets and in consideration for the agreements contained herein, including the
agreements contained in Article 15 hereof, will be payable in cash at Closing
and shall be U.S. Sixty-Five Million Dollars (U.S. $65,000,000) (the "Purchase
Price").
(b) No later than sixty (60) days after the Closing,
Seller and Buyer shall prepare the "Final Closing Statement" in the form
attached as Exhibit 3.1 reflecting the total amount of Receivables at the
Closing Date (to be used in the calculation in Section 2.1) and stating
Seller's Net Working Capital (as such term is defined in the Financial
Statements), determined in accordance with generally accepted accounting
principles (Canadian) consistently applied (herein, "GAAP") except for the
absence of notes thereto, consistently applied with prior periods. In the
event Net Working Capital, as reflected in the Final Closing Statement, is less
than the amount set forth on Seller's December 31, 1995 Financial Statements,
such deficit shall be payable to Buyer in cash, on or before the tenth day
following the day the Final Closing Statement is agreed upon or otherwise
determined as described below. If Buyer and Seller are unable to agree on the
Final Closing Statement within sixty (60) days after the Closing, they shall
appoint an independent accounting firm (the "Accountants") to make such
determination, which determination shall be final and binding on the parties
hereto for the purpose of this Agreement, and Buyer and Seller shall each pay
one-half the cost of the Accountants. The parties acknowledge that GAAP allows
alternatives and often involves various methods of estimation, and Seller has
historically chosen a particular method or alternative. Therefore,
"consistently applied" shall mean that the specific method or alternative
historically used by Seller shall continue to be used.
3.2. Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets in the manner set forth in Exhibit 3.2 attached
hereto (the "Allocation"). The parties to this Agreement expressly agree that
the Allocation shall be used by them for all purposes including tax,
reimbursement and other purposes. Each party to this Agreement agrees that it
will report the transaction completed pursuant to this Agreement in accordance
with the Allocation, including any report made under Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code"), and that no such party
will take a position inconsistent with the Allocation except with the prior
written consent of the other parties hereto.
5
<PAGE> 11
3.3 Tax Matters.
(a) Definitions.
"Excise Tax Act" shall refer to the Excise Tax Act, R.S.C.,
1985, c.#-15, together with the regulations promulgated thereunder, as amended
or supplemented from time to time.
"Quebec Sales Tax Act" shall refer to the Act respecting the
Quebec Sales Tax, R.S.Q., c.T-0.1, together with the regulations promulgated
thereunder, as amended or supplemented from time to time.
"Tax" shall mean any tax, governmental rate, levy, impost,
duty, fee, charge or other assessment, including, without limitation, any
income, excise, capital gain, gross income, gross receipt, sales, use, health
services, transaction, goods and services, ad valorem, value-added, franchise,
registration, title, license, capital, paid-up capital, profit, withholding,
payroll, employment, unemployment insurance, governmental pension plan,
employer health, severance, stamp, occupation, premium, real property, personal
property, highway use, commercial rent or environmental tax, custom, duty or
other tax, governmental fee or charge or other like assessment or charge of any
kind whatsoever, together with any interest, penalty or addition to tax arising
from nonpayment or underpayment of such tax.
"Tax Act" shall refer to the Income Tax Act, R.S.C., 1985 (5th
Suppl.) c.1, together with the regulations promulgated thereunder, as amended
or supplemented from time to time, including any proposed amendment to such
legislation announced by way of press release from time to time by the Minister
of Finance of Canada or other Minister charged with the administration of the
Tax Act, which announcement confirms that such proposed amendment, when
enacted, shall have retroactive effect to a date prior to the date of its
enactment.
"Quebec Tax Act" means the Taxation Act, R.S.Q., c.I-3,
together with the regulations promulgated thereunder, as amended or
supplemented from time to time, including any proposed amendment to such
legislation announced by way of press release from time to time by the Minister
of Finance for the Province of Quebec or such other Minister charged with the
administration of the Quebec Tax Act, which announcement confirms that such
proposed amendment, when enacted, shall have retroactive effect to a date prior
to the date of its enactment.
"GST" shall refer to the Goods and Services Tax levied under
Part IX of the Excise Tax Act.
"QST" shall refer to the Quebec Sales Tax levied under Title I
of the Quebec Sales Tax Act.
6
<PAGE> 12
(b) Cooperation. Each of Seller and Buyer shall
cooperate fully with each other and make available or cause to be made
available to each other for consultation, inspection and copying (at such other
party's expense) in a timely fashion such personnel, Tax data, files, books,
records, documents, financial, technical and operating data, computer records
and other information (whether of Seller or any Affiliate or predecessor of
Seller) as may be reasonably required (i) for the preparation by Buyer or
Seller of any Tax returns, elections, consents or certificates, projections,
schedules or estimated payments in respect of the transactions contemplated by
this Agreement or the Assets or any appraisal or valuation of the Assets or
(ii) in connection with any audit or proceeding by any governmental authority
relating to Taxes for which Buyer or Seller is responsible under this
Agreement.
(c) Joint Election. Seller and Buyer shall jointly elect
in prescribed form to have Section 22 of the Tax Act, Section 184 of the Quebec
Tax Act and the equivalent or comparable provisions in any provincial,
territorial, municipal, regional, urban, local or any other statute or law
apply to any and all Assets. Such joint elections shall allocate the
consideration among the Assets in the manner set forth in Exhibit 3.2. Seller
and Buyer shall cooperate fully in the joint filing of the aforesaid elections
as required by the Tax Act or the Quebec Tax Act, and equivalent or comparable
provisions of any other statute or law.
(d) GST and QST. The amount of the consideration for GST
purposes and the amount of the GST payable in respect of the Assets and the
amount of the consideration for QST purposes and the amount of the QST payable
in respect of the Assets shall be set forth in Exhibit 3.3(d), which shall be
attached hereto prior to Closing.
(e) Goods and Services Tax. Both Seller and Buyer shall
cooperate fully with each other and make any and all elections required in
order that the minimum possible GST and QST, if any, be payable in connection
with the transactions contemplated hereby. At the request of Buyer, Seller and
Buyer shall jointly elect in prescribed form under Subsection 167(1) of the
Excise Tax Act and under 75.1 of the Quebec Sales Tax Act that no tax be
payable pursuant to (i) Part IX of the Excise Tax Act, or (ii) the Quebec Sales
Tax Act, with respect to the sale of the Assets under this Agreement. Seller
and Buyer shall make such elections in prescribed form containing the
prescribed information pursuant to the said legislation. Buyer shall file the
joint elections with the returns required to be filed by Buyer under the Excise
Tax Act and the Quebec Sales Tax Act for Buyer's reporting period in which the
sale is made, in compliance with the requirements of the said legislation.
7
<PAGE> 13
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF
SELLER AND SHAREHOLDERS
As a material inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated herein, Seller and Shareholders hereby
solidarily represent and warrant to Buyer (subject to the provisions of Section
14.4(5)), which representations and warranties shall be true and correct on the
date hereof and as of the date of Closing, as follows:
4.1. Organization, Qualification and Authority. Each of Seller and
the Subsidiaries (as defined below) is a company duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is not required to be qualified to do business as a foreign
corporation in any other jurisdiction. Each of Seller and the Subsidiaries has
the necessary corporate power and authority to own, lease and operate its
facilities and assets as presently owned, leased and operated; and to carry on
its business as it is now being conducted. Except for Shareholders and as set
forth on Exhibit 4.1, no other person or entity owns or holds, has any interest
in, whether legal, equitable or beneficial, and no person or entity has the
right to purchase, any capital stock or other security (whether debt or equity)
of Seller. Except for the two wholly-owned subsidiaries listed on Exhibit 4.1
(the "Subsidiaries"), Seller owns no capital stock, security, interest or other
right, or any option or warrant convertible into the same, of any corporation,
partnership, joint venture or other business enterprise. 6651, Inc., a
wholly-owned Delaware subsidiary, is, and since formation has been, inactive
and has no operations, assets or liabilities of any kind or nature. 2645-2151
Quebec, Inc., a wholly-owned Quebec subsidiary, pays Seller's representatives
based in the USA and receives a management fee from Seller equal to such
payments, and has no other assets, liabilities or operations of any kind.
Seller has the necessary corporate power and authority to execute, deliver and
carry out the terms of this Agreement and all documents and agreements
necessary to give effect to the provisions of this Agreement and to consummate
the transactions contemplated on the part of Seller hereby. Each of the
Shareholders has the full right, power and authority to execute, deliver and
carry out the terms of this Agreement and all corporate actions, documents and
agreements necessary to give effect to the provisions of this Agreement, to
consummate the transactions contemplated on the part of Shareholders hereby,
and to take all actions necessary, in their capacity as all of the
stockholders of Seller, to permit or approve the actions of Seller taken in
connection with this Agreement. The execution, delivery and consummation of
this Agreement, and all other agreements and documents executed in connection
herewith by Seller, have been duly authorized by all necessary corporate action
on the part of Seller and Shareholders. No other action, consent or approval
on the part of Seller, Shareholders or any other person or entity, is necessary
to authorize Seller's due and valid execution, delivery and consummation of
this Agreement and all other agreements and documents executed in connection
hereto except that the transactions must be approved under the Investment
Canada Act and the Competition Act. This Agreement and all other agreements
and documents executed in connection
8
<PAGE> 14
herewith by Seller and/or Shareholders, upon due execution and delivery
thereof, shall constitute the valid and binding obligations of each of Seller
and Shareholders, as the case may be, enforceable in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and by general principles of equity.
4.2. Absence of Default. The execution, delivery and
consummation of this Agreement, and all other agreements and documents executed
in connection herewith by Seller and/or Shareholders will not constitute a
violation of, or be in conflict with, and will not, with or without the giving
of notice or the passage of time, or both, result in a breach of, constitute a
default under, or create (or cause the acceleration of the maturity of) any
debt, indenture, obligation or liability affecting the Assets or the Business
pursuant to, or result in the creation or imposition of any security interest,
lien, charge, hypothec or other encumbrance upon any of the Assets under: (a)
any term or provision of the Articles of Incorporation or corporate Bylaws of
Seller; (b) any contract, lease, purchase order, agreement, document,
instrument, indenture, mortgage, hypothec, pledge, assignment, permit, license,
approval or other commitment to which Seller is a party or by which Seller or
the Assets are bound; (c) to Seller's knowledge, any judgment, decree, order,
regulation or rule of any court or regulatory authority applicable to Seller
and the Assets; or (d) to Seller's knowledge, any law, statute, rule,
regulation, order, writ, injunction, judgment or decree of any court or
governmental authority or arbitration tribunal to which Seller and/or the
Assets are subject, except, with respect to items (b), (c) or (d) above, where
any breach or violation thereof would not have, individually or in the
aggregate, a material adverse effect upon the Business or the Assets.
4.3. Financial Statements. Attached as Exhibit 4.3 are true and
correct copies of Seller's Balance Sheets as of December 31, 1995, 1994 and
1993, and its Statements of Income and Statements of Changes in Financial
Position for the years then ending (the "Audited Financial Statements") and the
interim unaudited financial statements of Seller for the one month period
ending January 31, 1996 (the "Unaudited Financial Statements" which with the
Audited Financial Statements shall be the "Financial Statements"). The
Financial Statements present fairly and accurately in all material respects the
assets, liabilities (whether accrued, absolute, contingent or otherwise) and
the financial position of Seller and the results of its operations for the
periods specified. The Financial Statements have been prepared in accordance
with GAAP, applied consistently for the periods involved.
