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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 18, 1996
Chrysalis International Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-19659 22-28779373
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
575 Route 28, Raritan, New Jersey 08869
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 722-7900
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Exhibit Index at Pages 5 and 6
PAGE 1 OF 84 PAGES
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Item 2. Acquisition or Disposition of Assets.
-------------------------------------
Pursuant to three definitive agreements, each entered into as of
August 19, 1996, DNX Corporation (now known as Chrysalis International
Corporation) ("DNX") issued on December 18, 1996, after obtaining stockholder
approval at the Annual Meeting of Stockholders (the "Annual Meeting"),
2,632,600 shares of Common Stock, par value $0.01 per share, of DNX (the
"Common Stock") in exchange for all of the outstanding capital stock of, and
equity interests in, BioClin, Inc., a Delaware corporation ("BioClin/U.S."),
BioClin Europe AG, a Swiss corporation ("BioClin Europe"), BioClin GmbH, a
German corporation ("BioClin Germany"), Kilmer N.V., a Netherlands Antilles
corporation ("Kilmer"), and BioClin Institute of Clinical Pharmacology GmbH, a
German corporation ("BioClin Institute" and, together with BioClin/U.S.,
BioClin Europe, BioClin Germany and Kilmer, collectively, the "BioClin Group")
(the "Transaction"). The number of shares of Common Stock issued in the
Transaction in exchange for the outstanding capital stock and equity interests
of the BioClin Group was determined based upon arms-length negotiation between
DNX and the BioClin Group.
Prior to the Transaction, the BioClin Group was an international
contract research organization engaged in clinical drug development services
serving the pharmaceutical, biotechnology and medical device industries in the
United States, Europe, the Middle East and Australia. Following the Transaction,
each member of the BioClin Group became a wholly-owned subsidiary of DNX and
all physical assets of the BioClin Group acquired by DNX will be used in the
conduct of international preclinical and clinical drug development services by
DNX and its subsidiaries.
Prior to the Transaction, the BioClin Group was controlled by a
stockholder group consisting of Dr. Jack Barbut ("Barbut"), Dr. J. Chris Jensen
("Jensen") and Mr. Alec Hackel ("Hackel" and, together with Barbut and Jensen,
collectively, the "Interest Holders"). Prior to the Transaction, there was no
material relationship between the Interest Holders and DNX or its directors,
officers or affiliates. Pursuant to the terms of the Stockholders' Agreement,
dated as of December 18, 1996, among DNX and, among others, the Interest
Holders, Drs. Barbut and Jensen were appointed to the Board of Directors of DNX
following the Annual Meeting and the consummation of the Transaction.
In connection with the Transaction, the Board of Directors of DNX
resolved to submit to stockholder vote at the Annual Meeting a proposal to
change the name of the corporation to Chrysalis International Corporation (the
"Name Change"). The stockholders of DNX approved the Name Change at the Annual
Meeting and immediately thereafter DNX filed a Third Amended and Restated
Certificate of Incorporation of Chrysalis International Corporation
("Chrysalis") with the Secretary of State of the State of Delaware in order to
effect such Name Change.
PAGE 2 OF 84 PAGES
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Item 7. Financial Statements and Exhibits.
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(a) Financial statements:
Combined Balance Sheets of the BioClin Group as of December 31, 1995
and 1994 and the related Combined Statements of Operations, Deficit in
Stockholders' Equity and Cash Flows for each of the years in the
three-year period ended December 31, 1995, including Notes thereto
(incorporated by reference to pages X-1 through X-20 of the Proxy
Statement of DNX, dated as of November 11, 1996, for use in connection
with the solicitation of proxies for the Annual Meeting (the "Proxy
Statement") filed with the Securities and Exchange Commission (the
"Commission") on November 8, 1996 (copies of these financial statements
are attached hereto as Exhibit 99.2)).
(b) Pro Forma financial information:
Unaudited Pro Forma Combined Condensed Financial Information, including
Notes thereto (incorporated by reference to pages 79 through 86 of the
Proxy Statement (copies of this pro forma financial information is
attached hereto as Exhibit 99.3)).
(c) Exhibits: See Exhibit Index at pages 5 and 6.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
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In connection with the Transaction and in exchange for a portion of
the equity interests in BioClin Germany, 52,652 shares of the 2,632,600 shares
of Common Stock issued by DNX in the Transaction were issued to minority
shareholders of BioClin Germany, other than the Interest Holders, none of
whom are "U.S persons" within the meaning of Regulation S under the Securities
Act of 1933 (the "Securities Act"). Accordingly, such shares of Common Stock
were not registered under the Securities Act in reliance on Regulation S.
PAGE 3 OF 84 PAGES
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SIGNATURE
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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.
CHRYSALIS INTERNATIONAL CORPORATION
By: /s/ John G. Cooper
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Name: John G. Cooper
Title: Senior Vice President and
Chief Financial Officer
Date: December 31, 1996
PAGE 4 OF 84 PAGES
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INDEX TO EXHIBITS
Exhibit No. Description of Exhibits Page
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2.1 Merger Agreement, dated as of August 19, N/A
1996, among DNX Corporation, DNX
Acquisition Corporation, Dr. Jack Barbut,
Alec Hackel, Dr. John Christian Jensen,
Sherby N.V. and BioClin, Inc.
(incorporated by reference to Exhibit 2.1
to the Current Report on Form 8-K filed
by DNX with the Commission on August 19,
1996 (the "August Form 8-K")).
2.2 Share Exchange Agreement, dated as of N/A
August 19, 1996, among DNX Corporation,
Mr. Manfred Wissmann, as Trustee, Dr.
Gerald Rittershaus, as Employee Trustee,
Dr. Jack Barbut, Alec Hackel, Dr. John
Christian Jensen, Bettina Donhardt,
Christine Dune-Kraatz, BioClin GmbH,
Kilmer N.V. and BioClin Europe AG
(incorporated by reference to Exhibit 2.2
to the August Form 8-K).
2.3 Share Acquisition Agreement, dated as of N/A
August 19, 1996, among DNX Corporation,
Dr. Gerald Rittershaus, as Trustee, Dr.
Jack Barbut, Alec Hackel, Dr. John
Christian Jensen and BioClin Institute of
Clinical Pharmacology GmbH (incorporated
by reference to Exhibit 2.3 to the August
Form 8-K).
2.4 Stockholders' Agreement, dated as of 7
December 18, 1996, among DNX Corporation,
Dr. Gerald Rittershaus, as Trustee and
Employee Trustee, Manfred Wissmann, as
Trustee, Dr. Jack Barbut, Alec Hackel,
Dr. John Christian Jensen, Sherby N.V.,
Martha Lee Reynolds, Barry Dvorchik,
Bettina Donhardt and Christine Dune-
Kraatz.
3.1 Third Amended and Restated Certificate of 32
Incorporation of Chrysalis International
Corporation.
3.2 Third Amended and Restated By-Laws of 43
Chrysalis International Corporation.
99.1 Press Release dated December 19, 1996. 54
PAGE 5 OF 84 PAGES
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Exhibit No. Description of Exhibits Page
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99.2 Pages X-1 through X-20 of the Proxy 57
Statement setting forth the Combined
Balance Sheets of the BioClin Group as of
December 31, 1995 and 1994 and the
related Combined Statements of Operations,
Deficit in Stockholders' Equity and Cash Flows
for each of the years in the three-year period
ended December 31, 1995, including Notes
thereto.
99.3 Pages 79 through 86 of the Proxy 77
Statement setting forth the Unaudited Pro
Forma Combined Condensed Financial
Information, including Notes thereto.
PAGE 6 OF 84 PAGES
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Exhibit 2.4
STOCKHOLDERS' AGREEMENT
-----------------------
This STOCKHOLDERS' AGREEMENT (the "Agreement") is being entered into
this 18th day of December 1996, by and between DNX Corporation, a Delaware
corporation (together with its successors and permitted assigns, the "Issuer"),
Sherby N.V., a Netherlands Antilles corporation ("Sherby"), Dr. Gerald
Rittershaus, acting solely in his capacity as trustee ("Rittershaus") pursuant
to an Agreement among Rittershaus, Dr. Jack Barbut and Alec Hackel, dated August
29, 1991 (the "Rittershaus Trust Agreement"), Manfred Wissmann, acting solely in
his capacity as trustee ("Wissmann" and, together with Rittershaus, the
"Trustees") pursuant to an Agreement among Wissmann, Dr. Jack Barbut and Alec
Hackel, dated March 22, 1990 (the "Wissmann Trust Agreement" and, together with
the Rittershaus Trust Agreement, the "Trust Agreements"), Dr. Jack Barbut
("Barbut"), Alec Hackel ("Hackel"), Dr. John Christian Jensen ("Jensen",
collectively with Sherby, Barbut and Hackel, the "Stockholders") and Ms. Martha
Lee Reynolds ("Reynolds"), Mr. Barry Dvorchik ("Dvorchik"), Ms. Christine
Dune-Kraatz ("Kraatz"), Dr. Gerald Rittershaus, acting solely in his capacity as
trustee (the "Employee Trustee") pursuant to a Trust Agreement between the
Employee Trustee and Kraatz dated December 12, 1989 (the "Employee Trust
Agreement"), and Ms. Bettina Donhardt ("Donhardt" and, together with Reynolds,
Dvorchik and Kraatz, collectively, the "Employee Stockholders").
RECITALS
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A. The Issuer, the Trustees and the Stockholders, among others, are
parties to each of (i) a Share Exchange Agreement (the "Exchange Agreement")
with respect to BioClin Europe AG, a Swiss corporation ("BioClin Europe"),
Kilmer N.V., a Netherlands Antilles corporation ("Kilmer"), and BioClin GmbH, a
German corporation ("BioClin Germany"), (ii) a Share Acquisition Agreement (the
"Acquisition Agreement") with respect to BioClin Institute of Clinical
Pharmacology GmbH, a German corporation ("BioClin Institute"), and (iii) a
Merger Agreement (the "Merger Agreement") with respect to BioClin, Inc., a
Delaware corporation ("BioClin/U.S." and, together with BioClin Europe, Kilmer,
BioClin Germany and BioClin Institute, collectively, the "BioClin Affiliates"),
each dated August 19, 1996 (the Exchange Agreement, the Acquisition Agreement
and the Merger Agreement collectively, the "Securities Exchange Agreements"),
pursuant to which the Issuer will, among other things, directly, or indirectly,
issue to the Stockholders (or to the Trustees on behalf of Barbut and Hackel)
and the Employee Stockholders (or to the Employee Trustee on behalf of Kraatz)
shares (the "Acquiror Shares") of its Common Stock, par value $0.01 per share
(the "Common Stock").
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B. The Issuer has agreed to provide the Stockholders with the right to
designate one, or upon the earlier of March 31, 1997 or the next vacancy, two,
directors, for election to the Board of Directors of the Issuer (the "Board").
C. The Issuer has agreed to provide to the Stockholders and the
Employee Stockholders certain registration rights with respect to the Common
Stock.
D. The Issuer, the Trustees, the Stockholders and the Employee
Stockholders are entering into this Agreement to set forth the terms and
conditions applicable to such designation of directors to the Board, the grant
and exercise of such registration rights and certain indemnification
arrangements.
E. Capitalized terms used herein, unless otherwise defined herein,
shall have the meaning given to such terms in the Securities Exchange
Agreements.
NOW THEREFORE, for the consideration set forth in the Securities
Exchange Agreements and other good and valuable consideration, the sufficiency
and receipt of which is hereby acknowledged, the Issuer agrees with the Trustees
and the Stockholders as follows:
ARTICLE I
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DEFINITIONS
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1.1 As used in this Agreement, the following terms have the following
meanings:
(i) "AFFILIATE" means, as to any Person, another
Person which controls, is controlled by or is
under common control with, such Person;
(ii) "COMMISSION" means the Securities and
Exchange Commission.
(iii) "CUTBACK REGISTRATION" means any
registration in which the managing
underwriter advises the Issuer that
marketing factors require a limitation of
the number of shares of Common Stock to be
underwritten in such registration;
(iv) "EXCHANGE ACT" means the Securities Exchange
Act of 1934, as amended, including the rules
and regulations promulgated thereunder;
(v) "PERSON" means a corporation, association,
joint venture, partnership, limited liability
company, trust, business, individual,
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government or political subdivision thereof,
or any governmental agency;
(vi) "PERMITTED INTERRUPTION" has the meaning set
forth in Section 3.8.
(vii) "PIGGYBACK REGISTRATION" means any
registration which is not a First Tranche
Requested Registration (other than a
registration on Form S-4 or Form S-8
promulgated pursuant to the Securities Act);
(viii) "REGISTER", "REGISTERED" and "REGISTRATION"
refer to a registration of Common Stock
effected by preparing and filing with the
Commission a registration statement in
compliance with the Securities Act and the
declaration or ordering of the effectiveness
of such registration statement by the
Commission;
(ix) "REGISTRABLE SECURITIES" means the Common
Stock issued or issuable to any Stockholder
(or to the Trustees on behalf of any
Stockholder) or any Employee Stockholder (or
the Employee Trustee on behalf of any
Employee Stockholder) pursuant to the
Securities Exchange Agreements; PROVIDED
that, as to any particular securities, such
securities will cease to be Registrable
Securities upon the first to occur of the
following: (i) such securities have been
sold to the public pursuant to a registration
or pursuant to Rule 144 promulgated by the
Commission pursuant to the Securities Act (or
any similar rule then in force); or (ii) such
securities have been exchanged, substituted
or replaced by securities that have been
registered under the Securities Act.
(x) "REQUESTED REGISTRATION" means a registration
requested under Section 3.2 by the
Stockholders.
(xi) "SECURITIES ACT" means the Securities Act of
1933, as amended, including the rules and
regulations promulgated thereunder.
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ARTICLE II
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DESIGNATION OF DIRECTORS
------------------------
2.1 RIGHT TO NOMINATE A DIRECTOR OF ISSUER. (a) The Issuer shall take
all actions reasonably within its power on or prior to the fifth (5th) business
day after the closing of the transactions contemplated by the Securities
Exchange Agreements (the "Closing") to elect to the Board one (1) member who is
designated by the Stockholders, and upon the earlier to occur of March 31, 1997
or the next vacancy on the Board, one (1) additional member who is designated by
the Stockholders (each person so designated, a "Stockholder Nominee").
(b) Each Stockholder Nominee, regardless of whether to be appointed or
elected, shall be reasonably acceptable to the Issuer, except that the Issuer
hereby agrees that Barbut and Jensen are acceptable Stockholder Nominees.
(c) Notwithstanding any provision contained herein to the contrary, at
any time prior to the election of the second Stockholder Nominee to the Board,
in accordance with Section 2.1(a), one other person (the "Auditing Nominee")
shall have the right to attend and speak (but not vote) at all regular and
special meetings of the Board and, upon notice from the Stockholders of the
identity and address of such Auditing Nominee, the Issuer will cause all notices
of such meetings and all written materials prepared for such meetings to be sent
to such Auditing Nominee at the same time that such notices and materials are
sent to the members of the Board. Any Auditing Nominee shall be reasonably
acceptable to the Issuer, except that the Issuer hereby agrees that each of
Barbut and Jensen is an acceptable Auditing Nominee. Any Auditing Nominee shall
become a party hereto unless already a party hereto. Such Auditing Nominee
hereby acknowledges its obligations under the federal securities laws to not
trade in the Common Stock while in possession of material non-public information
relating to the Issuer and hereby agrees to not so trade.
ARTICLE III
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REGISTRATION PROVISIONS
-----------------------
3.1 PIGGYBACK REGISTRATION. Subject to Permitted Interruptions as
provided for in Section 3.8, if at any time after the Closing, and from time to
time thereafter, the Issuer proposes to effect a Piggyback Registration for its
account or for the account of a security holder or holders, the Issuer shall:
(a) promptly give to each Stockholder and Employee Stockholder written
notice thereof (which written notice shall include a list of the jurisdictions
in which the Issuer intends
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to attempt to qualify such securities under or otherwise comply with the
applicable blue sky or other state securities laws); and
(b) include in such registration (and any related qualification under
or other compliance with blue sky or other state securities laws), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request, made within fifteen (15) days after receipt of such written
notice from the Issuer, by any Stockholder (or the Trustees on behalf of any
Stockholder) or any Employee Stockholder (or the Employee Trustee on behalf of
any Employee Stockholder); PROVIDED, HOWEVER, that if such registration is a
Cutback Registration, then (i) if such registration is a registration on behalf
of the Issuer for its own account, the Issuer shall register in such
registration (A) first, the shares of Common Stock the Issuer proposes to sell
in such registration, and (B) second, the shares of Common Stock that are
Registrable Securities held by the Stockholders, the Employee Stockholders and
any other shares of Common Stock requested to be included therein by persons
entitled to piggyback registration rights (the "Other Holders"), on a pro rata
basis, based upon the number of shares of Common Stock each Stockholder,
Employee Stockholder and each Other Holder originally sought to include in such
registration; and (ii) if such registration is a Piggyback Registration that is
solely a secondary registration requested by, and being made on behalf of,
holders of Common Stock other than the Stockholders or the Employee Stockholders
(the "Demanding Holders"), the Issuer shall register in such registration (A)
first, the shares of Common Stock proposed to be sold by the Demanding Holders,
and (B) second, the shares of Common Stock that are Registrable Securities held
by the Stockholders, the Employee Stockholders and any other shares of Common
Stock requested to be included therein by the Other Holders, on a pro rata
basis, based upon the number of shares of Common Stock each Stockholder,
Employee Stockholder and each Other Holder originally sought to include in such
registration.