4.4. Operations Since December 31, 1995. Except as set forth in
Exhibit 4.4, since December 31, 1995, there has been no:
(a) material adverse change in the condition, financial
or otherwise, of the Assets, the Business or, to Seller's knowledge, prospects
of the Business (other than as may arise or result, directly or indirectly,
from economic or political factors which are
9
<PAGE> 15
not particular to the Business or the pre-clinical research business), or in
the results of the operations of Seller;
(b) loss, damage or destruction of or to any of the
Assets, whether or not covered by insurance;
(c) sale, lease, transfer or other disposition by Seller
of, or hypothecation, mortgages or pledges of or the imposition of any lien,
charge or encumbrance on, any portion of the Assets, other than those made in
the ordinary course of business;
(d) material change in Seller's management compensation
program, increase in the compensation payable by Seller to any of its
employees, directors, independent contractors or agents, or any increase in, or
institution of, any bonus, insurance (other than the changes to Seller's group
insurance effective as of April 1, 1995), pension, profit-sharing or other
employee benefit plan or arrangements made to, for or with the employees,
directors, independent contractors or agents of Seller;
(e) cumulative net operating loss incurred in the
operation of the Business;
(f) adjustment or write-off of Receivables or reduction
in reserves for Receivables outside of the ordinary course of business;
(g) change in the accounting methods or practices
employed by Seller or change in depreciation or amortization policies;
(h) issuance or sale by Seller or contract or other
commitment entered into by Seller for the issuance or sale of any shares of
capital stock or securities convertible into or exchangeable for capital stock
of Seller;
(i) payment by Seller of any dividend, distribution or
extraordinary or unusual disbursement or expenditure or intercompany payable;
(j) sale, transfer, pledge, mortgage or other disposition
of any of the Assets (except in the ordinary course of business);
(k) merger, amalgamation, consolidation or similar
transaction; or solicitations therefor;
(l) federal, provincial, state, municipal or local
statutes, rule, regulation, order or case adopted, promulgated or decided
which, to the knowledge of Seller, is likely to have a material adverse effect
on the Business or Assets;
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(m) strike, work stoppage or other labor dispute
adversely affecting the Business;
(n) termination, waiver or cancellation of any material
rights or claims of Seller, under contract or otherwise; or
(o) termination or, to the knowledge of Seller, proposed
termination of business from any customer or client of the Business that
accounted for more than 5% of Seller's revenues in 1995.
4.5. Absence of Certain Liabilities. Seller has no liabilities or
obligations, except for those liabilities or obligations (i) reflected in or
reserved against in the Financial Statements, (ii) the Current Liabilities or
(iii) disclosed herein or in any of the Exhibits attached to this Agreement.
4.6. Employment Discrimination. Except as disclosed in Exhibit 4.6
attached hereto, to the knowledge of Seller, no person or party (including,
without limitation, any governmental agency) has threatened to assert and there
is no outstanding claim for, any action or proceeding against Seller (or any
officer, director or employee of Seller) arising out of any statute, ordinance
or regulation relating to wages, collective bargaining, discrimination in
employment or employment practices or occupational safety and health standards,
including, without limitation, the Canada Labour Code, the Industrial Accidents
and Occupational Diseases Act, Labour Standards Act, the Charter of Human
Rights and Freedoms, the Employment Equity Act (Canada), the Occupational
Safety and Health Act, or any other statute or regulation relating to such
matters.
4.7. Licenses and Permits.
(1) Seller has all local, provincial, state and federal
licenses, permits, registrations, certificates, accreditations and approvals
(collectively, the "Licenses and Permits") necessary for Seller to operate and
conduct the Business as presently conducted, and, to Seller's knowledge, there
does not exist any waivers or exemptions relating thereto. To Seller's
knowledge, there is no default on the part of Seller under any of the Licenses
and Permits. To Seller's knowledge, Seller is in full compliance with and
there exist no grounds for revocation, suspension or limitation of any of the
Licenses or Permits. The Licenses and Permits are listed on Exhibit 4.7
attached hereto, and true, accurate and complete copies have been provided to
Buyer. Seller is, and at the time of Closing will be, licensed by the
regulatory bodies listed on Exhibit 4.7. No notices have been received by
Seller or Shareholders with respect to any threatened, pending, or possible
revocation, termination, suspension or limitation of the Licenses and Permits
and to Seller's knowledge there are no threatened revocations, terminations,
suspensions or limitations of the Licenses and Permits. To Seller's knowledge,
the transaction evidenced by this Agreement shall not result in the revocation,
termination, suspension or limitation of those Licenses and Permits that are
transferable.
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(2) To the knowledge of Seller, each employee of Seller
has all Licenses and Permits required for each such employee to perform such
employees' designated functions and duties for Seller in connection with
conducting the Business as presently conducted, and, to Seller's knowledge,
there exists no waivers or exemptions relating thereto. To the knowledge of
Seller, there is no default under, nor does there exist any grounds for
revocation, suspension or limitation of, any such Licenses and Permits.
4.8. Compliance with Zoning, Land Use and Other Laws; Easements.
To Seller's knowledge, none of the Real Estate is in violation of any, and all
of the Real Estate is operated and used in accordance with all, zoning, public
health, building code or other laws, regulations, bylaws, ordinances, rules,
orders or directives of any authority having jurisdiction applicable thereto or
to the ownership, occupancy and/or operation thereof (other than Environmental
Laws which are dealt with in Section 4.11), including, without limitation, all
laws, restrictions, regulations, orders, bylaws, ordinances, rules and
directives relating to air quality and circulation in buildings or applicable
to the materials used for construction of any building or structures forming
part of the Real Estate. No notice of any such contraventions has been
received by Seller nor, to Seller's knowledge, does there exist any waivers or
exemptions relating to the Real Estate with respect to any non-conforming use
or other zoning or building codes matters. To Seller's knowledge, Seller has
all servitudes and rights necessary to continue operation of the Business as
presently conducted.
4.9. Title to Assets.
(1) Seller is the sole legal and beneficial owner of, or
has the exclusive, unrestricted right and authority to use and transfer to
Buyer, the personal or moveable property included in the Assets, free and clear
of all mortgages, hypothecs, security interests, liens, leases, covenants,
assessments, easements, options, rights of refusal, restrictions, reservations,
defects in the title, encroachments, and other encumbrances, except for the
Permitted Exceptions. The Assets are all the assets set forth on the most
recent Financial Statements or used in the operation of the Business.
(2) The list of the Real Estate contained in Exhibit
1.1(1) hereto includes all real and immovable property leased or owned by
Seller and used in connection with the Business or set forth on the Unaudited
Financial Statements. Seller is the sole and exclusive beneficial, legal and
registered owner of all right, title and interest in and has good, marketable
and insurable title to all of the Real Estate (other than the "Leased Real
Estate," as hereinafter defined), and is in sole and exclusive possession of,
all of the Real Estate, including the buildings, structures, dependencies,
accessories, and improvements situated thereon and all appurtenances thereto,
in each case free and clear of all mortgages, hypothecs, prior claims, charges,
reserves, servitudes, homologated lines, liens, leases, assessments, covenants,
options, rights of refusal, restrictions, reservations, arrears of taxes
(including, without limitation, school, municipal (whether special or general),
intermunicipal, local improvement, business, water, sewer
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and ecclesiastical taxes), defects in title, encroachments on or from the Real
Estate and other encumbrances of any sort whatsoever, other than the Permitted
Exceptions, whether or not the same render the title to such Real Estate
uninsurable or unmarketable (all of the above are collectively referred to as
"Defects"), and the consummation of transactions contemplated hereby will
convey to and vest in Buyer such title in and to the Real Estate.
4.10. Leases and Contracts.
(1) Exhibit 4.10 attached hereto sets forth a complete
and accurate list as of May 21, 1996 (which list shall be updated at Closing),
of all contracts, agreements, purchase orders, outstanding responses to
requests for proposals, leases, options, letters of intent and commitments,
oral or written, and all assignments, amendments, change orders, schedules,
exhibits and appendices thereof, affecting or relating to the Business or any
Asset or any interest therein, to which Seller is a party or by which Seller,
the Assets or the Business is bound or affected and which have a value in
excess of $75,000 (collectively, the "Leases and Contracts"). Accurate and
complete copies of all Leases and Contracts (and summaries of any oral Leases
and Contracts) have been made available to Buyer.
(2) None of the Leases and Contracts have been modified,
amended, assigned or transferred, nor have any provisions thereof or right of
any party thereto been waived, and each is in full force and effect and is
valid, binding and enforceable in accordance with its respective terms, except
as enforcement may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally and by general principles of
equity.
(3) To Seller's knowledge, and subject to Section
4.10(6), no event or condition has happened or presently exists which
constitutes a default or breach (which could result in the termination of such
Lease or Contract or other fine, cost or penalty to Seller) or, after notice or
lapse of time or both, would constitute a default or breach (which could result
in the termination of such Lease or Contract or other fine, cost or penalty to
Seller) by Seller. There are no counterclaims or offsets under any of the
Leases and Contracts.
(4) There does not exist any security interest, hypothec,
prior claim, lien, encumbrance or claim of others created or suffered to exist
on any interest created by Seller under any of the Leases and Contracts (except
for those that result from or relate to leased Assets).
(5) No purchase commitment by Seller is in excess of
Seller's ordinary business requirements.
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(6) Subject to any consent requirements, Seller's
assignment to Buyer of those Leases and Contracts constituting part of the
Assumed Liabilities will not constitute a default under or alter or terminate
or entitle any party to alter or terminate any such Leases and Contracts or
occasion or result in the acceleration of any term of payment or in any change
in any rate of interest or other amount payable pursuant thereto, and such
assignment will confer and convey all of Seller's rights thereunder to Buyer.
(7) Except as set forth on Exhibit 4.10, Seller has
received no prepayment as of April 30, 1996, with respect to any of the Leases
or Contracts.
4.11. Environmental Matters.
(1) Hazardous Substances. As used in this Section, the
term "Hazardous Substances" means any hazardous, bio-hazardous or toxic
substances, materials or wastes, including but not limited to those substances,
materials, and wastes defined as hazardous substances in Canadian Environmental
Protection Act, Canadian Environmental Assessment Act, Transportation of
Dangerous Goods Act (Canada), The Hazardous Products Act (Canada), and any laws
related to the storage, use, transport or disposal of laboratory animals, which
are regulated under any other Environmental Law (as such term is defined
below), or any of the following: hydrocarbons, petroleum and petroleum
products, asbestos, polychlorinated biphenyls, formaldehyde, radioactive
substances (other than naturally occurring materials in place), flammables and
explosives.
(2) Compliance with Laws and Regulations. The Real
Estate, the Business and all operations and activities of Seller and all
operations or activities upon, or any use or occupancy of the Real Estate, or
any portion thereof, by Seller and any agent, contractor or employee of any
agent or contractor of Seller ("Agents"), or any tenant or subtenant of Seller
of any part of the Real Estate, are in compliance with any and all laws,
regulations, orders, codes, judicial decisions, decrees, licenses, permits and
other applicable requirements of governmental authorities (including federal,
state, provincial or local authorities) with respect to Hazardous Substances,
pollution or protection of human health and safety (collectively,
"Environmental Law"), including but not limited to the release, emission,
discharge, storage and removal of Hazardous Substances except where such
noncompliance would not have a material adverse effect on the Assets or the
Business and except as disclosed in the 1994 Audit and Study (as hereinafter
defined). Seller and its Agents have kept the Real Estate free of any lien
imposed pursuant to Environmental Law. Except for uses, handling, treatment
and storage or presence of Hazardous Substances reasonably necessary or
incidental to the customary operation of a business similar to the Business
(which if required, was duly licensed or authorized by appropriate governmental
authorities or otherwise permitted by Environmental Law, and which complies in
all material respects with Environmental Law), or as disclosed on the March
1994 environmental audit, effluents characterization
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study and soil characterization study obtained by Seller (the "1994 Audit and
Study"), a true and complete copy of which has been provided to Buyer, or as
disclosed on the attached Exhibit 4.11:
(a) Neither Seller nor, to Seller's knowledge,
its Agents have allowed the use, generation, treatment, handling, manufacture,
voluntary transmission or storage of any Hazardous Substances over, in or upon
the Real Estate nor, to Seller's knowledge, has the Real Estate ever been used
for any of the foregoing.
(b) Neither Seller nor, to Seller's knowledge,
its Agents have installed or permitted to be installed, in or on the Real
Estate friable asbestos or any substance containing asbestos in condition or
amount deemed hazardous by Environmental Law respecting such material.
(c) Seller has not at any time engaged in or
permitted, nor to the knowledge of Seller, has any tenant of Seller or its
Agents engaged in or permitted any dumping, discharge, disposal, spillage, or
leakage (whether legal or illegal, accidental or intentional) of such Hazardous
Substances, at, on, in or about the Real Estate, or any portion thereof that
would subject the Real Estate or Buyer to clean-up obligations imposed by
governmental authorities.