3.2 REQUESTED REGISTRATION. Subject to Permitted Interruptions as
provided for in Section 3.8:
(a) FIRST TRANCHE REQUESTED REGISTRATION. At any time following the
second anniversary of the Closing, the Stockholders, acting together, may make a
written request to the Issuer for one (1) registration (including any related
qualification under or compliance with blue sky or other state securities laws)
of up to thirty-eight percent (38%) of the Registrable Securities owned by them
(or by the Trustees on their behalf) to be allocated among the Stockholders as
agreed by them ("First Tranche Requested Registration").
(b) SECOND TRANCHE REQUESTED REGISTRATION. At any time following the
fifth anniversary of the Closing, the Stockholders, acting together, may make a
written request to the Issuer for one (1) registration (including any related
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qualification under or compliance with blue sky or other state securities laws)
of all or part of the Registrable Securities owned by them (or by the Trustees
on their behalf) to be allocated among the Stockholders as agreed by them
("Second Tranche Requested Registration").
(c) REQUEST AND REGISTRATION PROCEDURES. The offering of such
Registrable Securities pursuant to such Requested Registration shall be in the
form of an underwritten public offering. Each request to the Issuer for
registration shall specify whether the registration is a First Tranche Requested
Registration or a Second Tranche Requested Registration and the number of shares
of Common Stock that are Registrable Securities proposed to be registered and
the allocation of such Registrable Securities among the Stockholders. After
receipt of such request, the Issuer shall, subject to Permitted Interruptions,
use its best efforts diligently to effect such Requested Registration (and
related qualifications and compliances (including, without limitation, the
execution of an undertaking to file post-effective amendments and appropriate
qualifications under or other compliance with the applicable blue sky or other
state securities laws)) of the Registrable Securities which the Issuer has been
so requested to register by the Stockholders exercising the Requested
Registration rights ("Requesting Holders").
(d) PRIORITY ON REQUESTED REGISTRATIONS. If any Requested Registration
is a Cutback Registration, the Issuer shall register in such registration (i)
first, the Registrable Securities which any Requesting Holder seeks to include
in such registration, on a pro rata basis based upon the number of shares of
Common Stock each such Requesting Holder seeks to include in such registration
and (ii) second, the Registrable Securities held by the Employee Stockholders
that have exercised their Piggyback Registration rights in accordance with
Section 3.1 (the "Piggyback Holders") (with respect to a Second Tranche
Requested Registration) and any other shares of Common Stock requested to be
included in such registration by the Other Holders, on a pro rata basis, based
upon the number of shares of Common Stock each Piggyback Holder and each Other
Holder, as applicable, seeks to include in such registration.
(e) UNDERWRITING. Any Requesting Holder shall so advise the Issuer as a
part of the request made pursuant to this Section 3.2 of such Requesting
Holder's selection of an underwriter for the offering; PROVIDED that such
underwriter must be reasonably satisfactory to the Issuer. If another
Stockholder disapproves of the terms of the underwriting, such Stockholder may
elect to withdraw therefrom by written notice to the Issuer and the managing
underwriter, and each of the remaining Stockholders shall be entitled to
increase the number of shares being registered, to the extent permitted by the
managing underwriter, in the proportion which the number of shares of
Registrable Securities being registered by such Stockholder bears
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to the total number of shares being registered by all such
remaining Stockholders.
3.3 EXPENSES OF REGISTRATION.
(a) PIGGYBACK REGISTRATION. All expenses incurred in connection with a
Piggyback Registration which, but for such Piggyback Registration, would not
have been incurred by the Issuer (including, without limitation, fees and
disbursements of counsel or independent certified public accountants for any
Stockholder or Employee Stockholder, additional filing and/or listing fees,
additional expenses to secure qualification of such securities under state
securities laws, additional reasonable fees and disbursements of counsel or
independent certified public accountants for the Issuer) shall be for the
account of, and shall be paid by the Stockholders and the Employee Stockholders
participating in such Piggyback Registration or, to the extent such expenses
have already been paid by the Issuer, shall be promptly reimbursed to the Issuer
by the Stockholders and the Employee Stockholders participating in such
Piggyback Registration within ten (10) business days after written request
therefor by the Issuer. The Stockholders and the Employee Stockholders shall pay
all underwriters' fees, discounts or commissions relating to any Registrable
Securities included in any Piggyback Registration.
(b) REQUESTED REGISTRATION. All expenses incurred by the Issuer or the
Stockholders in connection with a Requested Registration (including, without
limitation, all registration, filing and qualification fees, printing expenses,
fees and disbursements of counsel for the Issuer and the Issuer's independent
certified public accountants (subject to the exceptions described herein) and
all underwriters' fees, discounts or commissions relating to any Registrable
Securities included in any such registration) shall be for the account of and
paid by the Stockholders whose Registrable Securities are included in the
Requested Registration, except that the Issuer shall pay up to $75,000 of the
fees and disbursements of the Issuer's counsel and independent certified public
accountants in connection with any Requested Registration.
(c) Notwithstanding any provision of this Section 3.3 to the contrary,
in no event shall the Issuer be required to pay underwriters' fees, discounts or
commissions relating to any Registrable Securities.
(d) In the event that a Requested Registration is withdrawn prior to
the effective disposition under a registration statement of the Registerable
Securities thereby registered, the request relating to such Requested
Registration shall be deemed not to have been made and registration shall be
deemed not to have been effected under this Article III if the Issuer is
reimbursed by the relevant Stockholders for the expenses incurred by it in
connection with the withdrawn Requested Registration.
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3.4 REGISTRATION PROCEDURES.
(a) In the case of each registration, qualification or compliance
effected by the Issuer pursuant to this Article III, the Issuer shall keep each
Stockholder and Employee Stockholder included in such registration advised in
writing as to the initiation, progress, and effective date of each registration,
qualification and compliance, and, at its or such Stockholder's or Employee
Stockholder's expense to the extent provided in Section 3.3, the Issuer shall:
(i) before filing a registration statement or prospectus or any
amendment or supplements thereto subject to this Article III, the
Issuer shall furnish to counsel selected by any Stockholder or Employee
Stockholder such copies of all such documents proposed to be filed and
the portions of such documents provided in writing by such Stockholder
or Employee Stockholder for use therein and for which such Stockholder
or Employee Stockholder shall indemnify the Issuer pursuant to Section
4.1(b) of this Agreement, as such counsel shall reasonably request;
(ii) subject to Section 3.4(b) below, keep each registration,
qualification or compliance effective for (A) the period required by
the managing underwriter in the case of an underwritten offering of
Registerable Securities, but in no event for more than ninety (90)
days, or (B) a period of ninety (90) days in the case of a
non-underwritten offering of Registerable Securities, in either case,
plus any number of days that the Stockholders are unable to use a
prospectus pursuant to Section 3.4(b) below (the "Registration
Period"); and
(iii) furnish such number of prospectuses (including preliminary
prospectuses) and other documents filed with the Commission as part of
the registration statement as such Stockholders or Employee
Stockholders from time to time may reasonably request.
(b) If, within the Registration Period, there occurs any development or
any event which makes any statement in the registration statement or any
post-effective amendment thereto, or any document incorporated therein by
reference, untrue in any material respect or which requires the making of any
changes in the registration statement or post-effective amendment thereto or
prospectus or amendment or supplement thereto, so that they will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein (in the case of
any prospectus, in the light of the circumstances under which they were made)
not misleading, the Issuer shall immediately notify each Stockholder and
Employee Stockholder whose Registrable
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Securities are included in such registration of the occurrence thereof and, as
soon as reasonably practicable, prepare and furnish to each such Stockholder and
Employee Stockholder, a reasonable number of copies of an amended or
supplemented prospectus so that, as thereafter delivered to purchasers of
Registrable Securities, such prospectus shall not contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Each Stockholder and Employee
Stockholder agrees that, upon receipt of any notice from the Issuer pursuant to
this Section 3.4(b), such Stockholder or Employee Stockholder shall forthwith
discontinue disposition of Registrable Securities until it shall have received
copies of such amended or supplemented prospectus, and, if so directed by the
Issuer, shall deliver to the Issuer all copies, other than permanent file
copies, then in its possession of the prospectus covering Registrable Securities
at the time of receipt of such notice.
(c) If requested by the underwriters for any underwritten offering of
Registrable Securities pursuant to a registration requested under this
Agreement, the Issuer shall enter into an underwriting agreement with such
underwriters for such offering, such agreement to contain such representations
and warranties by the Issuer and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and contribution to
the effect and to the extent provided in Section 4.1 and an opinion of counsel
for the Issuer dated the date of the closing under the underwriting agreement,
and providing that the Issuer shall use its best efforts to furnish a "comfort"
letter signed by the independent public accountants who have audited the
Issuer's financial statements included in such registration statement, in each
such case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) as are customarily
covered in opinions of Issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and, in the case of
such accountants' letter, with respect to events subsequent to the date of such
financial statements. The Stockholders and the Employee Stockholders on whose
behalf the Registrable Securities are to be distributed by such underwriters
shall be parties to any such underwriting agreement.
(d) In connection with the preparation and filing of each registration
statement registering Registrable Securities under the Securities Act, the
Issuer shall give the underwriters, and their counsel and accountants, such
reasonable and customary access to its books and records and such opportunities
to discuss the business of the Issuer with its officers and the independent
public accountants who have certified the Issuer's financial statements as shall
be necessary, in the opinion of such
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underwriters or their respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
(e) If at any time the Commission should institute or threaten to
institute any proceeding for the purposes of issuing, or should issue, a stop
order suspending the effectiveness of a registration statement which registered
Registrable Securities under the Securities Act, the Issuer will promptly notify
each Stockholder and Employee Stockholder whose Registerable Securities are
registered thereunder and will use its best efforts to prevent the issuance of
any such stop order or to obtain the withdrawal thereof as soon as possible. The
Issuer will advise each Stockholder and Employee Stockholder whose Registerable
Securities are registered promptly of any order or communication of any public
board or body addressed to the Issuer suspending or threatening to suspend the
qualification of any Registerable Securities for sale in any jurisdiction.
3.5 INFORMATION BY STOCKHOLDERS. If Registrable Securities owned by any
Stockholder or any Employee Stockholder are included in any registration, such
Stockholder or Employee Stockholder shall furnish to the Issuer such information
regarding itself and the distribution proposed by such Stockholder or Employee
Stockholder as the Issuer may reasonably request and as shall be required in
connection with any registration, qualification or compliance referred to in
this Article III.
3.6 HOLDBACK AGREEMENTS.
(a) In connection with the registration of Registrable Securities on
behalf of any Stockholder or any Employee Stockholder, or in the event that any
Stockholder or any Employee Stockholder was offered an opportunity to
participate in a Piggyback Registration pursuant to Section 3.1 but declined to
so participate, such Stockholder or Employee Stockholder will agree not to
effect any public sale or distribution of the issue of securities being
registered or a similar security of the Issuer or any securities convertible
into or exchangeable or exercisable for such securities, including a sale
pursuant to Rule 144 under the Securities Act, during the fourteen (14) days
prior to, and during the ninety (90) day period beginning on, the effective date
of such registration statement (except as part of such registration), if and to
the extent requested by the Issuer or the managing underwriter or underwriters
in the case of an underwritten public offering.
(b) The Issuer on its own behalf and on behalf of affiliates controlled
by the Issuer agrees not to effect any public sale or distribution of any
securities similar to those being registered in accordance with Sections 3.1 and
3.2 (other than similar securities registered on Form S-4 or Form S-8 or any
successor forms) or any securities convertible into or exchangeable or
exercisable for such securities, during the
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fourteen (14) days prior to, and during the ninety (90) day period beginning on,
the effective date of any registration statement (except as part of such
registration).
3.7 FUTURE REGISTRATION RIGHTS.
(a) The Issuer shall not hereafter agree with the holders of any
securities issued or to be issued by the Issuer to register such securities
under the Securities Act unless such agreement specifically provides that (a)
such holder of securities may not participate in any Piggyback Registration
except as provided in Section 3.1, (b) such holder of such securities may not
participate in any Requested Registration except as provided in Section 3.2, and
(c) such securities may not be publicly offered or sold for a period beginning
at least fourteen (14) days before and ending at least ninety (90) days after
the date upon which such registration statement becomes effective. No provision
of this Section 3.7 shall be deemed violated by the future grants of
registration rights provided that such rights are subject to the foregoing
restrictions and are exercisable on a pro rata basis with all other holders of
such rights and the Issuer will not be required to obtain the consent of any
party hereto with respect to such future grants.
(b) From and after the date hereof, the Issuer shall not enter into any
agreement with any holder or prospective holder of any securities of the Issuer
providing for the granting to such holder of registration rights (including
demand registration rights which, by their terms, do not permit the inclusion of
shares of parties other than the holders of such demand registration rights)
that entitle such holder to priority over the Stockholders or the Employee
Stockholders with respect to registration of the securities of the Issuer.
3.8 PERMITTED INTERRUPTION. Notwithstanding any provision of this
Article III to the contrary, the Issuer shall not be required to prepare or file
a registration statement, amendment or post-effective amendment thereto or
prospectus supplement or to supplement or amend any registration statement or
otherwise facilitate the offering and sale of Registrable Securities, and the
Issuer shall be free to take or omit to take any other action that would result
in the impracticality of such filing, supplement or amendment, if (a) financial
statements satisfying the requirements of the Securities Act and Regulation S-X
promulgated by the Commission cannot with reasonable efforts be obtained, (b)
the Issuer is in possession of material non-public information, which, in the
exercise of reasonable judgment by the Issuer's Board, the Issuer deems
advisable not to disclose in a registration statement at that time or (c) such
filing, supplement or amendment (and any required disclosure therein), in the
good faith and reasonable judgment of the Issuer's Board, would jeopardize the
completion of an acquisition, divestiture or other similar transaction that the
Issuer is in at such time negotiations therefor (any period described in this
Section 3.8
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during which the Issuer is not required to make such filing, supplement or
amendment being herein a "PERMITTED INTERRUPTION"). The Issuer agrees to notify
each Stockholder and Employee Stockholder upon each of the commencement and
termination of each Permitted Interruption. The Issuer shall state in the notice
to the Stockholders and the Employee Stockholders of the commencement of a
Permitted Interruption the general nature of the cause for such Permitted
Interruption, subject to any restrictions against such disclosure imposed by
applicable confidentiality arrangements. Each Stockholder and Employee
Stockholder hereby acknowledges its obligations under the federal securities
laws to not trade in the Common Stock while in possession of material non-public
information relating to the Issuer and hereby agrees to not so trade.
3.9 DELIVERY OF TRANSFERABLE CERTIFICATES. Upon a registration
statement applicable thereto becoming effective, the Issuer shall issue to each
Stockholder and Employee Stockholder whose Registerable Securities are
registered thereunder certificates representing the Registerable Securities
whose sale has been so registered in exchange for certificates bearing a
restrictive legend. Each such Stockholder and Employee Stockholder hereby agrees
that in the event of a stop order being issued in respect of the registration
statement relating to the sale of Registerable Securities registered on its or
his behalf, such Stockholder or Employee Stockholder will, without prejudice to
any rights hereunder, surrender or cause to be surrendered to the Issuer those
certificates delivered pursuant to this Section 3.9 without legend and will
accept, in exchange therefor, substitute certificates or instruments bearing an
appropriate legend.
3.10 TRANSFERABILITY OF RIGHTS. Each Stockholder and Employee
Stockholder, and any permitted transferee of such Stockholder or Employee
Stockholder, may transfer to one (but only one) person all (but not less than
all) of his rights under this Article III in connection with the transfer of
Registrable Securities to such person; provided, however, that such transferee
shall become a party to this Agreement and such transferee's rights shall be
subject to the provisions and limitations of this Agreement.
ARTICLE IV
----------
INDEMNIFICATION AND REMEDIES
----------------------------
4.1 INDEMNIFICATION RELATING TO REGISTRATION RIGHTS.
(a) With respect to any registration, qualification or compliance
effected or to be effected pursuant to Article III of this Agreement, the Issuer
shall indemnify each Stockholder and Employee Stockholder whose securities are
included or are to be included therein, each underwriter (as defined in the
Securities Act) of the securities sold by such Stockholder or Employee
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Stockholder, and each Person who controls (within the meaning of the Securities
Act) any such Stockholder, Employee Stockholder or underwriter (a "CONTROLLING
PERSON") from and against all losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any claim, cause of action,
proceeding or litigation asserted or commenced or threatened against any such
Stockholder, Employee Stockholder or any such underwriter or Controlling Person
concerning:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus or any related registration
statement incident to any such registration, qualification or
compliance;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make any
statement therein, in the light of the circumstances under which it was
made, not misleading; or
(iii) any violation by the Issuer of the Securities Act or any
rule or regulation promulgated thereunder applicable to the Issuer, or
of any blue sky or other state securities laws or any rule or
regulation promulgated thereunder applicable to the Issuer;
in each case, relating to action or inaction required of the Issuer in
connection with any such registration, qualification or compliance, and subject
to Section 4.6 below, shall reimburse each such Person entitled to indemnity
under this Section 4.1(a) for all legal and other expenses incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; PROVIDED, HOWEVER, that, the foregoing indemnity and
reimbursement obligation shall not be applicable to the extent that any such
claim, loss, damage or liability arises out of or is based on (i) any untrue
statement (or alleged untrue statement) or omission (or alleged omission) made
in reliance upon and in conformity with written information furnished to the
Issuer by or on behalf of such Stockholder, Employee Stockholder or by or on
behalf of such an underwriter specifically for use in such prospectus or
registration statement; or (ii) any untrue statement (or alleged untrue
statement) or omission (or alleged omission) contained in a prospectus delivered
prior to the delivery by the Issuer to the Stockholders and the Employee
Stockholders of a notice pursuant to Section 3.4(b); PROVIDED that the Issuer
made available to the Stockholders and the Employee Stockholders a corrected
prospectus which the Stockholders and the Employee Stockholders failed to
deliver to holders who had received the prior inaccurate prospectus.
(b) With respect to any registration, qualification or compliance
effected or to be effected pursuant to this Agreement,
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each Stockholder and Employee Stockholder whose securities are included or are
to be included therein, shall indemnify the Issuer, its directors and officers,
and, if and to the extent required by the underwriters of an underwritten
offering in which such Stockholder or Employee Stockholder will be selling
Registrable Securities, each underwriter (as defined in the Securities Act) of
the securities sold by such Stockholder or Employee Stockholder and each Person
who controls (within the meaning of the Securities Act) the Issuer or any such
underwriter (a "CONTROLLER") from and against all losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
claim, cause of action, proceeding or litigation asserted or commenced against
the Issuer or any of its directors and officers or any such underwriter or
Controller concerning:
(i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus or related registration
statement incident to any such registration, qualification or
compliance;
(ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make any
statement therein, in the light of the circumstances under which it was
made, not misleading; or
(iii) any violation by such Stockholder of the Securities Act or
any rule or regulation promulgated thereunder applicable to the Issuer
or such Stockholder or of any blue sky or other state securities laws
or any rule or regulation promulgated thereunder applicable to the
Issuer or such Stockholder;
in each case, relating to action or inaction required of such Stockholder or
Employee Stockholder in connection with any such registration, qualification or
compliance, and subject to Section 4.6 below, shall reimburse each such Person
entitled to indemnity under this Section 4.1(b) for all legal and other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; PROVIDED, HOWEVER, that, the foregoing
indemnity and reimbursement obligation shall only be applicable to the extent
that any such claim, loss, damage or liability arises out of or is based on any
untrue statement (or alleged untrue statement) or omission (or alleged omission)
made in reliance upon and in conformity with written information furnished to
the Issuer by or on behalf of such Stockholder or Employee Stockholder
specifically for use in such prospectus or other document.
4.2 INDEMNIFICATION BY THE STOCKHOLDERS. (a) Subject to the limitations
set forth in this Article IV, the Stockholders, jointly and severally, shall
indemnify and hold harmless the Issuer and its Representatives, stockholders,
controlling persons and Affiliates (collectively, the "Issuer
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Indemnified Persons") for, and shall pay (in the manner provided in Section
4.7(b)) to the Issuer Indemnified Persons the amount of, any loss, liability,
claim, damage (including, with respect to matters unrelated to the Identified
Liabilities (as defined in Section 4.5), incidental and consequential damages),
expense (including, without limitation, defense costs in connection with
third-party claims) or deficiency (including interest, penalties and reasonable
attorneys' fees), whether or not involving a third-party claim (collectively,
"Damages"), that any Issuer Indemnified Person may suffer, sustain, incur or
become subject to arising out of or due to any Identified Liability (as defined
in Section 4.5) or any inaccuracy of any representation or the breach of any
warranty, covenant, undertaking or other agreement of the Trustees, the BioClin
Affiliates or the Stockholders contained in this Agreement, any Securities
Exchange Agreement or in any other document or instrument delivered pursuant
hereto or thereto.
(b) The indemnity by the Stockholders set forth in Section 4.2(a) with
respect to Damages arising out of any Identified Liability shall continue until
the earlier of December 31, 1999 and the date on which the amount, if any, of
all such Damages is finally determined, and the indemnity by the Stockholders
set forth in Section 4.2(a) with respect to all other Damages shall continue
until the date of the independent auditor's report with respect to the audited
consolidated financial statements of the Issuer for fiscal 1996 (the "Report
Date"); provided, however, that in the event that as of December 31, 1999 with
respect to any Identified Liability or as of the Report Date with respect to all
other Damages any Issuer Indemnified Person can establish the existence but not
the amount of any such Damages, and shall have given written notice thereof to
the Stockholders on or prior to December 31, 1999 or the Report Date, as
applicable, depending upon the facts and circumstances existing at such time,
the Stockholders and the Issuer may agree to extend the indemnity with respect
to any such Damages until the date on which the amount, if any, of all such
Damages is finally determined.
4.3 INDEMNIFICATION BY ISSUER. (a) Subject to the limitations set forth
in this Article IV, the Issuer shall indemnify and hold harmless the Trustees
and the Stockholders and their Representatives, shareholders, controlling
persons and Affiliates (collectively, the "Stockholders' Indemnified Persons")
for, and shall pay (in the manner provided in Section 4.7(a)) to the
Stockholders' Indemnified Persons the amount of, any Damages that any
Stockholders' Indemnified Person may suffer, sustain, incur or become subject to
arising out of or due to any inaccuracy of any representation or the breach of
any warranty, covenant, undertaking or other agreement of the Issuer contained
in this Agreement, any Securities Exchange Agreement or in any other document or
instrument delivered pursuant hereto or thereto.
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(b) The indemnity by the Issuer set forth in Section 4.3(a) shall
continue until the Report Date; provided, however, that in the event that as of
the Report Date any Stockholders' Indemnified Person can establish the existence
but not the amount of any such Damages, and shall have given written notice
thereof to the Issuer on or prior to the Report Date, depending upon the facts
and circumstances existing at such time, the Stockholders and the Issuer may
agree to extend the indemnity with respect to any such Damages until the date on
which the amount, if any, of all such Damages is finally determined.
4.4 THRESHOLD AND CAP. Notwithstanding any provision contained herein
or in any Securities Exchange Agreement to the contrary, with respect to Damages
contemplated by Sections 4.2 and 4.3 other than those arising, directly or
indirectly, from or in connection with any Identified Liability, (i) no party
shall be entitled to any recovery from any other party with respect to any such
inaccuracy or breach which, pursuant to any Securities Exchange Agreement, would
have entitled such party not to perform its obligations thereunder, if such
party is informed in writing pursuant to Section 7.6 of any Securities Exchange
Agreement or otherwise has knowledge of such inaccuracy or breach prior to
Closing and such party nonetheless consummates the Closing, and (ii) no party
shall be entitled to recover Damages from any other party until the Damages
sustained by such party under this Agreement and the Securities Exchange
Agreements exceed, in the aggregate, U.S. $100,000 (the "Threshold"), and then
only amounts over and above such Threshold, and in no event shall the amount of
all such Damages to be recovered by the Issuer Indemnified Persons and the
Stockholders' Indemnified Persons exceed an aggregate amount of U.S. $1,349,207
(the "Cap"). Neither the Threshold nor the Cap shall apply to any Damages
arising, directly or indirectly, from or in connection with any Identified
Liability.
4.5 IDENTIFIED LIABILITIES. For purposes of this Agreement, "Identified
Liabilities" means any and all liabilities or Damages (including, without
limitation, defense costs in connection with any third-party claim) that any
Issuer Indemnified Person may suffer, sustain, incur or become subject to
arising out of or due to (i) the pending or threatened litigation involving,
among others, BioClin, Inc. and Dr. William H. Barr and/or any recovery by Dr.
Barr, pursuant to any statutory dissenter's rights to which Dr. Barr may be
entitled with respect to the common stock of BioClin, Inc. that he owns, of any
amounts that exceed the market value on the Closing Date of the Acquiror Shares
issuable to Dr. Barr pursuant to the Merger Agreement (collectively, the "Barr
Liability"); (ii) the pending litigation between BioClin, Inc. and Virginia
Commonwealth University, but only to the extent the aggregate amount of such
liability or Damages (including for this purpose the amount of such liability
previously satisfied by BioClin through the payment of amounts due to employees
and contractors ($201,127.52 in the aggregate), cash payments ($45,000.00 in the
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aggregate), the transfer of non-cash assets to VCU ($107,000 in aggregate
value), all payments received by VCU with respect to analytical contracts
assigned to VCU and the value of services provided by BioClin, Inc. which are
applied to reduce such liability) exceed $1,080,000 (the "VCU Liability"); and
(iii) the pending litigation filed in Texas titled Linda Gail Frase v. BioClin,
Inc. and Jack Barbut, but only to the extent such liability or Damages exceed
$25,000 (the "Barbut Liability").
4.6 PROCEDURE. (a) Any party seeking indemnification pursuant to this
Article IV (the "Indemnified Person") from another party (the "Indemnifying
Person") may proceed directly against such Indemnifying Person under this
Section 4.6 without first resorting to any other rights of indemnification;
PROVIDED, HOWEVER, that no Indemnifying Person shall be obligated hereunder to
the extent an Indemnified Person has already received, or shall receive, full
indemnification or reimbursement from another source.
(b) In the event any action, suit or proceeding shall be brought
against any Indemnified Person in connection with any matter for which
indemnification may be sought by such Indemnified Person pursuant to this
Article IV, the Indemnifying Person may, and upon the request of such
Indemnified Person shall, at the Indemnifying Person's expense, resist and
defend such action, suit or proceeding, or cause the same to be resisted or
defended, by counsel selected by the Indemnifying Person, subject to the
approval, which shall not be unreasonably withheld, of such Indemnified Person
and, in the event of any failure by the Indemnifying Person to do so, the
Indemnifying Person shall pay all reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) incurred by such
Indemnified Person in connection with such action, suit or proceeding.
(c) In case any claim is made, or any suit or action is commenced,
against an Indemnified Person in respect of which indemnification may be sought
by such Indemnified Person pursuant to this Article IV, such Indemnified Person
shall promptly give the Indemnifying Person notice thereof. If any Indemnified
Person fails to give prompt notice of any claim being made or any suit or action
being commenced in respect of which indemnification under this Article IV may be
sought, such failure shall not limit the liability of the Indemnifying Person;
PROVIDED, HOWEVER, that this provision shall not be deemed to limit the
Indemnifying Person's rights to recover for any loss, cost or expense which such
Indemnifying Person can establish resulted from such failure to give prompt
notice.
4.7 PAYMENT OF INDEMNITY. (a) The Issuer shall pay all amounts in
satisfaction of its indemnification obligations under Section 4.3 by delivering
to such Stockholders' Indemnified Persons such number of shares of Common Stock
computed by dividing the aggregate dollar amount of such Damages subject to
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indemnification thereunder by the closing sales price of the Common Stock as
reported on the NASDAQ National Market for the Business Day immediately
preceding the Closing Date (the "Closing Price").
(b) Except as provided in Section 4.7(f), the Stockholders shall pay
all amounts in satisfaction of their respective indemnification obligations
under Section 4.2 by delivering to such Issuer Indemnified Persons such number
of Acquiror Shares computed by dividing the dollar amount of such Damages
subject to indemnification thereunder by the Closing Price.
(c) In order to secure the payment by the Stockholders to the Issuer
Indemnified Persons of any Damages relating to Identified Liabilities and the
inaccuracy of the representations or breach of the warranties, covenants,
undertakings or other agreements of the Trustees, the BioClin Affiliates and the
Stockholders made hereunder or pursuant to any Securities Exchange Agreement
(collectively, the "General Liabilities"), a total of 599,260 shares (the
"Recovery Shares") of the Acquiror Shares delivered to the Stockholders pursuant
to the Securities Exchange Agreements shall be subject to the escrow provisions
set forth in paragraph (d) of this Section 4.7. Such aggregate number of
Recovery Shares shall be allocated as follows: with respect to (i) the General
Liabilities, 263,260 Recovery Shares (the "General Recovery Shares"); (ii) the
Barr Liability, 200,000 Recovery Shares; (iii) the VCU Liability, 112,000
Recovery Shares; and (iv) the Barbut Liability, 24,000 Recovery Shares (items
(ii) through (iv) above being hereinafter referred to collectively as the
"Identified Recovery Shares"). The aggregate number of Recovery Shares has been
determined, and the Recovery Shares have been allocated as set forth above, in
reasonable relation to the dollar value reasonably estimated to be attributable
to the respective contingencies existing as of the date of this Agreement
against which such Recovery Shares secure payment of indemnity. The Recovery
Shares shall be allocated among the Stockholders in proportion to their
respective ownership of the Acquiror Shares.
(d) If at any time prior to, with respect to (i) the General Recovery
Shares, the date on which the indemnity by the Stockholders with respect to
General Liabilities terminates as provided in Section 4.2(b) of this Agreement
and (ii) each group of Identified Recovery Shares, the date on which the
indemnity with respect to Damages relating to such corresponding Identified
Liability terminates pursuant to Section 4.2(b), the Stockholders shall sell,
assign, hypothecate, pledge or otherwise transfer any Acquiror Shares such that
thereafter the aggregate number of Acquiror Shares held by the Stockholders free
and clear of all such liens and encumbrances is less than the aggregate number
of Recovery Shares contemplated by this Section 4.7 (an "Early Transfer"), then
the Stockholders shall deposit the portion of the cash proceeds from such Early
Transfer as computed in
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accordance with Section 4.7(e) into an escrow account (the "Escrow Account")
with a national bank or other financial institution (the "Escrow Agent") agreed
to by the Trustees, the Stockholders and the Issuer pursuant to an escrow
agreement, in form and substance reasonably satisfactory to the Trustees, the
Stockholders and the Issuer to be held and dispersed subject to the provisions
of Section 4.7(f).
(e) The cash proceeds from an Early Transfer to be deposited into the
Escrow Account pursuant to Section 4.7(d) shall be computed as follows: (i) the
aggregate number of Recovery Shares contemplated by Section 4.7 less (ii) the
aggregate number of Acquiror Shares held by the Stockholders free and clear of
all such liens and encumbrances following such Early Transfer multiplied by
(iii) the Closing Price.
(f) In the event an Early Transfer has occurred, to the extent that a
sufficient number of Acquiror Shares are not then held by the Stockholders in
order to enable the Stockholders to satisfy their respective indemnification
obligations as contemplated by Section 4.7(b), the Stockholders and the Escrow
Agent shall deliver to the Issuer Indemnified Persons (i) all Acquiror Shares
then held by the Stockholders free and clear of all such liens and encumbrances
(the "Delivered Shares") and (ii) that portion of the cash proceeds deposited in
the Escrow Account computed by subtracting from (A) the aggregate dollar amount
of Damages subject to indemnification pursuant to Section 4.2, (B) the product
of the Delivered Shares and the Closing Price. The Issuer and the Stockholders
hereby agree to cause the Escrow Agent to promptly release all remaining cash
proceeds from the Escrow Account upon expiration of the Stockholders'
indemnification obligations or confirmation that the Stockholders then hold the
aggregate number of Recovery Shares contemplated by this Section 4.7.
4.8 EXCLUSIVITY. The rights and remedies of the parties hereto under
this Article IV shall be the exclusive rights and remedies with respect to the
matters set forth herein, except for (i) the rights of any party to seek
equitable relief and (ii) any other rights and remedies provided by this
Agreement or any Securities Exchange Agreement.
ARTICLE V
---------
MISCELLANEOUS
-------------
5.1 AMENDMENTS. The parties may, from time to time, enter into written
amendments, supplements, or modifications hereto for the purpose of adding any
provisions to this Agreement or changing in any manner the rights of either of
the parties hereunder. No amendment, supplement, or modification shall be
binding on any party unless made in writing and signed by a duly authorized
representative of such party.
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5.2 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission, which transmission is confirmed by first
class mail (postage pre-paid) or guaranteed overnight delivery:
(a) if to the Issuer to:
DNX Corporation
575 Route 28
Raritan, NJ 08869
Attention: John G. Cooper
Chief Financial Officer
Telephone: (908) 722-7900
Facsimile: (908) 722-6677
with copies to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Thomas C. Daniels, Esq.
Telephone: (216) 586-3939
Facsimile: (216) 579-0212
(b) if to Hackel to:
Alec Hackel
Flueliweg 3
6045 Meggen
Switzerland
Telephone: 011-41-41-377-3961
Facsimile: 011-41-41-377-3053
with copies to:
Piper & Marbury L.L.P.
1251 Avenue of the Americas
New York, New York 10020-1104
Attention: Ray A. Mantle, Esq.
Telephone: (212) 835-6000
Facsimile: (212) 835-6001
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(c) if to Barbut to:
Dr. Jack Barbut
c/o Piper & Marbury L.L.P.
1251 Avenue of the Americas
New York, New York 10020-1104
Telephone: (212) 835-6000
Facsimile: (212) 835-6001
with copies to:
Piper & Marbury L.L.P.
1251 Avenue of the Americas
New York, New York 10020
Attention: Ray A. Mantle, Esq.
Telephone: (212) 835-6000
Facsimile: (212) 835-6001
(d) if to Jensen to:
Dr. John Christian Jensen
Bohlstiasse 9a
6300 Zug
Switzerland
Telephone: 011-41-41-710-2309
Facsimile: 011-41-41-710-2341
with copies to:
Piper & Marbury L.L.P.
1251 Avenue of the Americas
New York, New York 10020
Attention: Ray A. Mantle, Esq.
Telephone: (212) 835-6000
Facsimile: (212) 835-6001
(e) if to Sherby to:
c/o CITCO
De Ruyterkade 62
P.O. Box 812
Curacao, Netherlands Antilles
Telephone: 599-9-322555
Facsimile: 599-9-325000
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with copies to:
Piper & Marbury L.L.P.