(d) None of the Real Estate, nor any part
thereof, nor Seller nor any present owner or operator of the Real Estate (i)
has either received or been issued a notice, demand, writ, request for
information, citation, summons, injunction or complaint regarding an alleged
failure to comply with Environmental Law, or (ii) is subject to any existing,
pending, or threatened investigation or inquiry by any governmental authority
for failure to comply with, or any remedial obligations under, Environmental
Law, and, to Seller's knowledge, there are no circumstances which could
reasonably serve as a basis therefor. Seller has not assumed any liability of
a third party for clean up under, or noncompliance with, Environmental Law.
(e) Neither Seller nor its Agents have
transported or arranged for the transportation of any Hazardous Substances to
any location which is listed or, to Seller's knowledge, proposed for listing
under Environmental Law, or is the subject of any enforcement action,
investigation or other inquiry under Environmental Law.
(f) To Seller's knowledge, other than as
disclosed on Exhibit 4.11(f), there are no underground storage tanks, active or
abandoned, whether or not currently used, on or under any portion of the Real
Estate, and the Real Estate is free of dangerous levels of naturally-emitted
radon. To Seller's knowledge, no portion of the Real Estate has ever been used
as a landfill. Seller has furnished to Buyer a copy of any environmental
audit, study, report or other analysis on the Real Estate, which Seller
obtained or was furnished.
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Seller and Shareholders shall promptly notify Buyer in writing
of any order of which either is aware, receipt of any notice of violation or
noncompliance with any Environmental Law, any threatened or pending action of
which either is aware by any regulatory agency or governmental authority, or
any claims made by any third party of which it is aware relating to Hazardous
Substances on, emanations on or from, releases on or from, any of the Real
Estate which relate to the period prior to Closing; and shall promptly furnish
Buyer with copies of any written correspondence, notices or legal pleadings and
written summaries of any oral communications or notices in connection
therewith. If, and only if, required by law or the failure to do so would
impose liabilities on Buyer or the Assets, Buyer shall have the right, but
shall not be obligated, to notify any governmental authority of any state of
facts which may come to its attention with respect to Hazardous Substances on,
released from or emanating from any part of the Real Estate. Buyer shall give
Seller prior or simultaneous notice of such notification.
4.12. Miscellaneous Representations Relating to Real Estate.
(1) To Seller's knowledge, no part of the Real Estate is
currently subject to condemnation, expropriation or other similar proceedings
or has been condemned, expropriated or otherwise taken or reserved, and no
condemnation, reserve or taking is threatened or contemplated and Seller has
received no notice with respect to any of the above. To Seller's knowledge,
there are no public improvements which may result in special assessments
against or otherwise affect the Real Estate.
(2) Seller has made available to Buyer complete copies of
all appraisals, mechanical and structural studies or reports or assessments,
engineering plans, architectural drawings, soil studies, surveys, certificates
of location, title deeds, title opinions and other documents in Seller's
possession (or obtainable by Seller without unreasonable effort) which have
been prepared by or at the direction of Seller or Shareholders within the last
five (5) years relating to any of the Assets. Also made available by Seller to
Buyer are the "as-built" plans and specifications of the buildings forming part
of the Real Estate, including, without limitation, all of the base systems,
such as electrical, mechanical and plumbing systems.
(3) All utilities serving the Real Estate are adequate to
operate the Real Estate in the manner it is currently operated, electricity and
natural gas services are available to the Real Estate. No fact or condition
exists that would result in the termination or impairment of access to the Real
Estate, or the discontinuance of, any such utilities or services.
(4) All potable and industrial water, all gas,
electrical, steam, compressed air, telecommunication, sanitary and storm sewage
lines and systems, and all accessories, mechanical installations, structures
and base systems and other similar systems serving the Real Estate and the
facilities of the Business are installed and operating and are sufficient to
enable the Real Estate and the facilities of the Business
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to continue to be used and operated in the manner currently being used and
operated, and any so-called hook-up fees or other associated charges accrued to
date have been fully paid. Seller has received no written recommendation from
any insurer to repair or replace any of the Assets with which Seller has not
complied.
(5) No person, firm, corporation or other entity has any
agreement, option or understanding or any right capable of becoming an
agreement, option or understanding for the purchase or lease of all or any part
of the Real Estate, and other than Seller, no person, firm, corporation or
other entity has any interest or right whatsoever in the Real Estate or is in
possession or entitled to possession of the whole or any part of the Real
Estate; there are no leases, offers to lease or occupation agreements, whether
written or verbal, affecting the Real Estate or any part thereof.
(6) No filings constituting a lien, prior claim, hypothec
or other form of security against the Real Estate have been made, and to
Seller's knowledge, there are no facts which may give rise to the filing of any
such security interest against the Real Estate by any party whomsoever.
Furthermore, all delays to publish any prior claims or hypothecs or to give
notice of conservation of prior claims or hypothecs, or to exercise or protect
hypothecary rights in respect of the Real Estate shall have expired prior to
the Closing, and no hypothec, legal or conventional, nor any prior claim shall
affect the Real Estate on the Closing. If a hypothec in respect of any work
conducted prior to the Closing is published subsequent to the Closing, Seller
shall assume and be solely responsible for the full amount thereof, including
the capital, interest and costs, and shall indemnify Buyer and discharge and
radiate any such hypothec at its own expense within seven (7) days of its
registration, subject to Buyer's right to retain a sum, out of the Purchase
Price, sufficient to pay the capital, interest and costs of said hypothec.
(7) All payments owing to contractors, subcontractors,
workers or any suppliers of goods or services with respect to the Real Estate
or to any other persons who have taken part in the construction or renovation
of the Real Estate prior to the Closing, have and will have been paid in full,
without subrogation.
(8) Seller has not contracted for any service and has not
made any commitment or assumed any obligations which bind Buyer as a successor
in interest to the Real Estate.
(9) No part of the Real Estate is located over any
railroad tracks or other appurtenances, and the Real Estate is not part of a
housing complex according to the Act respecting the Regie du logement (Quebec).
(10) To Seller's knowledge, there is no application or
motion before any governmental authority having jurisdiction to rezone the Real
Estate.
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(11) There is no contestation of real estate taxes
relating to the Real Estate; Seller does not and shall not owe any sum with
respect to contributions paid by third parties to Seller or its predecessors in
title with respect to real estate taxes payable or operating costs incurred
with respect to the Real Estate.
(12) No part of the Real Estate constitutes "land" as that
term is defined by the Land Transfer Duties Act (Quebec):
(13) To Seller's knowledge, neither the whole nor any part
of the Real Estate is subject to any law protecting agricultural land.
(14) To Seller's knowledge, neither the whole nor any part
of the Real Estate is classified or recognized as cultural property, is
situated in an historic or natural district, is a classified historic site or
is in a protected area contemplated by the Cultural Property Act, and Seller
has not received any notice in respect thereof and does not have any knowledge
of any such classification or proposed classification, recognition or any
action or proceeding in respect thereof being contemplated.
4.13. Litigation. Except as set forth in Exhibit 4.13 attached
hereto, there are no lawsuits, proceedings, actions, arbitrations, governmental
investigations, claims, inquiries or proceedings pending or, to the knowledge
of Seller, threatened involving Seller, any of the Assets or the Business, and
to Seller's knowledge, there are no meritorious grounds on which any legal
proceedings might be commenced with any reasonable likelihood of success.
4.14. Seller's Employees. Exhibit 4.14 attached hereto sets forth:
(a) a complete list of all of Seller's employees, and rates of pay as at May
23, 1996, (b) true and correct copies of any and all fringe benefits and
personnel policies, (c) the employment dates and job titles of each such
person, and (d) categorization of each such person as a full-time or part-time
employee of Seller. Except pursuant to any contract or agreement referred to
in Exhibit 4.10, Seller has no written employment agreements with its employees
and all such employees are employed for an indeterminate term and Seller has no
contractual obligations to make any severance payments to employees which could
be triggered by the transaction contemplated herein. The parties expressly
agree that Seller shall retain responsibility for and fully and timely pay all
salaries and wages, related payroll taxes and all sick leave, holiday, vacation
benefits and other fringe benefits that have accrued to its employees up to the
date of Closing, including related payroll taxes. Seller shall use its best
efforts to retain its employees in their current positions up to Closing.
Seller has withheld from each payment made to any of its present or former
employees, officers and directors, and to all persons who are non- residents of
Canada for purposes of the Income Tax Act (Canada) all amounts required by law
and has remitted such withheld amounts to the appropriate governmental
authority. Seller has no reason to believe that any managerial employee would
not
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accept employment with Buyer upon completion of the transactions contemplated
by this Agreement.
4.15. Labor Relations. Except as set forth in Exhibit 4.13, Seller
is not a party, either directly or by operation of law, to any labor contract,
collective bargaining agreement, contract, or any other arrangement, formal or
informal, with any labor or trade union or organization, council of trade
unions, employee bargaining agency or affiliated bargaining agent , nor are any
of its employees represented by any such entity. There is no pending or
threatened labor dispute, work stoppage, unfair labor practice complaint,
strike, administrative or court proceeding or order between Seller and any
present or former employee(s) of Seller. Except as set forth in Exhibit 4.13,
there is no pending or threatened suit, action, investigation or claim between
Seller and any present or former employee(s) of Seller. There has not been any
union organizing activity at any location of Seller, or elsewhere, with respect
to Seller's employees within the last three (3) years.
4.16. Insurance. All of the buildings and structures forming part
of the Real Estate are now and shall continue to be insured for their full
replacement value until the Closing. A complete and accurate list of all such
insurance policies is set forth in Exhibit 4.16 attached hereto, copies of
which policies have previously been provided to Buyer. Seller and Shareholders
agree solidarily to indemnify and hold harmless Buyer from and against such
pending insurance claims in accordance with Article 14. Other than as detailed
in Exhibit 4.13, Seller has not been denied any coverage in the last three (3)
years. Seller is not in default or breach with respect to any provision
contained in any such insurance policies which default or breach could
reasonably form the basis for a denial of coverage by the insurer, nor has
Seller failed to give any notice or to present any claim thereunder in due and
timely fashion.
4.17. Broker's or Finder's Fee. Seller has not employed, nor is it
liable for the payment of any fee to, any finder, broker, consultant or similar
person in connection with the transactions contemplated by this Agreement.
4.18. [Deleted]
4.19. Intellectual Property. All trademarks, service marks, trade
names, patents, inventions, processes, copyrights and applications therefor,
whether registered or at common law (collectively, the "Intellectual
Property"), owned by Seller are listed and described in Exhibit 4.19 attached
hereto. No proceedings have been instituted or are pending or, to Seller's
knowledge, threatened which challenge the validity of the ownership by Seller
of any such Intellectual Property. Seller has not licensed anyone to use any
such Intellectual Property, and, to Seller's knowledge, there is no use or the
infringement of any of such Intellectual Property by any other person. Seller
owns or possesses adequate and enforceable licenses or other rights to use all
Intellectual Property now used in the conduct of its Business.
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4.20. Inventories. The Inventory is, and on Closing will be, of a
quality and quantity presently used by Seller in the ordinary course of
business determined and valued consistent with Seller's past practice. The
Inventory is, and at Closing will be, properly valued at the lower of cost or
market value on a first-in/first-out basis in accordance with GAAP,
consistently applied. Since the date of the Unaudited Financial Statements,
Seller has not decreased or substituted its items of Inventory other than in
the ordinary course of business.
4.21. Motor Vehicles. All motor vehicles used in the Business,
whether owned or leased, are properly licensed and registered in accordance
with applicable law.
4.22. Employee Benefit Plans.
(1) Benefit Plans. Exhibit 4.22(1) attached hereto
contains a true, accurate and complete list of each employee benefit plan
(other than pension plans) maintained by Seller or to which Seller contributes
or is required to contribute (collectively, the "Benefit Plans"). Copies of
all Benefit Plans have previously been provided to Buyer.
(2) Pension Plans. Exhibit 4.22(2) attached hereto
contains a true and complete list of each registered or unregistered pension
plan maintained by Seller, to which Seller contributes or is required to
contribute (collectively, the "Pension Plans"). Copies of all Pension Plans
have previously been provided to Buyer. Except as indicated in Exhibit
4.22(2), the Pension Plans are duly registered and in good standing under all
applicable legislation including without limitation the applicable pension
benefits legislation and the Income Tax Act (Canada) and no events have
occurred which could jeopardize such status.
(3) Liabilities. The funding status (including
disclosure of any unfunded liabilities) of each of the Benefit Plans or Pension
Plans is described on Exhibit 4.22(3) attached hereto. Seller shall be liable
under its Benefit Plans and Pension Plans for all contributions and premiums
due on or prior to the Closing.