1251 Avenue of the Americas
New York, New York 10020
Attention: Ray A. Mantle, Esq.
Telephone: (212) 835-6000
Facsimile: (212) 835-6001
(f) if to the Trustees/Employee Trustee:
Dr. Gerald Rittershaus
c/o Rittershaus, Wissmann & von Rosenstiel
Theodor-Heuss-Anlage 2
68165 Mannheim
Germany
Telephone: 011-49-621-42-560
Facsimile: 011-49-621-42-56-250
(g) if to Reynolds:
Ms. Martha Lee Reynolds
5105 King William Road
Richmond, VA 23225
(h) if to Dvorchik:
Mr. Barry Dvorchik
1400 Worcester Road
Apt. 405
Framingham, MA 01701
(i) if to Kraatz:
Ms. Christine Dune-Kraatz
c/o BioClin GmbH
Klinische Forschung
Augusta-aulage 21-23
68165 Mannheim, Germany
(j) if to Donhardt:
Ms. Bettina Donhardt
c/o BioClin GmbH
Klinische Forschung
Augusta-aulage 21-23
68165 Mannheim, Germany
(k) or, in each case, at such other address or to such
other person as may be specified in writing to the other parties.
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5.3 WAIVER BY CONSENT. Any party hereto may execute and deliver to the
other parties hereto a written instrument waiving, on such terms and conditions
as such party may specify in such instrument, any of the requirements of this
Agreement.
5.4 NO IMPLIED WAIVER; RIGHTS ARE CUMULATIVE. The failure to exercise
or the delay in exercising by any party of any right, remedy, power, or
privilege under this Agreement, shall not operate as a waiver thereof. The
single or partial exercise of any right, remedy, or privilege under this
Agreement shall not preclude any other or further exercise thereof or the
exercise of any other right, remedy, power, or privilege. The rights, remedies,
powers, and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers, and privileges provided by law.
5.5 GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by, construed and interpreted in accordance
with the laws of the State of New York (except, to the extent the General
Corporation Law of the State of Delaware (the "DGCL") applies to the matters set
forth in Article II, the DGCL shall govern) applicable to agreements executed by
residents of that state, and fully to be performed in that state.
5.6 SEVERABILITY. If any provision of this Agreement is found to be
unenforceable for any reason whatsoever, such provision shall be deemed null and
void to the extent of such unenforceability but shall be deemed separable from
and shall not invalidate any other provision of this Agreement.
5.7 CAPTIONS. Captions to the various paragraphs of this Agreement are
provided for convenience only and shall not be used to construe the provisions
of this Agreement.
5.8 ENTIRE AGREEMENT. This Agreement, the Securities Exchange
Agreements and the other agreements contemplated hereby and thereby, constitute
the entire understanding of the parties hereto with respect to the subject
matter of this Agreement and supersedes all prior discussions, agreements, and
representations, whether oral or written, concerning the subject matter hereof
and whether or not executed by the parties hereto.
5.9 FURTHER ASSURANCES. From and after the Closing, upon the reasonable
request of any of the parties hereto, each of the other parties hereto shall
execute, acknowledge, and deliver all such further acts, deeds, bills of sale,
certificates, assignments, transfers, conveyances, sales, use or other transfer
tax documentation, powers of attorney, and assurances as may be required to
evidence the consummation of the transactions contemplated hereby and as may be
appropriate to carry out the transactions contemplated by this Agreement.
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<PAGE> 24
5.10 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns,
heirs and legal representatives. Except as specifically provided herein, no
party hereto may assign its rights or delegate its duties hereunder without the
prior written consent of the other parties hereto.
5.11 EXECUTION IN COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
or caused this Agreement to be duly executed and delivered by the proper and
duly authorized officers, as the case may be, as of the day and year first above
written.
ISSUER:
DNX CORPORATION
By: /s/ Paul J. Schmitt
-------------------------------
Name: Paul J. Schmitt
Title: President and Chief Executive Officer
TRUSTEES:
By: /s/ Dr. Gerald Rittershaus
-------------------------------
Dr. Gerald Rittershaus, as Trustee
under the Rittershaus Trust Agreement
By: /s/ Manfred Wissmann
-------------------------------
Manfred Wissmann, as Trustee
under the Wissmann Trust Agreement
STOCKHOLDERS:
/s/ Alec Hackel
- -----------------------------------
Alec Hackel
/s/ Dr. Jack Barbut
- -----------------------------------
Dr. Jack Barbut
/s/ Dr. John Christian Jensen
- -----------------------------------
Dr. John Christian Jensen
24
<PAGE> 25
SHERBY N.V.
By: /s/ Curacao Corporation Company N.V.
-------------------------------
Name: Curacao Corporation Company N.V.
Title: Managing Director
EMPLOYEE STOCKHOLDERS:
/s/ Martha Lee Reynolds
- -----------------------------------
Martha Lee Reynolds
/s/ Barry Dvorchik
- -----------------------------------
Barry Dvorchik
/s/ Christine Dune-Kraatz
- -----------------------------------
Christine Dune-Kraatz
/s/ Bettina Donhardt
- -----------------------------------
Bettina Donhardt
EMPLOYEE TRUSTEE:
/s/ Dr. Gerald Rittershaus
- -----------------------------------
Dr. Gerald Rittershaus, as Trustee
under the Employee Trust Agreement
25
<PAGE> 1
Exhibit 3.1
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CHRYSALIS INTERNATIONAL CORPORATON
The present name of the Corporation is DNX Corporation. The
name under which the Corporation was originally incorporated was Embryogen
Corporation. The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of Delaware on March 4, 1988. The Second
Restated Certificate of Incorporation was filed with the Secretary of State of
Delaware on December 18, 1991 under the name of DNX Corporation. An amendment to
Article Fourth, Section 1 of the Second Restated Certificate of Incorporation
was approved at the annual meeting of shareholders of the Corporation on May 18,
1993 by a majority of all of the shares entitled to vote in accordance with
Section 242 of the General Corporation Law of the State of Delaware and filed
with the Secretary of State of Delaware on November 23, 1993. This Third Amended
and Restated Certificate of Incorporation was duly adopted by the Board of
Directors and the stockholders of the Corporation in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware.
FIRST. The name of the corporation is Chrysalis
International Corporation (hereinafter referred to as the
"Corporation").
SECOND. The registered office of the Corporation in the State
of Delaware is located at Corporation Service Company, 1013 Centre Road, in the
City of Wilmington, County of New Castle, Delaware. The name of the
Corporation's registered agent at such address is Corporation Service Company.
THIRD. The purpose for which the Corporation is organized is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH. SECTION 1. AUTHORIZED STOCK. The total number of
shares which the Corporation is authorized to have issued is 25,000,000 shares,
consisting of 5,000,000 shares of Preferred Stock, par value $.01 per share
(hereinafter called "Preferred Stock"), and 20,000,000 shares of Common Stock,
par value $.01 per share (hereinafter called "Common Stock").
<PAGE> 2
After the filing of this Third Amended and Restated
Certificate of Incorporation, each holder of any certificate or certificates
representing shares of Common Stock of DNX Corporation shall be deemed for all
purposes to be holders of Common Stock of the Corporation and, upon the
surrender of such certificate or certificates representing shares of Common
Stock of DNX Corporation, shall receive a certificate or certificates
representing the shares of Common Stock of the Corporation which such holder is
entitled to receive pursuant to the terms and conditions of this Section 1 of
Article Fourth.
SECTION 2. PREFERRED STOCK. The Preferred Stock may be issued,
subject to any limitations prescribed by law, this Third Amended and Restated
Certificate of Incorporation or the Third Amended and Restated By-Laws
("By-Laws") of the Corporation as from time to time amended, from time to time
in one or more series of any number of shares, and with distinctive serial
designations. Subject to any limitations prescribed by law, this Third Amended
and Restated Certificate of Incorporation or the By-Laws, the Board of Directors
hereby is authorized to provide for the issuance of shares of Preferred Stock in
series, and by filing a certificate pursuant to the applicable law of the State
of Delaware, to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, preferences and rights
of the shares of each such series and the qualifications, limitations and
restrictions thereof.
The authority of the Board of Directors with respect to each
series shall include, but not be limited to, determination of the following:
a. The designation of the series, which may be
by distinguishing number, letter and title;
b. The number of shares of the series, which
number may thereafter (except where otherwise provided
in the creation of the series) increase or decrease
(but not below the number of shares thereof then
outstanding);
c. The dividends, if any, for shares of the series
(which may be cumulative or noncumulative) at such rates, on
such conditions, and at such times, and payable in preference
to, or in such relation to, the dividends payable on any other
class or classes or of any other series of stock;
d. The redemption rights, if any, and price or
prices for shares of the series;
e. The terms and amount of any sinking fund
provided for the purchase or redemption of shares of
the series;
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<PAGE> 3
f. The rights of such shares of the series in
the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the
Corporation;
g. Whether the shares of the series shall be
convertible into shares of any other class or series of shares
of the Corporation, and, if so, the specification of such
other class or series, the conversion price or prices or rate
or rates, any adjustments thereof, the date or dates as of
which such shares shall be convertible and all other terms and
conditions upon which such conversion may be made;
h. The voting rights, if any, of the holders of
such series; and
i. Such other designations, powers, preferences and
relative, participating optional or other special rights, and
qualifications, limitations or restrictions of such
preferences and/or rights.
SECTION 3. COMMON STOCK. a. Subject to the limitations
prescribed by law, this Third Amended and Restated Certificate of Incorporation
or the By-Laws of the Corporation as from time to time amended, with respect to
the closing of the transfer books or the fixing of a record date for the
determination of stockholders entitled to vote and except as otherwise provided
by law, this Third Amended and Restated Certificate of Incorporation or the
By-Laws of the Corporation as from time to time amended or by the terms and
conditions of any and all series of Preferred Stock issued pursuant to the terms
of this Third Amended and Restated Certificate of Incorporation as from time to
time amended, the holders of outstanding shares of Common Stock shall
exclusively possess voting power for the election of Directors and for all other
purposes, each holder of record of shares of Common Stock being entitled to one
vote for each share of Common Stock standing in his name on the books of the
Corporation.
b. Except as otherwise provided by law, this Third Amended and
Restated Certificate of Incorporation or the By-Laws of the Corporation as from
time to time amended or by the terms and conditions of any and all series of
Preferred Stock issued pursuant to the terms of this Third Amended and Restated
Certificate of Incorporation as from time to time amended, the holders of Common
Stock shall be entitled, to the exclusion of the holders of Preferred Stock of
any and all series, to receive such dividends as from time to time may be
declared by the Board of Directors.
c. Except as otherwise provided by law, this Third
Amended and Restated Certificate of Incorporation or the By-Laws
of the Corporation as from time to time amended or by the terms
3
<PAGE> 4
and conditions of any and all series of Preferred Stock issued pursuant to the
terms of this Third Amended and Restated Certificate of Incorporation as from
time to time amended, in the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, after payment shall have
been made to the holders of Preferred Stock of the full amount, if any, for
which they shall be entitled pursuant to the terms and conditions of any and all
series of Preferred Stock issued pursuant to the terms of this Third Amended and
Restated Certificate of Incorporation as from time to time amended, the holders
of Common Stock shall be entitled, to the exclusion of the holders of Preferred
Stock of any and all series, to share, ratably according to the number of shares
of Common Stock held by them, in all remaining assets of the Corporation
available for distribution to its stockholders.
FIFTH. The Board of Directors shall have the power to make,
amend and repeal the By-Laws of the Corporation. Any ByLaws made by the Board of
Directors under the powers conferred hereby may be amended or repealed by the
Board of Directors or by the stockholders in the manner provided in the By-Laws
of the Corporation. Notwithstanding the foregoing and anything contained in this
Third Amended and Restated Certificate of Incorporation to the contrary,
Sections 3, 12, 14 and 15 of the By-Laws shall not be amended or repealed by the
stockholders, and no provision inconsistent herewith shall be adopted by the
stockholders without the affirmative vote of the holders of at least 66-2/3% of
the Voting Stock, voting together as a single class. The Corporation may in its
By-Laws confer powers upon its Board of Directors in addition to the foregoing
and in addition to the powers and authorities expressly conferred upon the Board
of Directors by applicable law. For the purposes of this Article Fifth of this
Third Amended and Restated Certificate of Incorporation, "Voting Stock" shall
mean the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of Directors. Notwithstanding anything contained in
this Third Amended and Restated Certificate of Incorporation to the contrary,
the affirmative vote of the holders of at least 66- 2/3% of the Voting Stock,
voting together as a single class, shall be required to amend or repeal, or to
adopt any provisions inconsistent with, this Article Fifth.
SIXTH. Subject to the rights of the holders of any and all
series of Preferred Stock:
(a) any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called
annual or special meeting of stockholders of the Corporation and may
not be effected by any consent in writing of such stockholders; and
4
<PAGE> 5
(b) special meetings of stockholders of the Corporation may be
called only by the Chairman of the Board of Directors, by the Chief
Executive Officer or the President of the Corporation or by the
Secretary within 10 days after receipt of the written request of a
majority of the Directors of the Corporation.
Notwithstanding anything contained in this Third Amended and
Restated Certificate of Incorporation to the contrary, the affirmative vote of
at least 66-2/3% of the Voting Stock (as defined in Article Fifth), voting
together as a single class, shall be required to amend, repeal, or adopt any
provision inconsistent with, this Article Sixth.
SEVENTH. SECTION 1. NUMBER, ELECTION AND TERMS OF DIRECTORS.
Subject to the rights, if any, of the holders of any and all series of Preferred
Stock to elect additional Directors pursuant to the terms and conditions of such
Preferred Stock, the number of the Directors of the Corporation shall be fixed
from time to time in the manner described in the By-Laws. The Directors, other
than those who may be elected by the holders of any series of Preferred Stock,
shall be classified with respect to the time for which they severally hold
office into three classes, as nearly equal in number as possible, designated
Class I, Class II and Class III. The Directors first elected to Class I shall
hold office for a term expiring at the annual meeting of stockholders to be held
in 1992; the Directors first elected to Class II shall hold office for a term
expiring at the annual meeting of stockholders to be held in 1993; and the
Directors first elected to Class III shall hold office for a term expiring at
the annual meeting of stockholders to be held in 1994; with the members of each
class to hold office until their successors are elected and qualified. At each
succeeding annual meeting of the stockholders of the Corporation, the successors
of the class of Directors whose term expires at that meeting shall be elected by
plurality vote of all votes cast at such meeting to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election. Election of Directors of the Corporation need not be
by written ballot unless requested by the Chairman of the Board of Directors or
by the holder of a majority of the Voting Stock (as defined in Article Fifth)
present in person or represented by proxy at a meeting of the stockholders at
which Directors are to be elected.
SECTION 2. NOMINATION OF DIRECTOR CANDIDATES. Advance
notice of stockholder nominations for the election of Directors
shall be given in the manner provided in the By-Laws of the
Corporation.
SECTION 3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Subject to the rights, if any, of the holders of any and all series of Preferred
Stock to elect additional Directors pursuant to the terms and conditions of such
Preferred Stock, newly
5
<PAGE> 6
created directorships resulting from any increase in the number of Directors and
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of a majority of the remaining Directors then in office, even
though less than a quorum of the Board of Directors, or by a sole remaining
Director. Any Director elected in accordance with the preceding sentence shall
hold office for the remainder of the full term of the class of Directors in
which the new directorship was created or the vacancy occurred and until such
Director's successor shall have been elected and qualified. No decrease in the
number of Directors constituting the Board of Directors shall shorten the term
of an incumbent Director.
SECTION 4. REMOVAL. Subject to the rights, if any, of the
holders of any and all series of Preferred Stock to elect additional Directors
pursuant to the terms and conditions of such Preferred Stock, any Director may
be removed from office by the stockholders only for cause and only in the manner
provided in this Section 4. At any annual meeting or special meeting of the
stockholders of the Corporation, the notice of which shall state that the
removal of a Director or Directors is among the purposes of the meeting, the
affirmative vote of the holders of at least 66-2/3% of the Voting Stock (as
defined in Article Fifth), voting together as a single class, may remove such
Director or Directors for cause.
SECTION 5. AMENDMENT, REPEAL, ETC. Notwithstanding anything
contained in this Third Amended and Restated Certificate of Incorporation to the
contrary, the affirmative vote of at least 66-2/3% of the Voting Stock (as
defined in Article Fifth), voting together as a single class, shall be required
to amend, repeal, or adopt any provision inconsistent with, this Article
Seventh.
EIGHTH. SECTION 1. PURPOSE. In addition to any affirmative
vote required by law or by this Third Amended and Restated Certificate of
Incorporation, any Business Combination (as defined in Section 2 of this Article
Eighth) respecting the Corporation shall require the approval of the
stockholders of the Corporation pursuant to Section 5 of this Article Eighth of
the approval of the Directors of the Corporation pursuant to Section 4 of this
Article Eighth.
SECTION 2. CERTAIN DEFINITIONS. For the purposes of
this Article Eighth:
(a) "Act" shall mean the Securities Exchange Act of 1934.
(b) "Affiliate," "affiliated" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Act (as hereinafter defined), as in
effect on October 25, 1991.