(4) Transfer or Termination of Participation. Seller
shall transfer and Buyer shall accept the transfer of the Benefit Plans and
Pension Plans listed on Exhibits 4.22(1) and (2). Seller shall adopt all
appropriate resolutions authorizing such transfer. From and after the Closing
Date, the participation of the employees in Seller's Pension Plans and Benefit
Plans other than as set forth on such Exhibit and their accrual of benefits
thereunder shall cease. Seller shall comply with all applicable laws with
respect to the entitlements of the employees under Seller's Pension Plans and
Benefit Plans.
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4.23. Bulk Sales Law. The parties hereto believe that, assuming
compliance with this Agreement by both Seller and Buyer, it is both unnecessary
for the protection of Seller's creditors and impracticable to comply with the
bulk sales legislation in the various jurisdictions in which the Assets are
located. Accordingly, in the event that any creditor of Seller should take any
claim against either Buyer or the Assets which is wholly or partially based on
the bulk sales legislation of any such jurisdiction, Seller and Shareholders
agree solidarily to indemnify and save Buyer harmless from and against any such
claim in accordance with Article 14.
4.24. Compliance with Laws. Seller has not received notice of any
violation of any law, rule, regulation, ordinance or order of any court or
tribunal, or federal, provincial, state, municipal or other governmental
authority, department, commission, board, bureau, agency or instrumentality
(including, without limitation, legislation and regulations applicable to
environmental protection, civil rights, public health and safety and
occupational health). To Seller's knowledge, and other than as disclosed
herein or in the Exhibits hereto, Seller is in compliance (without obtaining
waivers, variances or extensions) with, all federal, provincial, state and
local laws, rules and regulations which relate to the operations of the
Business, except where the failure to be in compliance would not have a
material adverse effect on the Business. To Seller's knowledge, and other than
as disclosed herein or in the Exhibits hereto, Seller operates the Business in
compliance with all applicable regulations, policies and procedures of the U.S.
Food and Drug Administration (including, but not limited to the requirements of
Good Clinical Practice and all applicable Investigational New Drug
Applications), the U.S. Environmental Protection Agency, the Health Protection
Branch of Health and Welfare Canada and the Japanese Ministry of Health and
Welfare and any other governmental agency responsible for regulation of the
Business, except where the failure to be in compliance would not have a
material adverse effect on the Business.
4.25. Condition of Assets. The Equipment and Furnishings are all of
the "Equipment" reflected on the Unaudited Financial Statements, other than
those items sold and replaced in the ordinary course of business. The Assets
together with the Excluded Assets comprise all of the assets owned by Seller.
All components of all of the Equipment and Furnishings (a) operate in
accordance with their respective specifications, (b) perform the functions they
are supposed to perform, (c) to Seller's knowledge, are free of material
structural, installation, engineering, or mechanical defects or problems, and
(d) are otherwise in good working order (ordinary wear and tear excepted).
Seller has received no written recommendation from any insurer to repair or
replace any of the Assets with which Seller has not complied.
4.26. Taxes. Seller is duly registered under subdivision (d) of
Division V of Part IX of the Excise Tax Act with respect to the GST and under
Division I of Chapter VIII of Title I of the Quebec Sales Tax Act with respect
to the QST, and its registration numbers are as follows: (GST) 100524941RT and
(QST) 1009493685TQ001. Seller is not a non-resident for purposes of the
Income Tax Act (Canada).
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4.27. No Omissions or Misstatements. To the knowledge of Seller,
none of the representations and warranties included in this Article 4 or in the
Exhibits to this Agreement contains any untrue statement of a material fact or
is misleading in any material respect or omits to state any material fact
necessary in order to make any of the said representations and warranties not
misleading. To the knowledge of Seller, except as disclosed in this Agreement
or as set forth in the Exhibits annexed hereto, there is no fact, condition or
circumstance which is likely to have a material adverse effect on the Business
or which would likely prevent Seller from performing its obligations under this
Agreement, other than any fact, condition or circumstance that may arise or
result, directly or indirectly, from economic or political factors which are
not particular to the Business.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller and Shareholders to enter into this
Agreement and to consummate the transactions contemplated herein, Buyer hereby
represents and warrants to Seller, which representations and warranties shall
be true and correct on the date hereof and on the date of Closing, as follows:
5.1. Organization, Qualification and Authority. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Buyer has the full corporate power and
authority to own, lease and operate its properties and assets as presently
owned, leased and operated and to carry on its business as it is now being
conducted. Buyer has the full right, power and authority to execute, deliver
and carry out the terms of this Agreement and all documents and agreements
necessary to give effect to the provisions of this Agreement and to consummate
the transactions contemplated on the part of Buyer hereby. The execution,
delivery and consummation of this Agreement and all other agreements and
documents executed in connection herewith by Buyer have been duly authorized by
all necessary corporate action on the part of Buyer. No other action, consent
or approval on the part of Buyer or any other person or entity is necessary to
authorize Buyer's due and valid execution, delivery and consummation of this
Agreement and all other agreements and documents executed in connection
herewith except that the transaction must be approved under the Investment
Canada Act and the Competition Act. This Agreement, and all other agreements
and documents executed in connection herewith by Buyer, upon due execution and
delivery thereof, shall constitute the valid binding obligations of Buyer,
enforceable in accordance with their respective terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally and by general principles of equity.
5.2. Absence of Default. The execution, delivery and consummation
of this Agreement and all other agreements and documents executed in connection
herewith by Buyer will not constitute a violation of, be in conflict with, or,
with or without the giving
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of notice or the passage of time, or both, result in a breach of, constitute a
default under, or create (or cause the acceleration of the maturity of) any
debt, indenture, obligation or liability or result in the creation or
imposition of any security interest, lien, charge or other encumbrance upon any
of the Assets (except in the ordinary course pursuant to Buyer's existing
credit agreements) under: (a) any term or provision of the Certificate of
Incorporation or Bylaws of Buyer; (b) any contract, lease, agreement, document,
instrument, indenture, mortgage, pledge, assignment, permit, license, approval
or other commitment to which Buyer is a party or by which Buyer is bound; (c)
any judgment, decree, order, regulation or rule of any court or regulatory
authority, or (d) any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority or arbitration
tribunal to which Buyer is subject.
5.3. Broker's or Finder's Fee. Buyer has not employed and is not
liable for the payment of any fee to any finder, broker, government official,
consultant or similar person in connection with the transactions contemplated
by this Agreement.
ARTICLE 6. COVENANTS OF PARTIES
6.1. Preservation of Business and Assets. From the execution of
this Agreement until the Closing, Seller shall use commercially reasonable best
efforts to do or cause to be done all such acts and things as may be necessary
to preserve, protect and maintain intact the operation of the Business and
Assets as a going concern consistent with prior practice and not other than in
the ordinary course of business, to preserve, protect and maintain for Buyer
the good will of the suppliers, employees, clientele and others having business
relations with Seller or the Business. Seller shall use its best efforts to
obtain all consents and documents called for by this Agreement. Buyer and
Seller shall use commercially reasonable best efforts to facilitate the
consummation of the transactions contemplated under this Agreement. Until
termination of this Agreement, Seller and Shareholders agree that they will not
sell or transfer, or negotiate or entertain offers relating to the sale or
transfer of, either the Assets or any stock of Seller other than the sale or
use of Assets in the ordinary course of business. From the execution of this
Agreement until the Closing, Seller shall pay no dividend, and shall make no
distribution or extraordinary payment to Shareholders or any third party or pay
any intercompany payable and, other than in the ordinary course of business,
Seller will not sell, discard or dispose of any of the Assets. None of the
Leases and Contracts shall be amended in any material respect between the date
hereof and Closing, other than in the ordinary course of business, without the
prior written consent of Buyer. From the execution of this Agreement until
Closing, and other than as may be required by law, Seller and any party in
possession of all or any part of the Real Estate will not perform any material
grading or excavation, construction or removal of any improvement, or make any
material other change or improvement upon or about the Real Estate. From the
execution of this Agreement until Closing, Seller will maintain and keep the
Assets in good order and repair (ordinary wear and tear excepted).
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6.2. Absence of Material Change. From the execution of this
Agreement until the Closing, Seller shall not make any material change in the
Business and shall not enter into any other material contract or commitment or
any other transaction with respect to the Business or the Assets without the
prior written consent of Buyer, other than in the ordinary course of Seller's
business.
6.3. Access to Books and Records.
(1) From the date hereof until the Closing, Seller shall
give to Buyer and to Buyer's counsel, accountants and other representatives,
full access to all of Seller's offices, properties, books, contracts,
commitments, records and affairs relating to the Assets or the Business so that
Buyer may inspect and audit them and shall furnish to Buyer a copy of all
documents and information concerning the properties and affairs of Seller, the
Business or the Assets in Seller's possession (or obtainable by Seller with
reasonable effort) as Buyer may reasonably request. If any such books, records
and materials are in the custody of third parties but under Seller's control,
Seller shall direct such third parties to promptly provide them to Buyer.
Copies of documents furnished to Buyer by Seller will be returned by Buyer
immediately upon request if the transaction is not consummated. Seller shall
provide Buyer promptly with interim financial statements of Seller and any
other management reports, as and when they are available.
(2) Following the Closing, Buyer shall permit Seller's
representatives (including, without limitation, their counsel and auditors),
during normal business hours, to have reasonable access to, and examine and
make copies of, all books and records of the Business which relate to
transactions or events occurring prior to the Closing. All out-of-pocket costs
associated with the delivery of the requested documents shall be paid by
Seller.
(3) Following the Closing, Seller shall permit Buyer and
its representatives (including, without limitation, their counsel and
auditors), to have access to, and examine and make copies of, all books and
records of Seller, which books and records are retained by Seller and which
relate to transactions or events occurring prior to the Closing. For a period
of five (5) years after the Closing, Seller agrees that, prior to the
destruction or disposition of any such books or records, Seller shall provide
not less than forty-five (45) days', nor more than ninety (90) days', prior
written notice to Buyer of such proposed destruction or disposal. If Buyer
desires to obtain any such documents or records, it may do so by notifying
Seller in writing at any time prior to the date scheduled for such destruction
or disposal. In such event, Seller shall not destroy such documents or records
and the parties shall then promptly arrange for the delivery of such documents
or records to Buyer, its successors or assigns. All out-of-pocket costs
associated with the delivery of the requested documents or records shall be
paid by Buyer.
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(4) Seller shall cause its accounting firm to consent to
the inclusion of the Audited Financial Statements in any registration
statements, private placement memoranda, and periodic reports, if any,
necessary or appropriate in order to enable Buyer or its affiliates to comply
with any applicable registration or reporting requirements of federal or state
securities laws. The books and records of Seller are in such order and
completeness so that an unqualified audit may be performed for such periods.
(5) For a period of six (6) years from the Closing Date
or for such longer period as may be required by applicable Law, Buyer covenants
and agrees to retain all original accounting books and records relating to
Seller's Business, as well as all other records referred to at Section 1.1(6),
for the period prior to the Closing Date. So long as any such books and
records are retained by Buyer pursuant to this Agreement, Seller shall have the
reasonable right to inspect and to make copies (at its own expense) of the same
at any time upon reasonable request during normal business hours and upon
reasonable notice for any proper purpose and without undue interference to the
business operations of Buyer. Buyer shall have the right to have its
representatives present during any such investigations.
6.4. Risk of Loss. In the event there is any damage to or loss of
any of the Assets (whether by fire, theft, vandalism, terrorism, act of God or
other cause or casualty, damage or loss), between the date hereof and the
Closing, the Purchase Price shall be reduced by the amount necessary to repair
the damage, which reduction shall be offset by any amounts paid by Seller's
insurance company and assigned to Buyer; provided, however, that in the event
of a casualty which in Buyer's judgment adversely affects the Business or the
Assets, Buyer, in its sole discretion, may elect either: (i) to terminate this
Agreement without obligation or penalty, or (ii) to terminate this Agreement
with respect to the damaged property only with a reduction in the Purchase
Price determined as follows. The reduction in Purchase Price shall be
determined, based on the value on the date of this Agreement of the Assets
damaged or lost, assigned by an appraiser to be mutually selected and paid
equally by Seller and Buyer.