6
<PAGE> 7
(c) A person shall be a "beneficial owner" of, or
"Beneficially Own," or have "beneficial ownership" of, any
Voting Stock:
(i) That such person or any of its Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) that such person or any of its Affiliates or
Associates has (A) the right to acquire (whether or not such
right is immediately exercisable) pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement,
arrangement or understanding (other than a revocable proxy
given to such person or any of its Affiliates or Associates in
response to a public proxy solicitation made pursuant to, and
in accordance with, all applicable requirements of the Act and
the rules and regulations promulgated thereunder); or
(iii) that is beneficially owned, directly or
indirectly, by any other person with which such person or any
of its Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of Voting Stock (other than a
revocable proxy given to such person or any of its Affiliates
or Associates in response to a public proxy solicitation made
pursuant to, and in accordance with, all applicable
requirements of the Act and the rules and regulations
promulgated thereunder).
(d) "Business Combination" shall include:
(i) any merger of the Corporation or any Subsidiary
with (A) an Interested Stockholder or (B) any other
corporation (whether or not itself an Interested Stockholder)
that is, or after such merger would be, an Affiliate of an
Interested Stockholder;
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series
of transactions) to or with an Interested Stockholder for an
Affiliate of an Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $750,000 or more;
(iii) the issuance or transfer by the Corporation or
any Subsidiary (in one transaction or a series of
transactions) of any securities of the Corporation of any
Subsidiary to an Interested Stockholder or any Affiliate of an
Interested Stockholder in exchange for
7
<PAGE> 8
cash, securities or other property (or a combination
thereof) having an aggregate fair market value of
$750,000 or more;
(iv) any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of an Interested
Stockholder, except that this provision shall not limit the
right of stockholders to elect voluntarily to wind up or
dissolve the Corporation; and
(v) any reclassification of the Corporation's securities
(including any reverse stock split), recapitalization of the
Corporation, merger of the Corporation with any Subsidiary
or any other transaction (whether or not involving an
Interested Stockholder) that has the effect, directly or
indirectly, of increasing the proportionate beneficial
ownership of an Interested Stockholder or any Affiliate of
an Interested Stockholder in the outstanding shares of any
class of equity or convertible securities of the Corporation
or of any Subsidiary.
(e) "Disinterested Director" shall mean any member of the
Board of Directors of the Corporation who is not an Affiliate,
Associate or representative of the Interested Stockholder that is
involved with the Business Combination and was a member of the Board of
Directors prior to the time that such Interested Stockholder became an
Interested Stockholder, or any successor of a Disinterested Director
who is not an Affiliate, Associate or representative of the Interested
Stockholder that is involved with the Business Combination and is
nominated for election as a director or elected as a director to
succeed a Disinterested Director by a majority of the Disinterested
Directors then on the Board of Directors; PROVIDED, HOWEVER, that for
purposes of this definition a Director shall not be deemed to be an
Affiliate or Associate of any other Director solely as the result of
such Director's service on the Board of Directors.
(f) "Interested Stockholder" shall mean any person (other
than the Corporation or any Subsidiary) that:
(i) is the beneficial owner, directly or indirectly, of
15% or more of the Voting Stock;
(ii) is an Affiliate of the Corporation and at any time
during the prior two years was the beneficial owner,
directly or indirectly, of 15% or more of the then
outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to
any shares of Voting Stock of which an Interested Stockholder
was the beneficial owner at any
8
<PAGE> 9
time during the prior two years, unless such assignment or
succession occurs in a transaction that is a public offering
within the meaning of the Securities Act of 1933;
PROVIDED, HOWEVER, that in determining whether a person is an Interested
Stockholder, the number of shares of Voting Stock deemed to be outstanding shall
include shares of which the Interested Stockholder is deemed to have beneficial
ownership through application of paragraph c of this Section 2 but shall not
include any other shares of Voting Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise.
(g) A "person" shall mean any individual, partnership,
firm, corporation or other entity.
(h) "Subsidiary" shall mean any corporation of which a
majority of any class of equity security is owned, directly or
indirectly, by the Corporation; PROVIDED, HOWEVER, that for the
purposes of paragraph f of this Section the term "Subsidiary" shall
mean only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(i) "Voting Sock" shall mean the outstanding shares of
capital stock of the Corporation entitled to vote generally in the
election of Directors.
SECTION 3. POWERS OF THE BOARD OF DIRECTORS. For purposes of
this Article Eighth, a majority of the Directors of the Corporation present at a
meeting at which a quorum is present shall have the power and duty to determine
in good faith, on the basis of information known to them after reasonable
inquiry, which determination shall be conclusive, (i) whether a person is an
Interested Stockholder, (ii) the number of shares of Voting Stock of which a
person is the beneficial owner, (iii) whether a person is an Affiliate or
Associate of another and (iv) the fair market value of any assets to be sold,
leased, exchanged mortgaged, pledged or transferred.
SECTION 4. APPROVAL BY BOARD OF DIRECTORS. A Business
Combination that is approved by a majority of the Disinterested Directors shall
not require the approval of the stockholders pursuant to Section 5 of this
Article Eighth.
SECTION 5. APPROVAL BY STOCKHOLDERS. Unless a proposed
Business Combination is approved by the Directors of the Corporation pursuant to
Section 4 of this Article Eighth,, such Business Combination shall require the
affirmative vote of the holders of at least 66-2/3% of the Voting Stock, voting
together as a single class, excluding shares of Voting Stock that are
beneficially owned by any Interested Stockholder that is involved
9
<PAGE> 10
with the Business Combination. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required by law, by this Third
Amended and Restated Certificate of Incorporation or the By-Laws of the
Corporation, by an Agreement with any over-the-counter market quotation system,
or otherwise.
SECTION 6. NO EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED
STOCKHOLDERS. Nothing contained in this Article Eighth shall be construed to
relieve an Interested Stockholder form any fiduciary obligation imposed by law.
SECTION 7. AMENDMENT, REPEAL OR MODIFICATION. Notwithstanding
anything contained in this Third Amended and Restated Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
66-2/3% of the Voting Stock, voting together as a single class, shall be
required to amend or repeal, or to adopt any provision inconsistent with, this
Article Eighth.
NINTH. SECTION 1. PERSONAL LIABILITY. To the full extent
permitted by the General Corporation Law of the State of Delaware or any other
applicable law presently or hereafter in effect, no Director of the Corporation
shall be personally liable to the Corporation or its stockholders for or with
respect to any acts or omissions in the performance of his or her duties as a
Director of the Corporation. Any repeal or modification of this Article Ninth
shall not adversely affect any right or protection of a Director of the
Corporation existing immediately prior to such repeal or modification.
SECTION 2. INDEMNIFICATION. Each person who is or was or had
agreed to become a Director or officer of the Corporation, or each such person
who is or was serving or who had agreed to serve at the request of the Board of
Directors or an officer of the Corporation as a director, or officer, of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified by the Corporation to the full extent permitted by the General
Corporation Law of the State of Delaware or any other applicable law as
presently or hereafter in effect. The right of indemnification provided in this
Section 2 shall not be exclusive of any other rights to which any person seeking
indemnification may otherwise be entitled, and shall be applicable to matters
otherwise within its scope irrespective of whether such matters arose or arise
before or after the adoption of this Article Ninth. Without limiting the
generality or the effect of the foregoing, the Corporation may adopt By-Laws, or
enter into one or more agreements with any person, which provide for
indemnification greater or different than that provided in this Article Ninth.
SECTION 3. AMENDMENT, REPEAL OR MODIFICATION.
Notwithstanding anything contained in this Third Amended and Restated
Certificate of Incorporation to the contrary, the amendment, repeal or adoption
of any provision inconsistent with,
10
<PAGE> 11
this Article Ninth shall require the affirmative vote of the holders of at least
66-2/3% of the Voting Stock (as defined in Article Fifth), voting together as a
single class. Any amendment, repeal or adoption of any provision inconsistent
with this Article Ninth shall not adversely affect any right or protection
existing hereunder immediately prior to such amendment, repeal or adoption.
IN WITNESS WHEREOF, DNX Corporation has caused this Third
Amended and Restated Certificate of Incorporation to be signed by Paul J.
Schmitt, President of the Corporation, and attested by John G. Cooper, Secretary
of the Corporation, this 18th day of December 1996.
DNX CORPORATION
By: /s/ Paul J. Schmitt
-------------------------------
Paul J. Schmitt, President
ATTEST:
By: /s/ John G. Cooper
--------------------------------
John G. Cooper, Secretary
11
<PAGE> 1
Exhibit 3.2
THIRD
AMENDED AND RESTATED BY-LAWS
OF
CHRYSALIS INTERNATIONAL CORPORATION
(A DELAWARE CORPORATION)
------------------------
OFFICES
1. OFFICES. The Corporation shall maintain its
registered office in the State of Delaware at Corporation Service
Company, 1013 Centre Road, in the city of Wilmington, County of
New Castle, Delaware, and its resident agent at such address is
Corporation Service Company.
The Corporation may also have offices in such other places in
the United States or elsewhere as the Board of Directors may, from time to time,
appoint or as the business of the Corporation may require.
MEETINGS OF STOCKHOLDERS
2. ANNUAL MEETINGS. An annual meeting of stockholders shall be
held at such place either within or without the State of Delaware, and at such
time and date as the Board of Directors shall determine by resolution at which
the stockholders shall elect by a plurality vote the Directors to succeed those
whose terms expire at such annual meeting and shall transact such other business
as may properly be conducted at such annual meeting.
3. SPECIAL MEETINGS. Special meetings of the stockholders may
be called only by the Chairman of the Board, if one is elected, by the Chief
Executive Officer or President, or by the Secretary within ten (10) days after
receipt of the written request of a majority of the Directors of the
Corporation. Any such request by a majority of the Directors shall be sent to
the Chairman of the Board, if one is elected, the President and the Secretary
and shall state the purpose or purposes of the proposed meeting. Special
meetings of holders of the outstanding Preferred Stock, par value $.01 per share
("Preferred Stock"), may be called in the manner and for the purposes provided
in the resolutions of the Board of Directors providing for the issuance of such
stock as filed pursuant to the applicable law of the State of Delaware or
pursuant to the Third Amended and Restated Certificate of Incorporation.
<PAGE> 2
2
4. NOTICE OF MEETINGS. Written notice of every meeting of the
stockholders, stating the place, date and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, except
as otherwise provided herein or by law. When a meeting is adjourned to another
place, date or time, written notice need not be given of the adjourned meeting
if the place, date and time thereof are announced at the meeting at which the
adjournment is taken; PROVIDED, HOWEVER, that if the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, written notice of the place, date and time of the
adjourned meeting shall be given in conformity herewith. At any adjourned
meeting, any business may be transacted which might have been transacted at the
original meeting.
5. QUORUM. Unless otherwise required by law or the Third
Amended and Restated Certificate of Incorporation, the holders of a majority of
the issued and outstanding stock entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at all meetings of stockholders. If, however, such quorum shall not be present
in person or represented by proxy at any meeting of the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented.
6. VOTING. Unless otherwise provided by law or by the Third
Amended and Restated Certificate of Incorporation, each stockholder shall be
entitled at every meeting of the stockholders to one vote for each share of
stock having voting power which stands in the name of such stockholder on the
books of the Corporation on the record date for the meeting and such votes may
be case either in person or by written proxy. Every proxy must be duly executed
and filed with the Secretary of the Corporation. A stockholder may revoke any
proxy that is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or another duly executed
proxy bearing a later date with the Secretary of the Corporation. The vote upon
any question brought before a meeting of the stockholders may be by voice vote,
unless otherwise required by the Third Amended and Restated Certificate of
Incorporation or these By-Laws or unless the Chairman of the Board, if one is
elected, the President or the holders of a majority of the outstanding shares of
all classes of stock entitled to vote thereon present in person or by proxy at
such meeting shall so determine. Every vote taken by written ballot shall be
counted by the inspectors of election. When a quorum is present at any meeting,
the affirmative vote of the holders of a
<PAGE> 3
3
majority of the stock present in person or represented by proxy at the meeting
and entitled to vote on the subject matter and which has actually been voted
shall be the act of the stockholders, except in the election of Directors or as
provided in these By-laws, the Third Amended and Restated Certificate of
Incorporation or by law.
7. INSPECTORS. The Board of Directors shall, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear or act, the chairman of the meeting may appoint one or more substitute
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes or ballots, count and tabulate all votes or
ballots or consents, determine the results, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders.
8. CHAIRMAN OF MEETINGS. The Chairman of the Board of the
Corporation, if one is elected, or, in his absence or disability, the President
of the Corporation, shall preside at all meetings of the stockholders.
9. SECRETARY OF MEETING. The Secretary of the Corporation
shall act as Secretary at all meetings of the stockholders. In the absence or
disability of the Secretary, the Chairman of the Board or the President shall
appoint a person to act as Secretary at such meetings.
10. LISTS OF STOCKHOLDERS. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, showing the
address of each stockholder and the number and class of shares held by each.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which shall be specified in the notice of the meeting,
or, if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the meeting and may be inspected by any
stockholder who is present.
BOARD OF DIRECTORS
<PAGE> 4
4
11. POWERS. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law or by the Third Amended and Restated Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
12. NUMBER AND TERM. The Board of Directors shall consist of
three or more members. Subject to the rights, if any, of any series of Preferred
Stock to elect additional Directors pursuant to the terms and conditions of such
Preferred Stock, the authorized number of Directors may be determined from time
to time only by a vote of a majority of the Board of Directors. The Directors,
other than those who may be elected by the holders of any series of the
Preferred Stock, shall be classified with respect to the time for which they
severally hold office into three classes, as nearly equal in number as possible,
designated Class I, Class II and Class III. The Directors first elected to Class
I shall hold office for a term expiring at the annual meeting of stockholders to
be held in 1992; the Directors first elected to Class II shall hold office for a
term expiring at the annual meeting of stockholders to be held in 1993; and the
Directors first elected to Class III shall hold office for a term expiring at
the annual meeting of stockholders to be held in 1994, with the members of each
class to hold office until their successors of the class of Directors whose term
expires at that meeting shall be elected by plurality vote of all votes cast at
such meeting of stockholders held in the third year following the year of their
election and such Directors elected for such three year term will hold office
until their successors are elected and qualified.
13. RESIGNATIONS. Any director may resign at any time by
giving written notice of such resignation to the Chairman of the Board, if one
is elected, the President or the Secretary. The acceptance of a resignation
shall not be necessary to make it effective.
14. REMOVAL. At any annual meeting or special meeting the
notice of which indicated that the removal of a director would be considered and
voted upon at such meeting, any Director may be removed from office by the
stockholders for cause by the affirmative vote of the holders of at least 66
2/3% of the voting power of the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of Directors, voting
together as a single class.
15. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Subject to the
rights, if any, of the holders of any series of Preferred Stock pursuant to the
terms and conditions of such Preferred Stock, newly created directorships
resulting from any increase in the number of Directors and any vacancies on the
<PAGE> 5
5
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled solely by the affirmative vote of a majority of
the remaining Directors then in office, even though less than a quorum of the
Board of Directors, or by a sole remaining Director. Any Director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of Directors in which the new directorship was
created or the vacancy occurred and until such Director's successor shall have
been elected and qualified. No decrease in the number of Directors constituting
the Board of Directors shall shorten the term of an incumbent Director.
16. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held immediately after the annual meeting of the stockholders
and at such other time and place either within or without the State of Delaware
as shall from time to time be determined by the Board of Directors. Notice of
regular meetings of the Board of Directors need not be given.
17. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, if one is elected, or the
President on one (1) day's written notice to each Director by whom such notice
is not waived, given either personally or by telephone, telegram, telex,
facsimile or similar medium of communication or five (5) days written notice to
each Director by whom such notice is not waived given by mail, and shall be
called by the Chairman of the Board, if one is elected, or the President in like
manner and on like notice on the written request of one (1) Director. Special
meetings of the Board of Directors may be held at such time and place either
within or without the State of Delaware as is determined by the Board of
Directors or specified in the notice of any such meeting.
18. QUORUM, VOTING AND ADJOURNMENT. At all meetings of the
Board of Directors, a majority of the total number of Directors then in office
shall constitute a quorum for the transaction of business. Except as otherwise
required by these By-Laws, by the Third Amended and Restated Certificate of
Incorporation or by law, the act of a majority of the Directors present thereat
may adjourn the meeting from time to time to another place, time or date,
without notice other than announcement at the meeting, until a quorum shall be
present.
19. COMMITTEES. The Board of Directors, by resolution passed
by a majority of the Board of Directors, may designate one or more committees,
each committee to consist of one or more Directors and each to have such
lawfully delegable powers and duties as the Board of Directors may confer. Each
such committee shall serve at the pleasure of the Board of Directors. The Board
of Directors may designate one or more Directors as alternate members of any
committee, who may replace
<PAGE> 6
6
any absent or disqualified member at any meeting of the committee. In lieu of
such action by the Board of Directors, in the absence or disqualification of any
member of a committee, the members thereof present at any such meeting of the
committee and not disqualified from voting, whether or not they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Except as
otherwise provided by law, any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the discretion of the management of
the business and affairs of the Corporation. Any committee or committees so
designated by the Board of Directors shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Unless otherwise prescribed by the Board of Directors, a majority of the members
of the committee shall constitute a quorum for the transaction of business and
the act of a majority of the members present at a meeting at which there is a
quorum shall be the act of such committee. Each committee shall prescribe its
own rules for calling and holding meetings and its method of procedure, subject
to any rules prescribed by the Board of Directors, and shall keep a written
record of all actions taken by it.
20. ACTION WITHOUT A MEETING. Unless otherwise restricted by
the Third Amended and Restated Certificate of Incorporation or these By-Laws,
any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board of Directors or any committee thereof consent thereto in
writing.
21. COMPENSATION. The Board of Directors shall have the
authority to fix the compensation of directors for their services. A director
may also serve the Corporation in other capacities and receive compensation
therefor.
22. TELEPHONE MEETING. Unless otherwise restricted by the
Third Amended and Restated Certificate of Incorporation, members of the Board,
or any committee designated by the Board, may participate in a meeting by means
of conference telephone or similar communications equipment in which all persons
participating in the meeting can hear each other. Participation in such
telephonic meeting shall constitute the presence in person at such meeting.
23. RULES. The Board of Directors may adopt rules and
regulations that are not inconsistent with law or these By-Laws for the conduct
of their meetings and the management of the affairs of the Corporation.
<PAGE> 7
7
NOTICES
24. GENERALLY. Except as otherwise provided by law, these
By-Laws or the Third Amended and Restated Certificate of Incorporation, whenever
by law or under the provisions of the Third Amended and Restated Certificate of
Incorporation or these By-Laws, notice is required to be given to any Director
or stockholder, it shall not be construed to mean personal notice, but such
notice may be given in writing, by mail, addressed to such Director or
stockholder, at the address of such Director or stockholder as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to Directors may also be given by telephone, telegram,
telex, facsimile or similar medium of communication.
25. WAIVERS. Whenever any notice is required to be given by
law or under the provisions of the Third Amended and Restated Certificate of
Incorporation or these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the time of
the event for which such notice is to be given, shall be deemed equivalent to
such notice. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
OFFICERS
26. GENERALLY. The officers of the Corporation shall be
elected by the Board of Directors and shall consist of a Chief Executive
Officer, a President, a Secretary and a Treasurer. The Board of Directors may
also choose any or all of the following: a Chairman of the Board, one or more
Executive Vice Presidents, one or more Vice Presidents, one or more Assistant
Secretaries and one or more Assistant Treasurers. Any number of offices may be
held by the same person. Any of the offices may be left vacant from time to time
as the Board of Directors may determine. In the case of the absence or
disability of any officer of the Corporation or for any other reason deemed
sufficient by a majority of the Board of Directors, the Board of Directors may
delegate his powers or duties to any other officer or to any Director.
27. COMPENSATION. The compensation of all officers and
agents of the Corporation who are also Directors of the Corporation shall be
fixed by the Board of Directors or by a committee of the Board of Directors
established pursuant to By-Law 19. The Board of Directors may delegate the power
to fix the
<PAGE> 8
8
compensation of other officers and agents of the Corporation to
an officer of the Corporation.
28. SUCCESSION. The officers of the Corporation shall hold
office until their successors are elected and qualified. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy occurring
in any office of the Corporation may be filled by the Board of Directors.
29. AUTHORITY AND DUTIES. Each of the officers of the
Corporation shall have such authority and shall perform such duties as are
customarily incident to their respective offices and as may be specified from
time to time by the Board of Directors in a resolution which is not inconsistent
with these By-Laws.
30. CONTRACTS AND OTHER DOCUMENTS. The President or Treasurer,
or such other officer or officers as may from time to time be authorized by the
Board of Directors, shall have power to sign and execute on behalf of the
Corporation deeds, conveyances and contracts, and any and all other documents
requiring execution by the Corporation.
31. OWNERSHIP OF STOCK OF ANOTHER CORPORATION. The President
or the Treasurer, or such other officer or agent as shall be authorized by the
Board of Directors, shall have the power to sign and execute on behalf of the
Corporation, to attend and to vote at any meeting of the stockholders or any
corporation in which the Corporation holds stock and may exercise, on behalf of
the Corporation, any and all of the rights and powers incident to the ownership
of such stock at any such meeting, including the authority to execute and
deliver proxies and consents on behalf of the Corporation.
STOCK
32. CERTIFICATES OF STOCK. Certificates representing shares of
stock of the Corporation shall be in such form as shall be determined by the
Board of Directors, subject to applicable legal requirements. Each such
certificate shall be numbered and its issuance recorded in the books of the
Corporation, and such certificate shall exhibit the holder's name and the number
of shares and shall be signed by, or in the name of, the Corporation by the
Chairman of the Board, if one is elected, or the President and the Secretary or
an Assistant Secretary, or the Treasurer or an Assistant Treasurer of the
Corporation, and shall also be signed by, or bear the facsimile signature of, a
duly authorized officer or agent of any properly designated transfer agent of
the Corporation. Any or all of the signatures and the seal of the Corporation,
if any, upon such certificates may be facsimiles, engraved or printed. Such
certificates may be issued and
<PAGE> 9
9
delivered notwithstanding that the person whose facsimile signature appears
thereon shall have ceased to be such officer at the time the certificates are
issued and delivered.
33. CLASSES OF STOCK. The designations, preferences and
relative participating, optional or other special rights of the various classes
of stock or series thereof, shall be set forth in full or summarized on the face
or back of the certificates which the Corporation issues to represent its stock,
or in lieu thereof, such certificates shall set forth the office of the
Corporation from which the holders of certificates may obtain a copy of such
information.
34. TRANSFER OF SHARES. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue, or to cause its
transfer agent to issue, a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
35. LOST CERTIFICATES. The Secretary may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact, satisfactory
to the Secretary, by the person claiming the certificate of stock to be lost,
stolen or destroyed. As a condition precedent to the issuance of a new
certificate or certificates, the Secretary may require the owners of such lost,
stolen or destroyed certificate or certificates to give the Corporation a bond
in such sum and with such surety or sureties as the Secretary may direct as
indemnity against any claims that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed or the
issuance of the new certificate.
36. STOCKHOLDERS OF RECORD. (a) In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty (60) nor less than ten (10)
calendar days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the calendar day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the calendar day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or
<PAGE> 10
10
to vote at a meeting of the stockholders shall apply to any adjournment of the
meeting; PROVIDED, HOWEVER, that the Board of Directors may fix a new record
date for the adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of Directors may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty (60) calendar days prior to such action. If no record date is
fixed, the record date for determining stockholders for any such purpose shall
be at the close of business on the calendar day on which the Board of Directors
adopts the resolution relating thereto.
(c) The Corporation shall be entitled to treat the person in
whose name any share of its stock is registered as the owner thereof for all
purposes, and shall not be bound to recognize any equitable or other claim to,
or interest in, such share on the part of any other person, whether or not the
Corporation shall have notice thereof, except as expressly provided by
applicable law.
MISCELLANEOUS
37. AMENDMENT OF BY-LAWS. Except as otherwise provided by law
or by the Third Amended and Restated Certificate of Incorporation, these By-Laws
or any of them may be amended in any respect or repealed at any time, either (i)
at any meeting of stockholders, provided that any amendment or supplement
proposed to be acted upon at any such meeting shall have been described or
referred to in the notice of such meeting; or (ii) at any meeting of the Board
of Directors, provided that any amendment or repeal proposed to be acted upon at
any such meeting shall have been described or referred to in the notice of such
meeting or an announcement with respect thereto shall have been made at the last
previous meeting of the Board of Directors and provided further that no
amendment adopted by the Board of Directors shall vary or conflict with any
amendment adopted by the stockholders.
38. SEAL. The Board of Directors may adopt a corporate seal
and use the same by causing it or a facsimile thereof to be impressed or affixed
or reproduced or otherwise.
39. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each Director,
member of a committee designated by the Board of Directors, and each officer of
the Corporation shall, in the performance of his or her duties, be fully
protected in relying in good faith upon the records of the Corporation and upon
such information, opinions, reports or statements presented to the
<PAGE> 11
11
Corporation by any of the Corporation's officers or employees, or committees of
the Board of Directors, or by any other person as to matters the Director,
committee member or officer believes are within such other person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Corporation.
40. TIME PERIODS. In applying any provision of these By-Laws
that requires that an act be done or not be done a specified number of days
prior to an event or that an act be done during a period of a specified number
of days prior to an event, calendar days shall be used unless otherwise
specified, the day of the doing of the act shall be excluded and the day of the
event shall be included.
41. FISCAL YEAR. The fiscal year of the Corporation shall
end on December 31st of each year, or such other twelve consecutive months as
the Board of Directors may designate.
<PAGE> 1
Exhibit 99.1
[CHRYSALIS LOGO]
CHRYSALIS
Corporate Offices
575 Route 28
Raritan, NJ 08869 USA
Tel: (908) 722-7900
Fax: (908) 722-6677
E-mail: [email protected]
FOR IMMEDIATE RELEASE
---------------------
Contact:
Paul J. Schmitt Harvey A. Goralnick
Chairman, President & CEO Focus Partners LLC
(908) 722-7900 ext.11 (212) 752-9445
DNX AND BIOCLIN COMPLETE MERGER WITH ADOPTION OF NEW NAME AND STOCK SYMBOL
NASDAQ:CRLS
-COMPANY CHANGES NAME TO CHRYSALIS INTERNATIONAL CORPORATION-
Raritan, NJ, December 19, 1996 -- DNX Corporation (Nasdaq:DNXX) announced today
that it has completed its transaction to merge with the BioClin Group. In
connection with this transaction DNX has changed its name and stock symbol to
Chrysalis International Corporation (NASDAQ:CRLS).
"By merging these companies to form Chrysalis, we have created a Contract
Research Organization (CRO) with global capabilities that span the entire
spectrum of drug development from preclinical through clinical to product
registration," said Paul J. Schmitt, Chairman of the Board, President and CEO.
"With nine major international preclinical and clinical operating centers and
more than 450 employees in 19 countries throughout North America, Eastern and
Western Europe, Australia and the Middle East, we feel especially well-
positioned to support ever increasing demands for global drug development
services."
Chrysalis is one of only two CROs capable of providing both preclinical and
clinical services on a global basis. This will become an increasingly important
paradigm in the CRO industry as clients continue to seek innovative ways to
accelerate the transition from preclinical to human clinical trials.
Chrysalis is derived from the Greek word for gold, Chrysos and represents the
stage of metamorphosis when a golden pupa emerges into a butterfly. "Its
universal meaning of change and growth makes it an ideal name for the new
company," explained Mr. Schmitt. "The name Chrysalis symoblizes the new
company's ability to manage the progression of new drug candidates emerging from
the discovery phase through preclinical and clinical development." The
combination of these
-more-
The Global Drug Development Services Company
<PAGE> 2
capabilities can help accelerate the development process enabling Chrysalis to
provide its clients with innovative solutions that enhance the financial returns
of their new drugs. Combined with the scientific symbol for infinity, the new
logo symbolizes a dynamic, innovative organization that is driven to constantly
improve along a never-ending continuum.
Prior to this merger, DNX and its subsidiaries, DNX Transgenic Sciences and
Pharmakon Research International, had already built substantial credibility as a
global provider of preclinical drug development services, the prelude to human
clinical trials. The Company's services include broad capabilities in
toxicology, pharmacology, pharmacokinetics and includes specialties such as
continuous infusion administration techniques, use of rodent models genetically
engineered with human genes for use in evaluating new drugs and therapies,
immunotoxicology and specialty pharmacology assays. Through preclinical
laboratories in Lyon, France, Scranton, PA and Princeton, NJ, DNX provides
preclinical services to over 250 pharmaceutical and biotech companies in 16
countries.
Since 1982, BioClin has been an active international drug development company
with the capacity to manage entire clinical development programs. The company
offers a full range of development services from Phase I to Phase IV human
clinical studies including protocol design, monitoring, data management, quality
assurance and report writing. BioClin is noted for its experience and expertise
in managing local or multinational clinical projects and has a presence
throughout all major European countries, the U.S., Israel and Australia.
Paul J. Schmitt will serve as Chairman, President and CEO of Chrysalis and John
G. Cooper as Senior Vice President and Chief Financial Officer. Jack Barbut,
Sc.D., founder and president of BioClin, will become Vice Chairman and
President, Clinical Services. Leif Modeweg, D.V.M., will continue to serve as
President, Preclinical Services. Chris Jensen, Ph.D., currently president of
BioClin Europe, will serve as President, International Services and assume
responsibilities for managing a wide range of new synergistic opportunities with
an emphasis on the development and management of full-scale preclinical through
clinical programs. Drs. Barbut and Jensen will also be joining Chrysalis' Board
of Directors.
Under the terms of the transaction agreements, DNX Corporation issued 2.6
million shares of its common stock to the shareholders of BioClin. The
transaction is being treated as a pooling of interests for accounting purposes.
For the nine months ended September 30, 1996, the pro forma consolidated
revenues for Chrysalis International was $31,112,000 and pro forma net income
was $310,000, or $0.03 per share.
-more-
<PAGE> 3
Vector Securities International, Inc. acted as financial advisor to DNX
Corporation.
This press release contains forward looking statements. The actual results
might differ materially from those projected in the forward looking statements.
Additional information concerning this transaction, as well as information that
could cause actual results to materially differ from those in forward looking
statements is contained in DNX Corporation's SEC filings, including periodic
reports under the Securities Exchange Act of 1934, as amended.
NOTE TO EDITORS: Camera-ready art of the Chrysalis logo, to accompany this
story, is available via NewsCom Database, (305) 448-8411 or
http://www.newscom.com.
###
<PAGE> 1
Exhibit 99.2
FINANCIAL STATEMENTS -- THE BIOCLIN GROUP
X-1
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
DNX Corporation:
We have audited the accompanying combined balance sheets of the BioClin
Group as of December 31, 1995 and 1994 and the related combined statements of
operations, deficit in stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1995. These combined financial
statements are the responsibility of the BioClin Group's management. Our
responsibility is to express an opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the BioClin Group as
of December 31, 1995 and 1994, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
1995, in conformity with generally accepted accounting principles.
The accompanying combined financial statements have been prepared assuming
the BioClin Group will continue as a going concern. As discussed in note 1 to
the combined financial statements, the BioClin Group has suffered recurring net
losses and has a net capital deficiency that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in note 1. The combined financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
KPMG PEAT MARWICK LLP
August 19, 1996
X-2
<PAGE> 3
THE BIOCLIN GROUP
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................. $ 1,126 995
Marketable debt securities (note 3).................................. 386 --
Trade accounts receivable (note 4)................................... 3,245 2,452
Prepaid expenses and other current assets............................ 187 336
-------- --------
Total current assets.............................................. 4,944 3,783
Marketable debt securities (note 3).................................... 547 835
Property and equipment, net (note 5)................................... 871 963
Other assets........................................................... 215 81
-------- --------
Total assets...................................................... $ 6,577 5,662
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Short-term borrowings (note 6)....................................... 9,834 9,589
Note payable -- related party (note 7)............................... 326 287
Accounts payable..................................................... 1,073 2,607
Accrued expenses (note 8)............................................ 3,102 990
Deferred revenue..................................................... 2,569 2,065
-------- --------
Total current liabilities......................................... 16,904 15,538
Deferred income taxes (note 11)...................................... 14 154
-------- --------
Total liabilities................................................. 16,918 15,692
-------- --------
Stockholders' deficiency:
Series I redeemable, noncumulative preferred stock, BioClin, Inc.,
par value $.01 per share, with a liquidation preference in the
amount of $1,374 plus 10% per annum from date of issuance;
authorized, issued and outstanding 91 shares in 1995 and 1994
(note 9).......................................................... 1 1
Common stock, BioClin, Inc., par value $.01 per share; authorized
50,000 shares, issued and outstanding 9 shares in 1995 and 1994... -- --
Common stock, BioClin Europe AG, par value SFr500 per share;
authorized 100 shares, issued and outstanding 100 bearer shares in
1995 and 1994..................................................... 105 105
Common stock, BioClin Institute of Clinical Pharmacology GmbH, par
value DM100 per share; authorized 1,500 shares, issued and
outstanding 1,500 shares in 1995 and 1994......................... 86 86
Additional paid-in capital........................................... 125 125
Foreign currency translation adjustment.............................. (409) (234)
Employee stock purchase loans........................................ (93) (99)
Accumulated deficit.................................................. (10,233) (10,092)
Net unrealized gain on marketable debt securities (note 3)........... 77 78
-------- --------
Total stockholders' deficiency.................................... (10,341) (10,030)
-------- --------
Commitments and contingencies (note 13)
Total liabilities and stockholders' deficiency.................. $ 6,577 5,662
======== ========
</TABLE>
See accompanying notes to combined financial statements.
X-3
<PAGE> 4
THE BIOCLIN GROUP
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Gross revenues.............................................. $ 18,837 11,386 8,536
Less reimbursed costs (note 2).............................. (4,551) (1,727) (1,361)
-------- ------- --------
Net revenues (note 2)..................................... 14,286 9,659 7,175
-------- ------- --------
Operating costs and expenses:
Direct costs.............................................. 8,456 7,528 6,072
Selling, general and administrative....................... 4,467 3,537 2,824
Depreciation and amortization............................. 445 366 237
-------- ------- --------
13,368 11,431 9,133
-------- ------- --------
Income (loss) from operations........................ 918 (1,772) (1,958)
Other income (expense):
Interest income........................................... 85 66 142
Interest expense (notes 6 and 7).......................... (700) (599) (450)
Foreign currency losses, net (note 2)..................... (292) (25) (215)
Other..................................................... (38) 3 72
-------- ------- --------
(945) (555) (451)
-------- ------- --------
Loss before income taxes............................. (27) (2,327) (2,409)
Income taxes (note 11)...................................... 114 58 28
-------- ------- --------
Net loss............................................. $ (141) (2,385) (2,437)
======== ======= ========
</TABLE>
See accompanying notes to combined financial statements.