6.5. Condemnation. From the date hereof until the Closing, in the
event that any portion of the Assets become subject to or is threatened with
any condemnation or eminent domain proceedings, then Buyer, in its sole
discretion, may elect either: (i) to terminate this Agreement in its entirety
without penalty or obligation, or (ii) to terminate this Agreement with respect
only to that portion of the Assets that is condemned or threatened to be
condemned with a reduction in the Purchase Price determined as provided in
Section 6.4.
6.6. Preserve Accuracy of Representations and Warranties. Seller
and Shareholders shall refrain from taking any action which would render any
representation and warranty contained in Article 4 hereof untrue, inaccurate or
misleading as of Closing. Seller will promptly notify Buyer of any lawsuit,
claim, administrative action or other proceeding asserted or commenced against
Seller, its directors, officers, or
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Shareholders, that may involve or relate in any way to Seller, the Assets,
Shareholders or the operation of the Business. Seller shall promptly notify
Buyer of any facts or circumstances that come to its attention and that cause,
or through the passage of time is likely to cause, any of Seller's and
Shareholders' representations and warranties to be untrue or misleading at any
time from the date hereof to Closing.
6.7. Maintain Books and Accounting Practices. From the date hereof
until the Closing, Seller shall maintain their books of account in the usual,
regular and ordinary manner on a basis consistent with prior years and shall
make no change in their accounting methods or practices.
6.8. Indebtedness; Liens. Other than in the ordinary course of
business, from the date hereof until the Closing, with respect to the Assets,
including the Business and operations conducted with the Assets, Seller shall
not create, incur, assume, guarantee or otherwise become liable or obligated
with respect to any indebtedness for borrowed money, nor make any loan or
advance to, or any investment in, any person or entity, nor create any lien,
hypothec, security interest, mortgage, right or other encumbrance in any of the
Assets, without Buyer's prior written approval.
6.9. Compliance with Laws and Regulatory Consents. From the date
hereof until the Closing, (a) Seller shall comply in all material respects with
all applicable statutes, laws, ordinances and regulations, (b) Seller shall
keep, hold and maintain all certificates, certificates of need, certificates of
exemption, accreditations, participations, licenses, and other permits
necessary for the business and operation of the Assets, (c) Seller shall use
its reasonable efforts and Seller shall cooperate fully with Buyer to obtain
all consents, approvals, exemptions and authorizations of third parties,
whether governmental or private, necessary to consummate the transactions
contemplated by this Agreement, and (d) Seller shall make and cause to be made
all filings and give and cause to be given all notices which may be necessary
or desirable under all applicable laws and under applicable contracts,
agreements and commitments in order to consummate the transactions contemplated
by this Agreement.
6.10. Maintain Insurance Coverage. From the date hereof until the
Closing, Seller shall maintain and cause to be maintained in full force and
effect the existing insurance on the Assets and the operations of the Business
and shall provide at Closing evidence satisfactory to Buyer that such insurance
continues to be in effect and that all premiums due have been paid. Seller
will provide such assistance to Buyer as may be reasonably required for Buyer
to obtain, at Buyer's cost, "retro coverage" with respect to periods prior to
Closing, such coverage to be acceptable to Seller, acting reasonably. Buyer
shall cause Seller, its officers and directors to be named additional insureds
under such policy. Seller will continue to maintain all of its insurance
policies and coverage amounts in full force and effect until the Closing.
6.11. Current Return Filing. Seller shall be responsible for (a)
the preparation and filing of the federal, provincial, state and local income
tax and gross receipts and
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use tax returns for all the tax periods of Seller ending on or before the
Closing; and (b) the payment of all such taxes when due. Seller shall prepare
and timely file the federal and provincial income tax returns and shall pay
such taxes when due.
6.12. No Sale, Merger or Consolidation. From the date hereof until
the Closing, Shareholders shall not sell, pledge or transfer any of their
capital stock in Seller nor make any agreements in that regard, and Seller
shall not sell all or substantially all of its assets, or merge, amalgamate or
consolidate with any other entity; neither party shall solicit any inquiries,
proposals or offers relating to any such transactions.
6.13. Hart-Scott-Rodino Filing. If required by applicable law,
Seller will, or, if Seller is not the "ultimate parent," it will cause the
ultimate parent to (with the assistance of Buyer and Shareholders if and when
required) timely and promptly make, and Buyer will or if Buyer is not the
"ultimate parent" it will cause its "ultimate parent" (with the assistance of
Seller if and when required) to timely and promptly make, all filings which are
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1987 (the
"Antitrust Improvements Act"). Buyer and Seller will use their reasonable best
efforts to obtain the approval of the United States Federal Trade Commission or
the Antitrust Division of the United States Department of Justice, as the case
may be, to the purchase of the Assets by Buyer or the lapse prior to the
Closing Date of the waiting period under the Antitrust Improvements Act without
the commencement of litigation, or threat thereof, by the appropriate
governmental enforcement agency to restrain the transactions contemplated by
this Agreement.
6.14. Stock Options. Seller shall cause each participant in the
Bio-Research Laboratories, Ltd. 1992 Stock Option Plan (the "Option Plan") to
receive out of the Purchase Price, in full and final satisfaction of his rights
under the Option Plan, an amount equal to the difference between the value
ascribed for purposes of this Agreement to a common share of Seller and such
participant's weighted average exercise price for the acquisition of a common
share under the Option Plan, multiplied by the number of the participant's
vested and unvested unexercised options. Notwithstanding the foregoing, the
amount payable to a participant in the Option Plan by reason of this Section
6.14 may be adjusted in such manner as to give effect to Section 3.1(b) of this
Agreement.
6.15. [Deleted]
6.16. Contracts to be Assigned. To the extent that assignment
hereunder by Seller to Buyer of any lease or contract is not permitted or is
not permitted without the consent of a third party, this Agreement shall not be
deemed to constitute an undertaking to assign the same if such consent is not
given or if such an undertaking otherwise would constitute a breach of, or
cause a loss of benefits under, any such lease or contract; provided, however,
that nothing contained in this Section shall be construed to limit or diminish
in any way the representations and warranties of Seller contained in
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Article 4 hereof. Seller shall use commercially reasonable best efforts to
obtain any and all such consents required for assignment of the Leases and
Contracts. Buyer shall cooperate in obtaining such consents. Seller agrees to
advise Buyer promptly in writing with respect to any lease or contract in
respect of which it knows or has reason to believe it will not receive any
required consent to assign.
Without in any way limiting Seller's obligation to use commercially
reasonable best efforts to obtain all consents and waivers necessary for the
sale, transfer, assignment and delivery of the Leases and Contracts to Buyer,
if such consent is not obtained or if such assignment is not permitted
irrespective of consent, Seller shall cooperate with Buyer in any reasonable
lawful arrangement designed to provide for Buyer the benefit under any such
lease or contract, including enforcement for the benefit of Buyer of any and
all rights of Seller against any other person arising out of breach or
cancellation by such other person and including, if so requested by Buyer, or
as Buyer shall otherwise reasonably require. If Seller provides to Buyer the
benefits under any lease or contract, (i) Buyer shall be responsible for, and
shall pay, all obligations relating thereto on the same basis as if such lease
or contract had been assigned to and assumed by Buyer, (ii) Buyer shall
reimburse Seller for any payments made by Seller pursuant to the terms of any
such lease or contract and (iii) Buyer shall indemnify Seller for Buyer's
failure to make such payments or discharge such obligations as if the same were
Assumed Liabilities hereunder.
Notwithstanding anything to the contrary contained in this Agreement,
and provided that Seller is in compliance with the provisions of this Section
6.16, the failure to obtain a consent to assignment of one or more leases or
contracts and any termination or loss of benefits resulting therefrom shall not
be considered for the purposes of this Agreement as a material adverse change
in the Business.
6.17. Continued Employment of Employees. All employees employed by
Seller shall be offered employment by Buyer on substantially the same terms and
conditions of employment as were enjoyed immediately prior to the Closing Date.
6.18. Severance. Seller shall not be responsible for any severance
or termination costs incurred with respect to any employees terminated for any
reason after the Closing Date, including a constructive dismissal by virtue of
a change in benefits or otherwise. Buyer shall recognize accumulated service
with both Seller and Buyer for purposes of determining any such severance and
termination costs, including, without limitation, any damages arising out of,
resulting from or in connection with any wrongful dismissal of such employees
or for the purpose of any pension, retirement or other benefit arrangements
made by Buyer.
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ARTICLE 7. TITLE AND SURVEYS
7.1. Title Opinion. Buyer may, at Buyer's expense and election,
obtain an opinion of title from a notary acceptable to Buyer, with respect to
the condition of title to each tract of Real Estate, which opinion shall, at
Buyer's expense and election, later be updated to the Closing Date (said
opinion, as updated is herein the "Title Opinion"). The Title Opinion shall
show that title to the Real Estate is held by Seller, free from all Defects,
except the Permitted Exceptions. The parties agree that all documents executed
in connection with the Closing shall be held in escrow and the Purchase Price
shall be paid in trust to Buyer's counsel until the notary or other legal
counsel providing the Title Opinion confirms, by updated Title Opinion, that
title to the Real Estate has been transferred and the deed of sale effecting
such transfer has been registered in all appropriate land registries without
adverse or conflicting entries from those set forth in the Title Opinion.
7.2. Survey. At least thirty (30) days prior to Closing, Seller
shall furnish to Buyer, at Seller's expense, any existing surveyor's plan and
technical description of the Real Estate in Seller's possession, or reasonably
obtainable by Seller without expense to Seller. Buyer may, at Buyer's expense
and election, obtain an update to such survey prepared by a duly qualified
Quebec Law Surveyor. Any such survey shall show the Real Estate and its
current condition, stating that it is in conformity with all applicable laws
and regulations, that there are no physical encumbrances onto the Real Estate
or from the Real Estate or any illegal views onto or from the Real Estate and
that the Real Estate is not charged with any servitudes. The survey shall show
the boundaries of the Real Estate, separate legal descriptions and boundaries
for the tracts and the location of all streets, highways, alleys and public
ways crossing or abutting said Real Estate, all servitudes, all building lines
and all buildings and structures as are situated thereon as of said date.
7.3. Defects and Cure. The Title Opinion and survey described in
this Article are collectively referred to as "Title Evidence". Buyer shall
notify Seller as soon as reasonably possible of any Defects disclosed in the
Title Evidence which either: (a) do not constitute Permitted Exceptions, or (b)
even if they constitute Permitted Exceptions, if such matter adversely impacts
any of the Assets or the financeability thereof in the reasonable opinion of
Buyer. Seller, at its sole cost and expense, may elect to not cure the
objection and shall give written notice to Buyer within ten (10) days of its
receipt of Buyer's objections of its decision whereupon Buyer may waive such
objection and close or may terminate this Agreement, which election shall be
made within ten (10) days of receipt of notice from Seller. If Seller fails to
timely give such notice, Seller shall be deemed to have elected not to cure the
objection, whereupon Buyer may waive such objection and close or may terminate
this Agreement, which election by Buyer shall be made within thirty (30) days
following notice of objection to Seller. Upon termination of this Agreement
under the terms of this Section 7.3, no party to this Agreement shall have any
further claims under this Agreement against any other party. No title searches
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or opinions rendered, nor the failure of Buyer to send any notice to Seller of
any defect, shall have the effect of waiving, limiting, reducing or otherwise
affecting, in any manner whatsoever, any of Seller's representations or
warranties given or made hereunder or in connection herewith, which
representations and warranties shall survive the Closing and shall be repeated
in the deed of sale consummating the sale of the Real Estate.
7.4. Environmental and Engineering Reports. Seller shall obtain
and deliver to Buyer, at Seller's expense, a copy of the most recently prepared
Phase I (or "Stage 1") environmental audit of the Real Estate. If reasonably
requested by Buyer, Seller shall obtain and deliver to Buyer, at Buyer's
expense, an update to such existing audit, together with such structural,
mechanical and electrical reports on the Real Estate as Buyer may reasonably
request. In the event such reports reveal defects unacceptable to Buyer, Buyer
shall notify Seller of such defects. Matters disclosed in the 1994 Audit and
Study shall not be deemed "defects" for purposes of this Section. Seller, at
its sole cost and expense, may elect to not cure the objection and shall give
written notice to Buyer within ten (10) days of its receipt of Buyer's
objections of its decision whereupon Buyer may waive such objection and close
or may terminate this Agreement, which election shall be made within ten (10)
days of receipt of notice from Seller. If Seller fails to timely give such
notice, Seller shall be deemed to have elected not to cure the objection,
whereupon Buyer may waive such objection and close or may terminate this
Agreement, which election by Buyer shall be made within thirty (30) days
following notice of objection to Seller. Upon termination of this Agreement
under the terms of this Section 7.4, no party to this Agreement shall have any
further claims under this Agreement against any other party.