X-4
<PAGE> 5
THE BIOCLIN GROUP
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES I COMMON STOCK,
REDEEMABLE, BIOCLIN
NONCUMULATIVE COMMON INSTITUTE OF FOREIGN
PREFERRED COMMON STOCK, CLINICAL ADDITIONAL CURRENCY
STOCK, STOCK, BIOCLIN PHARMACOLOGY PAID-IN TRANSLATION
BIOCLIN. INC. BIOCLIN. INC. EUROPE AG GMBH CAPITAL ADJUSTMENT
------------- ------------- --------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992
(unaudited)............... $ 1 -- 105 86 125 (489)
Cash received on employee
stock purchase loan..... -- -- -- -- -- --
Translation adjustment.... -- -- -- -- -- 579
Net loss.................. -- -- -- -- -- --
----- --- --- --- ---- ----
Balance, December 31,
1993...................... 1 -- 105 86 125 90
Cash received on employee
stock purchase loan..... -- -- -- -- -- --
Translation adjustment.... -- -- -- -- -- (324)
Decrease in net unrealized
gain on marketable debt
securities.............. -- -- -- -- -- --
Net loss.................. -- -- -- -- -- --
----- --- --- --- ---- ----
Balance, December 31,
1994...................... 1 -- 105 86 125 (234)
Cash received on employee
stock purchase loan..... -- -- -- -- -- --
Translation adjustment.... -- -- -- -- -- (175)
Decrease in net unrealized
gain on marketable debt
securities.............. -- -- -- -- -- --
Net loss.................. -- -- -- -- -- --
----- --- --- --- ---- ----
Balance, December 31,
1995...................... $ 1 -- 105 86 125 (409)
===== === === === ==== ====
<CAPTION>
NET UNREALIZED
GAIN (LOSS)
EMPLOYEE ON
STOCK MARKETABLE TOTAL
PURCHASE ACCUMULATED DEBT STOCKHOLDERS'
LOANS DEFICIT SECURITIES DEFICIENCY
-------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992
(unaudited)............... (124) (5,270) (15) (5,581)
Cash received on employee
stock purchase loan..... 6 -- -- 6
Translation adjustment.... 9 -- -- 588
Net loss.................. -- (2,437) -- (2,437)
---- ------- --- -------
Balance, December 31,
1993...................... (109) (7,707) (15) (7,424)
Cash received on employee
stock purchase loan..... 10 -- -- 10
Translation adjustment.... -- -- -- (324)
Decrease in net unrealized
gain on marketable debt
securities.............. -- -- 93 93
Net loss.................. -- (2,385) -- (2,385)
---- ------- --- -------
Balance, December 31,
1994...................... (99) (10,092) 78 (10,030)
Cash received on employee
stock purchase loan..... 6 -- -- 6
Translation adjustment.... -- -- -- (175)
Decrease in net unrealized
gain on marketable debt
securities.............. -- -- (1) (1)
Net loss.................. -- (141) -- (141)
---- ------- --- -------
Balance, December 31,
1995...................... (93) (10,233) 77 (10,341)
==== ======= === =======
</TABLE>
See accompanying notes to combined financial statements.
X-5
<PAGE> 6
THE BIOCLIN GROUP
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (141) (2,385) (2,437)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Noncash items:
Depreciation and amortization........................ 445 366 237
Foreign currency transaction loss.................... 292 25 215
Change in operating assets and liabilities:
Increase in trade accounts receivable................ (641) (209) (350)
Decrease in prepaid expenses and other current
assets............................................ 124 12 229
(Increase) decrease in other assets.................. (126) 11 (54)
Increase (decrease) in accounts payable.............. (1,560) 1,083 581
Increase (decrease) in accrued expenses.............. 2,516 440 (285)
Increase in deferred revenues........................ 375 768 500
Increase (decrease) in deferred income taxes......... (172) 125 (125)
-------- ------- --------
Net cash provided by (used in) operating activities.... 1,112 236 (1,489)
-------- ------- --------
Cash flows from investing activities:
Purchases of property and equipment....................... (312) (688) (218)
-------- ------- --------
Net cash used in investing activities.................. (312) (688) (218)
-------- ------- --------
Cash flows from financing activities:
Proceeds from short-term borrowings....................... 483 1,819 2,039
Principal payments on short-term borrowings............... (944) (610) --
Payments received on employee stock purchase loans........ 7 12 6
Increase in note payable -- related party................. 20 34 207
-------- ------- --------
Net cash provided by (used in) financing activities.... (434) 1,255 2,252
-------- ------- --------
Effect of exchange rate changes on cash................... (235) (467) (374)
Net increase in cash...................................... 131 336 171
Cash, beginning of year................................... 995 659 488
-------- ------- --------
Cash, end of year......................................... $ 1,126 995 659
======== ======= ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest............................................... $ 657 571 416
Income taxes........................................... 5 -- 28
======== ======= ========
Noncash investing and financing activities:
Unrealized gain (loss) on marketable debt securities...... $ 77 78 (15)
======== ======= ========
</TABLE>
See accompanying notes to combined financial statements.
X-6
<PAGE> 7
THE BIOCLIN GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(1) BASIS OF PRESENTATION
The combined financial statements of the BioClin Group include the accounts
of BioClin, Inc. (BioClin U.S.), BioClin Europe AG (BioClin Europe), BioClin
Europe's wholly-owned subsidiaries BioClin AG (BioClin Cham) and Merlik C.V.
(Merlik), BioClin Europe's majority-owned subsidiary BioClin GmbH (BioClin
Germany), Kilmer N.V. (Kilmer) and BioClin Institute of Clinical Pharmacology
GmbH (BioClin Institute). The accounts have been combined due to the common
ownership of the companies and in contemplation of the proposed transaction with
DNX Corporation which is more fully described below.
The combined financial statements of the BioClin Group have been prepared
assuming the BioClin Group will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities and commitments in
the normal course of business. The BioClin Group has financed its operations
primarily through debt, has a net stockholders' deficiency of approximately
$10,233 and has short-term borrowings due on demand or due during 1996 amounting
to approximately $10,160 at December 31, 1995.
At December 31, 1995, the BioClin Group had cash and marketable securities
totalling approximately $2,059. In contemplation of the proposed transaction
with DNX Corporation, which is more fully described below, it is anticipated
that a portion of the combined company's cash resources may be used to retire
the majority or possibly all of the BioClin Group's outstanding short-term
borrowings.
On August 19, 1996, DNX Corporation announced that it had entered into
agreements ("Transaction Agreements") providing for the acquisition of all of
the outstanding capital stock of, or equity interests in, the BioClin Group
companies in exchange for 2,632,600 shares of DNX Corporation Common Stock (the
"Proposed Transaction"). The Proposed Transaction has been structured, and the
legal agreements have been drafted, in a manner intended to qualify the Proposed
Transaction for pooling-of-interests accounting treatment. Pursuant to the
Transaction Agreements, the closing of the Proposed Transaction is subject to a
number of conditions including DNX Corporation stockholder approval and
regulatory approvals. The Proposed Transaction is expected to close late in the
fourth quarter of fiscal 1996.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization:
The BioClin Group is an international, full-service contract research
organization (CRO) serving the pharmaceutical, biotechnology and medical device
industries. The BioClin Group designs, monitors, manages and analyzes clinical
trials, assists with regulatory affairs, provides data management expertise, and
offers other related services and products.
Principles of combination:
The combined financial statements include the accounts of the BioClin Group
as described in note 1. All significant intercompany transactions and balances
have been eliminated.
Concentration of credit risk:
The BioClin Group extends unsecured trade credit in connection with its
commercial services to a customer base comprised of both foreign and domestic
entities, which are concentrated in the pharmaceutical and biotechnology
industries.
X-7
<PAGE> 8
THE BIOCLIN GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Marketable debt securities:
Effective January 1, 1994, the BioClin Group adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (FAS 115). Under this standard, the BioClin Group is required
to classify its marketable debt securities into one or more of the following
categories: held-to-maturity, trading or available-for-sale. All of the BioClin
Group's marketable debt securities are foreign corporate debt securities and are
classified as available-for-sale. In accordance with FAS 115, securities
available-for-sale are recorded at fair market value and any unrealized gains or
losses are recorded as part of stockholders' deficiency.
Property and equipment:
Major additions and replacements of assets are capitalized at cost.
Maintenance, repairs and minor replacements are expensed as incurred. Property
and equipment are depreciated utilizing the straight-line method over the
estimated useful lives of the related assets which range from three to ten
years. Leasehold improvements are amortized utilizing the straight-line method
over the estimated useful life of the asset or the lease term, whichever is
shorter. Upon retirement or sale, the cost of the assets disposed of and the
related accumulated depreciation are removed from the accounts and any resulting
gain or loss is credited or charged to operations.
Fair value of financial instruments:
Financial Accounting Standards Board Statement No. 107, "Disclosure about
Fair Value of Financial Instruments," defines the fair value of a financial
instrument as the amount at which the instrument could be exchanged in a current
transaction between willing parties. Cash, trade accounts receivable, prepaid
expenses and other current assets, short-term borrowings, note
payable -- related party, accounts payable, accrued expenses and deferred
revenue reported in the combined balance sheets equal or approximate fair
values.
Revenue recognition:
Substantially all revenues are earned by performing services under
contracts with various pharmaceutical and biotechnology companies. Certain
contracts require the BioClin Group to perform services for a specified number
of patients. Revenues are recognized based on the status of the work completed
as of a given time as a percentage of the total activity required under the
contract. Billings and payment terms are specified in the contract. Revenue
related to contract modifications is recognized after performance and when
realization is assured and the amounts are reasonably determinable. Adjustments
to contract cost estimates are made in the period in which the facts which
require the revisions become known. When the revised estimate indicates a loss,
such loss is provided for currently in its entirety.
Revenues earned but not billed as of a given date are reflected in the
accompanying combined balance sheets as trade accounts receivable -- unbilled.
Funds received that relate to future performance under service contracts are
deferred and recognized as revenue when earned.
Reimbursed costs:
Substantially all amounts recorded as reimbursed costs in the accompanying
combined statements of operations relate to independent investigator and travel
costs. These costs are reimbursed by sponsors of the respective studies in
accordance with the respective contract terms. Payments received from sponsors
for investigator and travel costs in excess of costs incurred are classified as
deferred revenue and costs incurred in excess of amounts paid by sponsors are
classified as trade accounts receivable -- unbilled.
X-8
<PAGE> 9
THE BIOCLIN GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income taxes:
The BioClin Group accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" (FAS 109).
Under the asset and liability method of FAS 109, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered or
settled. Valuation allowances are established to reduce deferred tax assets if
it is determined to be "more likely than not" that all or some portion of the
potential deferred tax assets will not be realized. Under FAS 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date of the tax rate change.
Foreign currency translation:
The financial statements of the European companies of the BioClin Group
companies are translated into U.S. dollars in accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation."
Substantially all assets and liabilities of the European companies of the
BioClin Group companies are translated at year-end exchange rates and income and
expense items are translated at an average exchange rate. Exchange adjustments
resulting from foreign currency transactions are generally recognized in
operations, whereas adjustments resulting from the translation of financial
statements are reflected as a separate component of stockholders' deficiency.
The BioClin Group does not hedge its currency translation exposure.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Recent accounting pronouncements:
In June 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed Of" (FAS 121), which requires
companies to review long-lived assets and certain identifiable intangibles to be
held, used or disposed of, for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The BioClin Group is required to adopt FAS 121 for 1996. The
BioClin Group believes the adoption of FAS 121 will not have a significant
effect on its combined financial statements.
In October 1995, FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (FAS 123), which is effective
for transactions entered into in fiscal years beginning after December 15, 1995.
As there are no stock options or warrants outstanding, management expects that
the adoption of FAS 123 will not have a significant effect on its combined
financial statements.
(3) MARKETABLE DEBT SECURITIES
Marketable debt securities outstanding at December 31, 1995 and 1994 are
available for sale and are recorded in the accompanying combined balance sheets
at fair value.
X-9
<PAGE> 10
THE BIOCLIN GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(3) MARKETABLE DEBT SECURITIES (CONTINUED)
The amortized cost, gross unrealized holding gains and fair value for
available-for-sale foreign corporate debt securities as of December 31, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
GROSS
UNREALIZED
AMORTIZED HOLDING FAIR
COST GAINS VALUE
--------- ---------- -----
<S> <C> <C> <C>
1995.................................................... $ 856 77 933
==== === ====
1994.................................................... $ 757 78 835
==== === ====
</TABLE>
Maturities of corporate debt securities classified as available-for-sale as
of December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- -----
<S> <C> <C>
1995:
Due within one year.............................................. $ 389 386
Due after one year through five years............................ 467 547
---- ----
$ 856 933
==== ====
1994:
Due within one year.............................................. $ -- --
Due after one year through five years............................ 757 835
---- ----
$ 757 835
==== ====
</TABLE>
(4) TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable as of December 31, 1995 and 1994 consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Trade accounts receivable -- billed................................ $1,731 1,398
Trade accounts receivable -- unbilled.............................. 1,514 1,054
------ ------
$3,245 2,452
====== ======
</TABLE>
(5) PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1995 and 1994 consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Equipment........................................................ $ 1,518 1,364
Furniture and fixtures........................................... 298 330
Leasehold improvements........................................... 59 63
Study facility improvements...................................... 329 302
------- -------
2,204 2,059
Less accumulated depreciation and amortization................... (1,333) (1,096)
------- -------
$ 871 963
======= =======
</TABLE>
X-10
<PAGE> 11
THE BIOCLIN GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(6) SHORT-TERM BORROWINGS
The BioClin Group has line of credit arrangements with domestic and foreign
banks totalling approximately $10,656 and $9,546 as of December 31, 1995 and
1994, respectively. Amounts outstanding under the line of credit arrangements
amounted to approximately $9,834 and $9,589 as of December 31, 1995 and 1994,
respectively, and are personally guaranteed by certain stockholders. The lines
are payable on demand or due in 1996 and bear interest at local bank rates or
LIBOR plus .5% to .75% (resulting in interest rates ranging from 6.47% to 10.25%
as of December 31, 1995, and 6.38% to 12.25% as of December 31, 1994). Certain
lines are collateralized by domestic and foreign standby letters of credit
aggregating approximately $5,477 and $5,344 as of December 31, 1995 and 1994,
respectively. Each letter of credit automatically renews for a one year term
unless the bank notifies the BioClin Group of its plan to terminate within 30
days of expiration.
(7) NOTE PAYABLE -- RELATED PARTY
As of December 31, 1995 and 1994, BioClin Europe owed approximately $326
and $287, respectively, to a relative of an officer and major stockholder in the
BioClin Group. The note payable bears interest at a rate of 6.75% and is
unsecured and due upon demand. Amounts outstanding as of December 31, 1995 and
1994 include accrued interest of approximately $48 and $28, respectively.
(8) ACCRUED EXPENSES
Accrued expenses as of December 31, 1995 and 1994 consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
------ ----
<S> <C> <C>
Income taxes........................................................ $ 382 --
Interest............................................................ 145 --
Investigator payments and contract expenses......................... 1,662 449
Payroll and fringe benefits......................................... 379 179
Professional fees................................................... 126 63
Other............................................................... 408 299
------ ----
$3,102 990
====== ====
</TABLE>
(9) SERIES I REDEEMABLE PREFERRED STOCK
Series I redeemable, 10% noncumulative preferred stock was issued in
December 1988, and is entitled to a preference in involuntary and voluntary
liquidation in an amount equal to the sum of $1,374 plus 10% per annum from the
date of issuance. The Series I redeemable noncumulative preferred stock is also
redeemable at any time at the option of the BioClin U.S. at $1,374 plus 10% per
annum from the date of issuance.
(10) EMPLOYEE BENEFIT PLANS
The BioClin Group maintains a pension plan for its key management employees
in Germany, one of whom is also a major shareholder in the BioClin Group. The
plan provides benefits based upon age, years of service, and remuneration.
Contributions to the plan are discretionary. The plan is an unfunded book
reserve plan. Expenses for this plan totaled approximately $172, $153 and $100
for the years ended December 31, 1995, 1994 and 1993, respectively.
X-11
<PAGE> 12
THE BIOCLIN GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(11) INCOME TAXES
Income tax expense (benefit) attributable to the net loss consists of the
following during the years ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
----- ---- ----
<S> <C> <C> <C>
Current:
U.S. Federal....................................................... $ 32 -- --
State and local.................................................... -- -- --
Foreign............................................................ 326 104 6
----- ---- ---
358 104 6
----- ---- ---
Deferred:
U.S. Federal....................................................... -- -- --
State and local.................................................... -- -- --
Foreign............................................................ (244) (46) 22
----- ---- ---
(244) (46) 22
----- ---- ---
$ 114 58 28
===== ==== ===
</TABLE>
For the years ended December 31, 1995, 1994 and 1993, income tax expense
differed from the amounts computed by applying the U.S. Federal income tax rate
of 34% as a result of the following:
<TABLE>
<CAPTION>
1995 1994 1993
----- ------ ------
<S> <C> <C> <C>
Computed "expected" income tax benefit............................ $ (9) (791) (819)
Increase (decrease) in income taxes resulting from:
Change in the beginning-of-the-year balance of the valuation
allowance for deferred tax assets............................ 342 1,267 1,336
Foreign tax rate differential................................... (413) (333) (520)
Changes in enacted tax rates.................................... -- (124) 115
Alternative minimum taxes....................................... 32 -- --
Other, net...................................................... 162 39 (84)
----- ------ ------
Provision for income taxes.............................. $ 114 58 28
===== ====== ======
</TABLE>
X-12
<PAGE> 13
THE BIOCLIN GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(11) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1994 are presented below:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................... $ 4,615 4,298
Deferred revenue............................................... 613 377
Accrued expenses............................................... 187 120
other.......................................................... 601 395
------- -------
Total gross deferred tax assets........................ 6,016 5,190
Less valuation allowance....................................... (5,932) (5,190)
------- -------
Net deferred tax assets................................ 84 --
------- -------
Deferred tax liabilities:
Other.......................................................... 98 154
------- -------
Total gross deferred liabilities....................... 98 154
------- -------
Net deferred tax liability............................. $ 14 154
======= =======
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1993 was
approximately $5,149. The net change in the total valuation allowance for the
years ended December 31, 1995, 1994 and 1993 was an increase (decrease) of
approximately $742, $1,377 and $(1,336), respectively.