ARTICLE 8. CLOSING
8.1. Closing. If all of the conditions to Closing set forth in
Articles 9 and 10 hereof are satisfied, then the execution of all necessary and
contemplated documents shall occur on or before August 28, 1996, at the offices
of Harwell Howard Hyne Gabbert & Manner, P.C., Nashville, Tennessee, or at such
other time or place as the parties may mutually agree. Upon transfer of the
Assets and payment of the Purchase Price (the "Closing"), the Closing shall be
deemed to be effective, and the transfer of the Assets shall be deemed to have
occurred, as of 12:01 a.m. local time on July 1, 1996 (or such other date as
the parties shall mutually agree). The parties acknowledge that the
recordation of the real estate may not occur on July 1, 1996. At Closing,
Buyer shall pay to Seller (subject to Section 7.1) (pursuant to wire
instructions given to Buyer by Seller) funds in an amount equal to the Purchase
Price, as determined pursuant to Section 3.1(a) of this Agreement. In the
event that Closing has not occurred by September 30, 1996, then any party not
in default hereunder may terminate this Agreement without further obligation.
Notwithstanding any statement contained herein seemingly to the contrary, Buyer
shall not be liable for any obligations or liabilities of Seller or
Shareholders other than the Assumed Liabilities.
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ARTICLE 9. SELLER'S AND SHAREHOLDERS' CONDITIONS TO CLOSE
The obligations of Seller and Shareholders under this Agreement are
subject to the satisfaction on or prior to Closing, of the following conditions
(which may be waived in writing by Seller in whole or in part):
9.1. Representations and Warranties True at Closing; Compliance
with Agreement. The representations and warranties of Buyer contained in this
Agreement (including the Exhibits and Attachments hereto) or in any certificate
or document delivered to Seller and Shareholders pursuant hereto, shall be
deemed to have been made again at the Closing and shall then be true in all
respects; and Buyer shall have performed and complied with all covenants,
agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at Closing.
9.2. No Action/Proceeding. No action or proceeding before a court
or any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the transaction herein contemplated, and no
governmental agency or body or other entity shall have taken any other action
or made any request of Seller, any of the Shareholders or Buyer as a result of
which Seller reasonably and in good faith deems that to proceed with the
transactions hereunder may constitute a violation of law. The waiting periods
specified under the Competition Act (Canada) and the Antitrust Improvements Act
with respect to the transactions contemplated by this Agreement will have
lapsed or been terminated.
9.3. Order Prohibiting Transaction. No order shall have been
entered in any action or proceeding before any court or governmental agency,
and no preliminary or permanent injunction by any court shall have been issued
which would have the effect of (a) making the transactions contemplated by this
Agreement illegal, or (b) otherwise preventing consummation of such
transactions. There shall have been no federal, provincial or state statute,
rule or regulations enacted or promulgated after the date of this Agreement
that would reasonably, directly or indirectly, result in any of the
consequences referred to in this Section.
ARTICLE 10. BUYER'S CONDITIONS TO CLOSE
The obligations of Buyer under this Agreement are subject to the
satisfaction, on or prior to Closing, of the following conditions (which may be
waived in writing by Buyer in whole or in part):
10.1. Representations and Warranties True at Closing; Compliance
with Agreement. The representations and warranties of Seller and Shareholders
contained in this Agreement (including the Exhibits and Attachments hereto) or
in any certificate
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or document delivered to Buyer pursuant hereto shall be deemed to have been
made again at the Closing and shall then be true in all respects; and Seller
and Shareholders shall have performed and complied with all covenants,
agreements and conditions required by this Agreement to be performed or
complied with by them prior to or at Closing.
10.2. Regulatory Approvals. Buyer shall have obtained all consents,
licenses, permits, and approvals from all appropriate governmental agencies and
authorities necessary in the reasonable judgment of Buyer to acquire and
operate the Assets and Business as contemplated hereunder.
10.3. No Action/Proceeding. No action or proceeding before a court
or any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the transaction herein contemplated, and no
governmental agency or body or other entity shall have taken any other action
or made any request of Seller or Buyer as a result of which Buyer reasonably
and in good faith deems that to proceed with the transactions hereunder may
constitute a violation of law. The waiting periods specified under the
Competition Act (Canada) and Antitrust Improvements Act with respect to the
transactions contemplated by this Agreement shall have lapsed or been
terminated.
10.4. Inspection of Assets. Buyer and their representatives shall
have had and continue to have reasonable rights of inspection of the Assets in
connection with Buyer's due diligence review.
10.5. Order Prohibiting Transaction. No order shall have been
entered in any action or proceeding before any court or governmental agency,
and no preliminary or permanent injunction by any court shall have been issued
which would have the effect of (a) making the transactions contemplated by this
Agreement illegal, (b) otherwise preventing consummation of such transactions,
or (c) imposing material limitations on the ability of Buyer effectively to
acquire and hold Assets, to operate the Business, or, in any case, to exercise
rights of ownership pursuant thereto. There shall have been no federal,
provincial or state statute, rule or regulations enacted or promulgated after
the date of this Agreement that would reasonably result, directly or
indirectly, in any of the consequences referred to in this Section.
10.6. Confidentiality and Non-Compete Agreements. Each of Seller's
senior management employees who are listed on the attached Exhibit 10.6 are
currently subject to Agreements on the Protection of Confidential Information
and Inventions. To the extent such agreements are not transferrable to Buyer
without the consent of such employees, such employees shall have either (i)
consented to the assignment of said agreement to Buyer, or (ii) entered into a
new Confidentiality and Non-Compete Agreement with Buyer on similar terms.
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10.7. Employment Agreement. Buyer and Michael Ankcorn shall have
entered into an employment agreement in the form attached hereto as Exhibit
10.7.
10.8. Updated Financial Statements. Prior to the time of Closing,
Seller shall provide to Buyer the most recently available interim, unaudited
financial statements evidencing that no material change has occurred in
connection with the Business or the Assets since the date of the Unaudited
Financial Statements.
10.9. Value of Assets. As of the date of the interim unaudited
Financial Statements described in Section 10.8 above, Seller shall have
Shareholders' Equity of at least U.S. Twenty-Six Million Dollars (U.S.
$26,000,000), including unrestricted cash of no less than U.S. Five Million
Five Hundred Thousand Dollars (U.S. $5,500,000).
10.10. Third Party Consents. Seller shall provide to Buyer all third
party consents or third party authorizations believed by Buyer, acting
reasonably, to be necessary for the legal and proper consummation of all
agreements and transactions contemplated within this Agreement, subject to
Section 6.16.
10.11. [Deleted]
10.12. [Deleted]
10.13. "Back Log". At Closing, Seller shall provide Buyer evidence
reasonably satisfactory to Buyer that the Business has confirmed back log as of
the Closing equal to no less than U.S. $20,000,000. For such purposes,
"confirmed back log" means anticipated revenue from signed contracts or letters
of intent (or verbal agreement with Japanese clients). Failure of Buyer to
obtain a consent to assignment from a customer shall not cause such anticipated
revenue from such customer to be excluded from this calculation.
ARTICLE 11. OBLIGATIONS OF SELLER AND SHAREHOLDERS AT CLOSING
At Closing, Seller and Shareholders shall deliver or cause to be
delivered to Buyer the following in form and substance reasonably satisfactory
to Buyer and Seller:
11.1. Documents Relating to Title. Seller shall execute,
acknowledge, deliver and cause to be executed, acknowledged and delivered to
Buyer:
(1) A deed of sale, in form reasonably satisfactory to
Buyer, conveying to Buyer good, valid and marketable title to the Real Estate
free and clear of all Defects, except for Permitted Exceptions.
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(2) An Assignment and Assumption of Lease agreement for
the Leased Real Estate, if any, conveying to Buyer the legal right to possess
and use the Leased Real Estate.
(3) A Bill of Sale and Assignment Agreement or General
Conveyance, in form and substance satisfactory to the parties, conveying to
Buyer title to all of the Assets (other than the Real Estate) on the terms and
conditions set forth herein.
(4) Certificates of title to all vehicles that constitute
Assets endorsed by Seller together with completed originals of any forms
required by all applicable states to transfer the same, free and clear of all
liens, except for those acceptable to Buyer.
(5) A wire transfer (or other payment method acceptable
to Buyer) of all Cash and Cash Equivalents included in the Assets to an account
designated by Buyer.
(6) An effective and enforceable assignment to Buyer of
each Lease (other than Leases of Real Estate) and Contract, subject to Section
6.16.
11.2. [Deleted].
11.3. Opinion of Counsel. Seller and Shareholders shall deliver to
Buyer the favorable opinion of counsel for Seller and Shareholders, dated as of
Closing, in form acceptable to Buyer, acting reasonably (or, in the case of
Ontario Teacher's Pension Plan Board and the Caisse de depot et placement de
Quebec, respectively, an alternative acceptable to Buyer, acting reasonably).
11.4. Corporate Good Standing and Corporate Resolutions. Seller and
Shareholders shall deliver to Buyer the following (or, in the case of Ontario
Teachers', an alternative reasonably acceptable to Buyer): (i) certificates of
good standing from the appropriate governmental authority of their jurisdiction
of incorporation, (ii) certified copies of the Bylaws and Charter of Seller
(all dated the most recent practical date prior to Closing), and (iii)
certified copies of the resolutions of the Board of Directors and Shareholders
of Seller and the board of directors of each Shareholder authorizing the
execution, delivery and consummation of this Agreement and the execution,
delivery and consummation of all other agreements and documents executed in
connection herewith by them, including all deeds, bills of sale, general
conveyances and other instruments required hereunder, sufficient in form and
content to meet the requirements of the law of the jurisdiction of Seller's
incorporation relevant to such transactions and certified by officers of Seller
and Shareholders, as the case may be, to be validly adopted and in full force
and effect and unamended as of Closing.
11.5. Closing Certificate. Seller shall deliver to Buyer
certificates of Michael F. Ankcorn and Paul Bancroft, respectively, in their
capacities as officers of Seller dated as of Closing, certifying that (a) each
covenant and obligation of Seller has been complied
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with by Seller, and (b) each representation and warranty of Seller is true and
correct on the Closing as if made on and as of the Closing.
11.6. Third Party Consents. Seller shall deliver to Buyer, all
consents, estoppels, approvals and authorizations of third parties that Buyer,
acting reasonably, believes are necessary for the legal and proper execution,
delivery and consummation of this Agreement, and the transactions contemplated
hereby, subject to Section 6.16.
11.7. Releases. Seller shall deliver to Buyer executed releases of
any mortgages, hypothecs, security interests, liens, pledges, restrictions or
other encumbrances on or applicable to the Assets other than Permitted
Exceptions.
11.8. Confidentiality and Employment Agreements. Seller shall
deliver to Buyer each of the agreements described in Sections 10.6 and 10.7
duly executed by the appropriate parties.
ARTICLE 12. OBLIGATIONS OF BUYER AT CLOSING
At Closing, Buyer shall deliver or cause to be delivered to Seller the
following in a form and substance reasonably satisfactory to Seller:
12.1. Purchase Price. Buyer shall pay to Seller the Purchase Price
as specified in Section 3.1(a) hereof (subject to Section 7.1).
12.2. Opinion of Counsel. Buyer shall deliver to Seller and
Shareholders a favorable opinion of counsel for Buyer, dated as of Closing, in
the form specified in Article 13 hereof.
12.3. Corporate Good Standing and Board Resolutions. Buyer shall
deliver to Seller a certificate of good standing from the Secretary of State of
Delaware, dated the most recent practical date prior to Closing, together with
a certified copy of the resolutions of the Board of Directors of Buyer
approving this Agreement and the consummation of the transactions intended
hereby.
12.4. Closing Certificate. Buyer shall deliver to Seller a
certificate of officers of Buyer, dated as of Closing, certifying that (a) each
covenant and obligation of Buyer has been complied with by Buyer, and (b) each
representation and warranty of Buyer is true and correct on the Closing as if
made on and as of the Closing.
12.5. Assumption of Liabilities. Buyer shall covenant to fully
perform and comply with all of the Assumed Liabilities, subject to the
provisions of this Agreement, from and after Closing.
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12.6. Insurance. Buyer shall deliver to Seller evidence of the
insurance coverage required by Section 6.10.
ARTICLE 13. OPINION OF BUYER'S COUNSEL
At the Closing, Buyer shall deliver to Seller an opinion of Harwell
Howard Hyne Gabbert & Manner, P.C. dated the date of the Closing and pursuant
to the Legal Opinion Accord of the ABA Section of Business Law (1991), in form
and substance reasonably satisfactory to Seller and their counsel to the effect
that:
(1) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and corporate authority to own, operate and lease
their properties and assets and to carry on their business as now conducted.
(2) Buyer has the corporate power and corporate authority
to execute, deliver and carry out the terms of this Agreement and all documents
and agreements necessary to give effect to the provisions of this Agreement and
to consummate the transactions contemplated on the part of Buyer hereby and
thereby; Buyer has taken all action required by law, and its Certificate of
Incorporation and Bylaws, to authorize such execution, delivery and
consummation of this Agreement, and this Agreement, and all other agreements
delivered by Buyer at Closing constitute the valid and binding obligations of
Buyer enforceable in accordance with their respective terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally and by general principles of equity.
ARTICLE 14. SURVIVAL OF PROVISIONS AND INDEMNIFICATION
14.1. Survival. The covenants, obligations, representations and
warranties of Buyer, Seller and Shareholders contained in this Agreement, or in
any certificate or document delivered pursuant to this Agreement, shall be
deemed to be material and to have been relied upon by the parties hereto
notwithstanding any investigation prior to the Closing shall not be merged into
any documents delivered in connection with the Closing and shall survive the
date of Closing for a period of two (2) years; provided that claims relating to
tax matters and any claim based on fraud shall survive until sixty (60) days
after the applicable statute of limitations relating to the underlying claim,
and that any claim based on fraud shall not be subject to the Indemnification
Threshold (as defined in Section 14.4(6)) but shall be subject to the
limitations of liability set forth in Section 14.4(5). In addition, with
respect to the breach of any representation which is qualified by words or
phrases such as "material," "materially," "immaterial" or "immaterially" or
words of similar import, such qualifier shall be disregarded for purposes
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of calculating any party's damages, and the other party's corresponding
indemnification obligation under this Article 14.
14.2. Indemnification by Seller and Shareholders. Subject to
Section 14.4, Seller and Shareholders jointly (in accordance with the
percentages and limitations set forth in Sections 14.4(5) and 14.4(6) below)
shall promptly indemnify, defend, and hold harmless Buyer, the directors,
officers, shareholders, employees and agents of Buyer against any and all
losses, costs, and expenses (including reasonable cost of investigation, court
costs and legal fees) and other damages resulting from: (i) any breach by
either Seller or Shareholders of any of the covenants, obligations,
representations or warranties or breach or untruth contained in this Agreement
or any certificate or document of Seller and/or Shareholders delivered pursuant
to this Agreement; (ii) any liability of Seller not expressly assumed by Buyer
pursuant to Section 1.3 hereof; and (iii) any claim not specifically disclosed
herein or in any of the Exhibits or other documents delivered pursuant to this
Agreement that is brought or asserted by any third party(s) against Buyer
arising out of the ownership, licensing, operation or conduct of the Business
or Assets or the conduct of any of Seller's employees, agents or independent
contractors, relating to all periods of time prior to the Closing. Any
indemnification payment made pursuant to this Article shall include interest at
a floating rate equal to two points over the prime rate of NationsBank of
Tennessee, N.A., established from time to time (the "Rate"), payable for the
period measured from the date of receipt of notice of the loss, cost, expense
or damage which was incurred until the date of payment.
14.3. Indemnification by Buyer. Subject to Section 14.4, Buyer
shall promptly indemnify, defend, and hold Seller and Shareholders harmless
against any and all losses, costs, and expenses (including reasonable cost of
investigation, court costs and legal fees) and other damages resulting from (i)
any breach by Buyer of any of its covenants, obligations, representations or
warranties or breach or untruth of any representation, warranty, fact or
conclusion contained in this Agreement or any certificate or document of Buyer
delivered pursuant to this Agreement,(ii) any claim which is brought or
asserted by any third party(s) against Seller or any of the Shareholders for
failure to pay or perform any of the Assumed Liabilities, and (iii) any claim
that is brought or asserted by any third party(s) against Seller arising out of
the ownership, licensing, operation or conduct of the Business or Assets or the
conduct of any of Buyer's employees, agents or independent contractors,
relating to all periods of time subsequent to the Closing. Any indemnification
payment pursuant to the foregoing shall include interest at the Rate from the
date that the loss, cost, expense or damage was incurred by Seller or any of
the Shareholders until the date of payment.
14.4. Rules Regarding Indemnification. The obligations and
liabilities of each party which may be subject to indemnification liability
hereunder (the "indemnifying party") to the other party (the "indemnified
party") shall be subject to the following terms
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and conditions (for purposes of this Section 14.4, "party" shall mean Buyer, on
the one hand and Seller and Shareholders, collectively, on the other hand):
(1) Claims by Non-parties. The indemnified party shall
give written notice within a reasonably prompt period of time to the
indemnifying party of any written claim by a third party which is likely to
give rise to a claim by the indemnified party against the indemnifying party
based on the indemnity agreements contained in this Article, stating the nature
of said claim and the amount thereof, to the extent known. The indemnified
party shall give notice to the indemnifying party that pursuant to the
indemnity, the indemnified party is asserting against the indemnifying party a
claim with respect to a potential loss from the third party claim, and such
notice shall constitute the assertion of a claim for indemnity by the
indemnified party. If, within thirty (30) days after receiving such notice,
the indemnifying party advises the indemnified party that it will provide
indemnification and assume the defense at its expense, then so long as such
defense is being conducted, the indemnified party shall not settle or admit
liability with respect to the claim and shall afford to the indemnifying party
and defending counsel all reasonable assistance in defending against the claim.
If the indemnifying party assumes the defense, counsel shall be selected by
such party and if the indemnified party then retains its own counsel, it shall
do so at its own expense. If the indemnified party does not receive a written
objection to the notice from the indemnifying party within thirty (30) days
after the indemnifying party's receipt of such notice, the claim for indemnity
shall be conclusively presumed to have been assented to and approved, and in
such case the indemnified party may control the defense of the matter or case
and, at its sole discretion, settle or admit liability. If within the
aforesaid thirty (30) day period the indemnified party shall have received
written objection to a claim (which written objection shall briefly describe
the basis of the objection to the claim or the amount thereof, all in good
faith), then for a period of ten (10) days after receipt of such objection the
parties shall attempt to settle the dispute as between the indemnified and
indemnifying parties.
(2) Claims by a Party. The determination of a claim
asserted by a party hereunder (other than as set forth in subsection (1) above)
pursuant to this Article shall be made as follows: The indemnified party shall
give written notice within a reasonably prompt period of time to the
indemnifying party of any claim by the indemnified party which has not been
made pursuant to subsection (1) above, stating the nature and basis of such
claim and the amount thereof, to the extent known. The claim shall be deemed
to have resulted in a determination in favor of the indemnified party and to
have resulted in a liability of the indemnifying party in an amount equal to
the amount of such claim estimated pursuant to this Section if within
forty-five (45) days after the indemnifying party's receipt of the claim the
indemnified party shall not have received written objection to the claim. In
such event, the claim shall be conclusively presumed to have been assented to
and approved. If within the aforesaid forty-five (45) day period the
indemnified party shall have received from the indemnifying party written
objection to a claim (which written objection shall briefly describe the basis
of the objection to the claim or the amount thereof, all in good faith), then
for a period of sixty (60) days after receipt
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of such objection the parties shall attempt to settle the disputed claim as
between the indemnified and indemnifying parties.
(3) Straddle Claims. Any claim based on negligence or
similar matters relating to time periods both prior to the Closing Date and
subsequent to the Closing Date will be the responsibility of either Buyer or
Seller and Shareholders in accordance with the following guidelines: (i) if it
is a claim in which the incident giving rise to liability clearly arose prior
to the Closing Date, Seller (including Shareholders) shall respond to the loss
and defense expenses; (ii) if it is a claim in which the incident giving rise
to liability clearly arose subsequent to the Closing Date, Buyer shall respond
to the loss and defense expenses; and (iii) in the event that the incident
giving rise to liability as to time is not clear, Seller (including
Shareholders) and Buyer will jointly defend the case and each will fully
cooperate with the other in such defense. Once the case is closed, if Buyer
and Seller (including Shareholders) cannot agree to the allocation of both
indemnity and expenses, then the matter shall be submitted to binding
arbitration in accordance with Section 16.6.
(4) Assignment by Buyer. No consent by Seller shall be
required for any assignment or reassignment of the rights (but not the
obligations) of Buyer under this Article 14 following Closing.
(5) Limitation of Liability. Notwithstanding anything to
the contrary contained in the first paragraph of Section 4.1 or elsewhere in
this Agreement but subject to Section 14.4(6): (i) the maximum aggregate
liability of the Seller and Shareholders, in the aggregate, on the one hand,
and Buyer, on the other, for indemnification under this Agreement shall be
equal to the Purchase Price; and (ii) the liability of any Shareholder in
respect of any claim for indemnification pursuant to this Article 14 shall be
limited to that portion of the claim calculated on the basis of the applicable
percentage set forth below (provided the maximum aggregate liability of any
Shareholder in respect of any claim(s) for indemnification pursuant to this
Article 14 shall not exceed that portion of the Purchase Price paid to such
Shareholder):
(a) in the case of CAI Capital Corporation, CAI
Capital Partners and Company Limited Partnership, and CAI Partners and
Company Limited Partnership (collectively, "CAI"), forty percent
(40%), it being understood that the obligations of CAI shall be
solidary;
(b) in the case of Ontario Teachers' Pension Plan
Board, thirty percent (30%); and
(c) in the case of the Caisse de Depot et
Placement du Quebec, thirty percent (30%).
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Notwithstanding the foregoing (i) in respect of any claims
which may be made against one or more Shareholders as a result of, relating to
or based on fraud the liability of the Shareholder(s) committing the fraud
shall not be subject to the percentage limitation set forth above but shall be
limited to the portion of the Purchase Price paid to such Shareholder(s); and
(ii) the covenants and obligations of Shareholders pursuant to Article 15 are
made on a joint (and not solidary) basis, and Buyer's recourses in the event of
a breach thereof shall be exercised only against the defaulting Shareholder(s),
with the liability of each such defaulting Shareholder not being subject to the
percentage limitation set forth above but being limited, in the aggregate, to
that portion of the Purchase Price paid to such Shareholder.
(6) Indemnification Threshold. Neither party shall seek
recourse against, and shall not recover from any indemnifying party under this
Article 14 on account of any claim, loss, cost, expenses (including reasonable
cost of investigation, court costs and legal fees) or damages unless and until
the aggregate amount thereof exceeds Five Hundred Thousand Dollars ($500,000)
(the "Indemnification Threshold"), in which event the liability of the
indemnifying party shall be limited to the amount by which such claims, losses,
costs, expenses and damages exceed Five Hundred Thousand Dollars ($500,000).
Notwithstanding the foregoing, the Indemnification Threshold shall not be
applicable in the case of (i) an indemnification claim in accordance with this
Article 14 based on any failure to transfer all the Assets subject to the
provisions of Section 6.16 or a breach of Article 15, or (ii) a Purchase Price
adjustment based on the Final Closing Statement pursuant to Section 3.1.
ARTICLE 15. RESTRICTIVE COVENANTS
15.1. Restrictive Covenants. Seller and Shareholders hereby
covenant and agree with Buyer that, during the "Covenant Period" (as such term
is defined herein), Seller and Shareholders shall (a) not disclose (other than
to Buyer or its representatives) any proprietary information related to the
Business, including but not limited to trade secrets, financial statements and
related information, customer lists, marketing strategy, business plans and
projections and other confidential information and materials or (b) not solicit
for employment or employ any person who at Closing or thereafter became an
employee of Buyer or an Affiliate unless such person is not so employed for at
least one (1) year; or (c) not disrupt or attempt to disrupt any past or
present contractual relationship between Buyer, on the one hand, and any
customer or client with whom Buyer contracts with in connection with the
Business, on the other hand. The "Covenant Period" shall commence at the
Closing and terminate on the third (3rd) anniversary thereof.
15.2. Enforceability. In the event of a breach of Section 15.1
hereof, Seller and Shareholders recognize that monetary damages may be
inadequate to compensate Buyer and Buyer may be entitled, without the posting
of a bond, to an injunction
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restraining such breach. Nothing contained herein shall be construed as
prohibiting Buyer from pursuing any other remedy available to it for such
breach or threatened breach.
All parties hereto hereby acknowledge the necessity of protection
against the competition of Seller and Shareholders and that the nature and
scope of such protection has been carefully considered by the parties. The
period provided is expressly represented and agreed to be fair, reasonable and
necessary. The consideration provided for herein is deemed to be sufficient
and adequate to compensate Seller and Shareholders for agreeing to the
restrictions contained in Section 15.1 hereof. If, however, any court
determines that the foregoing restrictions are not reasonable, such
restrictions shall be modified, rewritten or interpreted to include as much of
their nature and scope as will render them enforceable.
ARTICLE 16. MISCELLANEOUS
16.1. Assignment. Prior to Closing, Buyer may assign its rights
(but not its obligations) hereunder to a direct or indirect wholly-owned
subsidiary (U.S. or Canadian). Following Closing, Buyer may freely assign its
rights or delegate its obligations under this Agreement without the express
written consent of Seller or Shareholders, provided that Buyer remains
solidarily liable with the assignee or delegatee, as the case may be, to Seller
and Shareholders for the obligations of Buyer under this Agreement. Neither
Seller nor Shareholders may assign any rights or delegate any obligations under
this Agreement without the prior written consent of Buyer, and any prohibited
assignment or delegation will be null and void.
16.2. Other Expenses. Except as otherwise provided in this
Agreement, Seller and Shareholders shall pay all of their expenses in
connection with the negotiation, execution, and implementation of the
transactions contemplated by this Agreement and Buyer shall pay all of its
expenses in connection with the negotiation, execution, and implementation of
the transactions contemplated by this Agreement.
16.3. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given: (a) if delivered
personally or sent by facsimile, on the date received; (b) if delivered by
overnight courier, on the day after mailing; and (c) if mailed, five days
after mailing with postage prepaid. Any such notice shall be sent as follows:
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To Seller:
c/o CAI Advisors & Co.
767 Fifth Avenue
New York, New York 10153
Attn: Les Daniels
with a copy to:
Stikeman, Elliott
Suite 4000, 1155 Rene-Levesque Boulevard West
Montreal, Canada H3B 3V2
Attn: Stuart H. Cobbett and William B. Rosenberg
To Shareholders:
CAI Advisors & Co.
CAI Capital Partners and Company Limited Partnership
CAI Partners and Company Limited Partnership
767 Fifth Avenue
New York, New York 10153
Attn: Les Daniels
Ontario Teachers' Pension Plan Board
5650 Yonge, Suite 500
North York, Ontario M2M 4H5
Attn: Portfolio Manager, Merchant Banking Group
with a copy to the Law Department
Caisse de Depot et Placement du Quebec
1981 McGill College
Montreal, Quebec
CANADA H3A 3C7
Attn: Vice President, Coordinateur, Groupe Participation
Caisse
To Buyer:
ClinTrials Research Inc.
One Burton Hills Blvd., Suite 210
Nashville, Tennessee 37215
Attn: William C. O'Neil, Jr.
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with a copy to:
Harwell Howard Hyne Gabbert & Manner, P.C.
1800 First American Center
Nashville, Tennessee 37238-1800
Attn: Mark Manner
16.4. Confidentiality; Prohibition on Trading. All parties agree to
maintain the confidentiality of the existence of this Agreement and the
transactions contemplated hereunder, unless disclosure is required by law.
Seller, Shareholders and their Affiliates agree not to trade in the securities
of Buyer or its Affiliates based upon any nonpublic information.
16.5. Controlling Law. This Agreement shall be construed,
interpreted and enforced in accordance with the laws of the Province of Quebec.
16.6. Arbitration.
(a) If any dispute shall occur between Buyer, on the one
hand, and Seller and Shareholders, on the other hand, the parties relating to
the interpretation or implementation of any of the provisions of this
Agreement, such dispute shall be resolved by arbitration pursuant to Article
2638 of the Civil Code of Quebec.
(b) Whenever any arbitration is permitted or required
hereunder, arbitration proceedings shall be commenced by the party desiring
arbitration (hereinafter called the "Initiating Group") giving notice to the
other Group(s) entitled to participate in the arbitration proceedings
(hereinafter collectively called the "Responding Groups") specifying the matter
to be arbitrated and requesting an arbitration thereof. The Initiating Group
and the Responding Groups shall jointly appoint a single arbitrator. In the
event that the Initiating Group and the Responding Groups fail to agree to the
appointment of a single arbitrator within the thirty (30) days next following
the initial notice of recourse to arbitration, either the Initiating Group or
the Responding Groups may make application to a Judge of the Superior Court of
the Province of Quebec for selection of an arbitrator.
(c) The arbitrator appointed pursuant to the provisions
of this Section shall be entitled to establish the regulations and procedures
governing the arbitration procedures in his sole and absolute discretion.
(d) The decision of the arbitrator shall be final and
binding upon the parties and not subject to appeal.
(e) The arbitrator shall have the authority to assess the
costs of the arbitration against either or both of the Initiating Group or the
Responding Groups in
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such proportions as the arbitrator deems appropriate in his sole and absolute
discretion provided, however, that each party shall bear its own witness and
counsel fees.
(f) The arbitrator appointed as aforesaid shall forthwith
proceed to arbitrate the dispute between the parties hereto and he shall within
sixty (60) days or so soon thereafter as may be practicable, render his
decision in writing and transmit such document to the parties hereto.
(g) In the event of the death, resignation or legal
incapacity of an appointed arbitrator, or in the event of the neglect or
refusal to act for a period exceeding fifteen (15) days after notice given by
one of the parties, another arbitrator shall be appointed to fill the vacancy
so created in the manner provided for herein.
(h) The cost of any arbitration shall be borne equally by
the parties hereto except as the arbitrator may otherwise determine.
(i) The decision of the arbitrator shall be final and
binding upon the parties hereto.
16.7. Headings. Any table of contents and paragraph headings in
this Agreement are for convenience of reference only and shall not be
considered or referred to in resolving questions of interpretation.
16.8. Benefit. Subject to Section 16.1 hereof, this Agreement shall
be binding upon and shall inure to the exclusive benefit of the parties hereto
and their respective legal representatives, successors and assigns. This
Agreement is not intended to, nor shall it, create any rights in any other
party.
16.9. Partial Invalidity. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provisions were omitted.
16.10. Waiver. Neither the failure nor any delay on the part of any
party hereto in exercising any rights, power or remedy hereunder shall operate
as a waiver thereof, or of any other right, power or remedy; nor shall any
single or partial exercise of any right, power or remedy preclude any further
or other exercise thereof, or the exercise of any other right, power or remedy.
No waiver of any of the provisions of this Agreement shall be valid unless it
is in writing and signed by the party against which it is sought to be
enforced.
16.11. Post Closing Assistance. At the reasonable request of Buyer,
Seller and Shareholders shall cooperate with Buyer to put Buyer in actual
possession and operating control of the Assets and Business, execute and
deliver such further instruments of sale,
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conveyance, transfer and assignment, as Buyer may reasonably request in order
to effectively sell, convey, transfer and assign the Assets to Buyer and to
execute and deliver such further instruments and to take such other actions as
Buyer may reasonably request to release Buyer from all obligation and liability
with regard to any obligation or liability retained by Seller.
At the reasonable request of Seller, Buyer shall cooperate with Seller
in connection with the winding-up of Seller under the corporate laws of the
Province of Quebec, and shall provide Seller, without cost to Seller, with
reasonable access to Michael Ankcorn and Paul Bancroft, while they are
employees of Buyer. Except as set forth above, Seller shall bear all
out-of-pocket expenses related to its winding-up.
16.12. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
16.13. Interpretation; Knowledge. All pronouns and any variation
thereof shall be deemed to refer to the masculine, feminine, neuter, singular
or plural as the identity of the person or entity, or the context, may require.
Further, it is acknowledged by the parties that this Agreement has undergone
several drafts with the negotiated suggestions of both; and, therefore, no
presumptions shall arise favoring either party by virtue of the authorship of
any of its provisions or the changes made through revisions. Whenever in this
Agreement the terms "to the knowledge of Seller," "to Seller's knowledge" or
the like is used, it means the knowledge which either of Michael Ankcorn or
Paul Bancroft (i) actually has or (ii) should have after having conducted
reasonable inquiry.
16.14. Entire Agreement. This Agreement, including the Exhibits and
Attachments hereto, constitutes the entire agreement between the parties hereto
with regard to the matters contained herein and it is understood and agreed
that all previous undertakings, negotiations, letters of intent and agreements
between the parties are merged herein. This Agreement may not be modified
orally, but only by an agreement in writing signed by Buyer, Seller and
Shareholders.
16.15. Legal Fees and Costs. In the event any party incurs legal
expenses to enforce or interpret any provision of this Agreement, the
prevailing party will be entitled to recover such legal expenses, including,
without limitation, attorney's fees, costs and necessary disbursements, in
addition to any other relief to which such party shall be entitled.
16.16. English Language. The parties confirm that it is their wish
that this Agreement as well as any other documents relating hereto, including
notices, have been and will be drawn up in English only. Les parties aux
presentes confirment leur volonte que cette convention de meme que tous les
documents, y compris tous les avis sy rattachant, soient rediges en anglais
seulement.
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The parties hereto have executed this Agreement as of the date first above
written.
"SELLER":
BIO-RESEARCH LABORATORIES LTD.
By: /s/ Michael F. Ankcorn
-------------------------------------
Title: President & CEO
-------------------------------------
"SHAREHOLDERS":
CAISSE DE DEPOT ET PLACEMENT
DU QUEBEC
By: /s/ Pierre Fortier and Michel Nadeau
-------------------------------------
Title: Authorized Representatives
-------------------------------------
CAI CAPITAL CORPORATION
By: /s/ David M. Culver
-------------------------------------
Title: Chairman
------------------------------------
ONTARIO TEACHERS' PENSION PLAN BOARD
By: /s/ Mark MacDonald
------------------------------------
Title: Portfolio Manager
------------------------------------
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CAI CAPITAL PARTNERS AND COMPANY
LIMITED PARTNERSHIP by its General
Partner, CAI Capital G.P. Inc.
By: /s/ David Culver
---------------------------------
Title: Chairman
---------------------------------
CAI PARTNERS AND COMPANY LIMITED
PARTNERSHIP by its General Partner,
CAI Advisors & Co.
By: /s/ CLEA & Co.
---------------------------------
Title: A General Partner
---------------------------------
By: L.B. Daniels, President
"BUYER":
CLINTRIALS RESEARCH INC.
By: /s/ William C. O'Neil, Jr.
---------------------------------
Title: Chairman/Chief Executive
---------------------------------
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EXHIBIT INDEX
1.1 Permitted Exceptions
1.1(1) Real Estate
1.1(5) List of Bank Accounts
1.3(2) Seller's Current Liabilities
3.1 Form of Final Closing Statement
3.2 Allocation of Purchase Price
3.3(d) Amounts for GST and QST Purposes
4.1 Seller's Organization
4.3 Seller's Financial Statements
4.4 Seller's Business Operations Since December 31, 1995
4.6 Employment Claims
4.7 Licenses and Permits
4.10 Leases and Contracts
4.11 1994 Audit and Study
4.11(f) Environmental Matters
4.13 Litigation
4.14 List of Employees, Salaries, Benefits, etc.
4.16 Insurance
4.19 Intellectual Property
4.22(1) Employee Benefit Plans
4.22(2) Employee Pension Plans
4.22(3) Liabilities Under Benefit Plans
10.6 Seller's Senior Management Employees
10.7 Form of Employment Agreement
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Exhibit 23
Consent of Independent Auditors
We consent to the use of our report dated February 6, 1996, except for Note 12,
as to which the date is May 24, 1996, with respect to the financial statements
of Bio-Research Laboratories Ltd. in the Current Report (Form 8-K) of
ClinTrials Research Inc.
ERNST & YOUNG LLP
Nashville, Tennessee
June 18, 1996