At December 31, 1995, the BioClin Group had net operating loss
carryforwards for Federal, foreign and state income tax purposes of
approximately $3,200, $7,400 and $3,200, respectively. The Federal and state net
operating losses are available to offset future Federal and state taxable
income, if any, through 2009. The foreign net operating losses are available to
offset future foreign taxable income, if any, indefinitely.
(12) RELATED PARTY TRANSACTIONS
An officer and major shareholder in the BioClin Group performed certain
marketing, administrative, and consulting services which aggregated
approximately $26, $84 and $120 in 1995, 1994 and 1993, respectively. These
charges are reflected in selling, general and administrative expenses and direct
costs, according to the nature of the services rendered.
(13) COMMITMENTS AND CONTINGENCIES
The BioClin Group leases its facilities and certain equipment and
automobiles under various noncancellable operating leases. These leases
generally require the BioClin Group to pay insurance, property taxes and other
expenses related to the leased property. Total rental expense charged to
operations aggregated approximately $805, $690 and $661 in 1995, 1994 and 1993,
respectively.
X-13
<PAGE> 14
THE BIOCLIN GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(13) COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum rental commitments subsequent to December 31, 1995 under the
aforementioned operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
----------------------------------------------------
<S> <C>
1996.............................................. $1,003
1997.............................................. 849
1998.............................................. 757
1999.............................................. 706
2000.............................................. 614
------
$3,929
======
</TABLE>
(14) LEGAL PROCEEDINGS
In the ordinary course of business, the BioClin Group is involved in
various legal actions. In the opinion of management, based upon the advice of
counsel, the resolution of these legal matters will not have a material effect
upon the BioClin Group or its financial condition.
In 1995, the Bioclin Group terminated its relationship with the Virginia
Commonwealth University (VCU), which performed Phase I and analytical services
on behalf of the BioClin Group in the United States. The Bioclin Group expects
to sign a settlement agreement with VCU in fiscal year 1996. The settlement may
be significantly less than the recorded liability of approximately $794, which
could result in a substantial book gain to the Bioclin Group. In accordance with
Statement of Financial Accounting Standards No. 5, "Accounting for
Contingencies," the BioClin Group will recognize this gain when, and if,
realized.
(15) BUSINESS SEGMENT AND CUSTOMER INFORMATION
Business segment information:
The BioClin Group operates in two geographic areas. Information on the
Bioclin Group's geographic operations is set forth in the table below:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Net revenues:
Domestic operations......................................... $ 6,859 5,483 5,393
European operations......................................... 7,427 4,176 1,782
------- ------- -------
Total net revenues....................................... $14,286 9,659 7,175
======= ======= =======
Operating income (loss):
Domestic operations......................................... 811 (1,516) (521)
European operations......................................... 107 (256) (1,437)
------- ------- -------
Total operating income (loss)............................ $ 918 (1,772) (1,958)
======= ======= =======
Identifiable assets:
Domestic operations......................................... 1,833 1,831 2,375
European operations......................................... 4,744 3,831 2,042
------- ------- -------
Total identifiable assets................................ $ 6,577 5,662 4,417
======= ======= =======
</TABLE>
X-14
<PAGE> 15
THE BIOCLIN GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(15) BUSINESS SEGMENT AND CUSTOMER INFORMATION (CONTINUED)
Customer information:
For the year ended December 31, 1995 net revenues from 3 customers
aggregated approximately 9,435 or 66% of the BioClin Group's total net revenues.
For the year ended December 31, 1994, net revenues from 2 customers aggregated
approximately $4,004 or 42% of the Bioclin Group's total net revenues. For the
year ended December 31, 1993, net revenues from 2 customers aggregated
approximately $1,038 or 15% of the Bioclin Group's total net revenues.
During 1993, the Bioclin Group entered into a significant contract with a
customer to provide worldwide clinical research and data management services
through its U.S. and European companies. In 1995, the scope of the contract was
expanded significantly in that the number of patients and level of data
management services to be performed was increased, and the contract is scheduled
to extend into future years. This single contract provided the Bioclin Group
with approximately $5,513, $2,940, and $410 in net revenues in 1995, 1994, and
1993, respectively.
As described in note 14, in 1995 the Bioclin Group terminated its
relationship with VCU, which performed Phase I and analytical services on behalf
of the BioClin Group in the United States. The combined statements of operations
include net revenues related to these services in the amount of $3,465, $3,514
and $5,043 in 1995, 1994 and 1993, respectively. Future net revenue related to
these services will be discontinued as a result of terminating this
relationship.
X-15
<PAGE> 16
THE BIOCLIN GROUP
COMBINED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 1,009 1,126
Marketable debt securities........................ 361 386
Trade accounts receivable......................... 3,986 3,245
Prepaid expenses and other current assets......... 378 187
-------- --------
Total current assets........................... 5,734 4,944
Marketable debt securities.......................... 503 547
Property and equipment, net......................... 1,040 871
Other assets........................................ 832 215
-------- --------
Total assets................................... $ 8,109 6,577
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Short-term borrowings............................. 9,683 9,834
Note payable -- related party..................... 300 326
Accounts payable.................................. 1,791 1,073
Accrued expenses.................................. 2,810 3,102
Deferred revenue.................................. 3,472 2,569
-------- --------
Total current liabilities...................... 18,056 16,904
Other liabilities................................. 103 14
-------- --------
Total liabilities.............................. 18,159 16,918
-------- --------
Stockholders' deficiency:
Series I redeemable, noncumulative preferred
stock, BioClin, Inc., par value $.01 per share,
with a liquidation preference in the amount of
$1,374 plus 10% per annum from date of
issuance; authorized, issued and outstanding 91
shares in 1996 and 1995........................ 1 1
Common stock, BioClin, Inc., par value $.01 per
share; authorized 50,000 shares, issued and
outstanding 9 shares in 1996 and 1995.......... -- --
Common stock, BioClin Europe AG, par value SFr500
per share; authorized 100 shares, issued and
outstanding 100 bearer shares in 1996 and
1995........................................... 105 105
Common stock, BioClin Institute of Clinical
Pharmacology GmbH, par value DM100 per share;
authorized 1,500 shares, issued and outstanding
1,500 shares in 1996 and 1995.................. 86 86
Additional paid-in capital........................ 125 125
Foreign currency translation adjustment........... (139) (409)
Employee stock purchase loans..................... (86) (93)
Accumulated deficit............................... (10,219) (10,233)
Net unrealized gain on marketable debt
securities..................................... 77 77
-------- --------
Total stockholders' deficiency................. (10,050) (10,341)
-------- --------
Commitments and contingencies
Total liabilities and stockholders'
deficiency................................... $ 8,109 6,577
======== ========
</TABLE>
See accompanying notes to combined financial statements.
X-16
<PAGE> 17
THE BIOCLIN GROUP
COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1996 1995
------- -------
<S> <C> <C>
Gross revenues........................................................... $13,621 13,256
Less reimbursed costs.................................................... (4,466) (2,224)
-------- --------
Net revenues........................................................ 9,155 11,032
-------- --------
Operating costs and expenses:
Direct costs........................................................... 5,061 7,296
Selling, general and administrative.................................... 3,453 3,112
Depreciation and amortization.......................................... 328 343
-------- --------
8,842 10,751
-------- --------
Income from operations................................................. 313 281
Other income (expense):
Interest income........................................................ 44 65
Interest expense....................................................... (544) (536)
Foreign currency gain (loss), net...................................... 91 (219)
Other.................................................................. 115 (13)
-------- --------
(294) (703)
-------- --------
Income (loss) before income taxes................................... 19 (422)
Income tax expense....................................................... 5 61
-------- --------
Net income (loss)................................................... $ 14 (483)
======== ========
</TABLE>
See accompanying notes to combined financial statements.
X-17
<PAGE> 18
THE BIOCLIN GROUP
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON
SERIES I STOCK, NET
REDEEMABLE, BIOCLIN UNREALIZED
NONCUMULATIVE COMMON INSTITUTE OF FOREIGN EMPLOYEE GAIN ON
PREFERRED COMMON STOCK, CLINICAL ADDITIONAL CURRENCY STOCK MARKETABLE
STOCK, STOCK, BIOCLIN PHARMACOLOGY PAID-IN TRANSLATION PURCHASE ACCUMULATED DEBT
BIOCLIN, INC. BIOCLIN, INC. EUROPE AG GMBH CAPITAL ADJUSTMENT LOANS DEFICIT SECURITIES
------------- ------------- --------- ------------- ---------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December
31, 1995........ $ 1 -- 105 86 125 (409) (93) (10,233) 77
Translation
adjustment..... -- -- -- -- -- 270 -- -- --
Cash received on
employee stock
purchase
loans......... -- -- -- -- -- -- 7 -- --
Net income...... -- -- -- -- -- -- -- 14 --
-- -- -- --
--- --- ----- ---- --------
Balance,
September 30,
1996............ $ 1 -- 105 86 125 (139) (86) (10,219) 77
== == === == === ===== ==== ======== ==
<CAPTION>
TOTAL
STOCKHOLDERS'
DEFICIENCY
-------------
<S> <C>
Balance, December
31, 1995........ (10,341)
Translation
adjustment..... 270
Cash received on
employee stock
purchase
loans......... 7
Net income...... 14
--------
Balance,
September 30,
1996............ (10,050)
========
</TABLE>
See accompanying notes to combined financial statements.
X-18
<PAGE> 19
THE BIOCLIN GROUP
COMBINED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1996 1995
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................................ $ 14 (483)
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities:
Noncash items:
Depreciation and amortization....................................... 328 343
Gain on disposal of assets.......................................... (27) --
Foreign currency transaction (gain) loss............................ (91) 219
Change in operating assets and liabilities:
Increase in trade accounts receivable............................... (920) (575)
Increase in prepaid expenses and other current assets............... (205) (242)
Increase in other assets............................................ (638) (87)
Decrease in accounts payable........................................ 753 26
Increase (decrease) in accrued expenses............................. (177) 1,525
Increase (decrease) in deferred revenues............................ 1,052 (874)
Increase (decrease) in other liabilities............................ 89 (171)
------- -------
- -
Net cash provided by (used in) operating activities................... 178 (319)
------- -------
- -
Cash flows from investing activities:
Purchases of property and equipment...................................... (540) (261)
Proceeds from disposals of property and equipment........................ 34 --
------- -------
- -
Net cash used in investing activities................................. (506) (261)
------- -------
- -
Cash flows from financing activities:
Proceeds from short-term borrowings...................................... 1,389 313
Principal payments on short-term borrowings.............................. (1,102) (433)
Payments received on employee stock purchase loans....................... 7 --
------- -------
- -
Net cash provided by (used in) financing activities................... 294 (120)
------- -------
- -
Effect of exchange rate changes on cash.................................... (83) 42
Net decrease in cash....................................................... (117) (658)
Cash, beginning of period.................................................. 1,126 995
------- -------
- -
Cash, end of period........................................................ $1,009 337
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.............................................................. $ 278 561
Income taxes.......................................................... 67 5
======== ========
Noncash investing and financing activities:
Unrealized gain on marketable debt securities............................ $ 77 72
======== ========
</TABLE>
See accompanying notes to combined financial statements.
X-19
<PAGE> 20
THE BIOCLIN GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
Note 1. BASIS OF PRESENTATION
The combined financial statements of the BioClin Group (the Bioclin Group)
include the accounts of BioClin, Inc. (BioClin U.S.), BioClin Europe AG (BioClin
Europe), BioClin Europe's wholly-owned subsidiaries BioClin AG (BioClin Cham)
and Merlick C.V. (Merlick), BioClin Europe's majority-owned subsidiaries BioClin
GmbH (BioClin Germany), Kilmer N.V. (Kilmer) and BioClin Institute of Clinical
Pharmacology GmbH (BioClin Institute). The accounts have been combined due to
the common ownership of the companies and in contemplation of the proposed
transaction with DNX Corporation which is more fully described in Note 2.
In the opinion of the Bioclin Group's management, the accompanying
unaudited combined financial statements include all significant adjustments
(consisting only of normal recurring adjustments) necessary to fairly state the
Bioclin Group's combined financial position as of September 30, 1996, and the
combined results of operations and cash flows for the nine month periods ended
September 30, 1996 and 1995. The accompanying combined financial statements
should be read in conjunction with the combined financial statements and notes
thereto for the year ended December 31, 1995 included elsewhere herein.
The nine-month interim results are not necessarily indicative of the
results to be expected for the full year.
Note 2. PROPOSED TRANSACTION WITH DNX CORPORATION
On August 19, 1996, DNX Corporation announced that it had entered into
agreements ("Transaction Agreements") providing for the acquisition of all of
the outstanding capital stock of, or equity interest in, the BioClin Group
companies in exchange for 2,632,600 shares of DNX Corporation Common Stock (the
"Proposed Transaction"). The Proposed Transaction has been structured, and the
legal agreements have been drafted, in a manner intended to qualify the Proposed
Transaction for pooling-of-interests accounting treatment. Pursuant to the
Transaction Agreements, the closing of the Proposed Transaction is subject to a
number of conditions including DNX Corporation stockholder approval and
regulatory approvals. The Proposed Transaction is expected to close late in the
fourth quarter of fiscal 1996.
Note 3. CUSTOMER INFORMATION
For the nine months ended September 30, 1996, net revenues from three
customers aggregated approximately $6,408,000 or 70% of the BioClin Group's
total net revenues.
During 1993, the Bioclin Group entered into a significant contract with a
customer to provide worldwide clinical research and data management services
through its U.S. and European companies. In 1995, the scope of the contract was
expanded significantly in that the number of patients and level of data
management services to be performed was increased, and the contract is scheduled
to extend into future years. This single contract provided the Bioclin Group
with approximately $3,975,000 in net revenues for the nine months ended
September 30, 1996.
In 1995, the Bioclin Group terminated its relationship with Virginia
Commonwealth University, which performed Phase I and analytical services on
behalf of the BioClin Group in the United States. The combined statements of
operations include net revenues related to these services in the amount of
approximately $3,369,000 for the nine months ended September 30, 1995. There was
no revenue related to these services in 1996.
X-20
<PAGE> 1
Exhibit 99.3
UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial information
gives effect to the Proposed Transaction, including the issuance by the Company
of 2,632,600 shares of Common Stock in connection with the acquisition by the
Company of all of the outstanding capital stock of, and equity interests in, the
BioClin Group, using the "pooling-of-interests" method of accounting, but
without giving effect to costs and expenses associated with the consummation of
the Proposed Transaction, which currently are estimated to range between $2.0
million and $2.5 million. The unaudited pro forma combined condensed balance
sheet combines the condensed balance sheets of the Company and the BioClin Group
as of September 30, 1996. The unaudited pro forma combined condensed statements
of operations combine historical condensed statements of operations of the
Company and the BioClin Group for the nine month periods ended September 30,
1996 and 1995 and for the years ended December 31, 1995, 1994 and 1993. The
unaudited pro forma combined condensed balance sheet is presented as if the
Proposed Transaction occurred on the date thereof. The unaudited pro forma
combined condensed statements of operations are presented as if the Proposed
Transaction occurred at the beginning of the earliest period presented. The
consummation of the Proposed Transaction is subject to a number of conditions.
There can be no assurance as to when, if at all, the conditions with respect to
the Proposed Transaction will be satisfied or waived. See "TRANSACTION
AGREEMENTS -- Conditions to Closing."
The unaudited pro forma combined condensed financial information is not
necessarily indicative of the results of operations or the financial condition
that would have been reported had the Proposed Transaction been in effect during
those periods, or as of those dates, or that may be reported in the future. The
unaudited pro forma combined condensed financial information should be read in
conjunction with the information appearing in "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and "FINANCIAL
STATEMENTS" for each of the Company and the BioClin Group included elsewhere in
this Proxy Statement.
79
<PAGE> 2
DNX CORPORATION AND SUBSIDIARIES
AND THE BIOCLIN GROUP
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------
PRO
BIOCLIN PRO FORMA FORMA
DNX GROUP ADJUSTMENTS COMBINED
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.................... $ 15,456 1,009 16,465
Short-term investments....................... 5,233 -- 5,233
Marketable debt securities................... -- 361 361
Trade accounts receivable, net............... 7,167 3,986 11,153
Prepaid expenses and other current assets.... 983 378 1,361
-------- -------- ----- --------
Total current assets................. 28,839 5,734 -- 34,573
Property and equipment, net.................... 15,190 1,040 16,230
Intangible assets.............................. 964 -- 964
Marketable debt securities..................... -- 503 503
Other assets................................... 797 832 1,629
Restricted cash................................ 460 -- 460
-------- -------- ----- --------
$ 46,250 8,109 -- 54,359
======== ======== ===== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings........................ -- 9,683 9,683
Current portion of long-term debt............ 246 -- 246
Note payable -- related party................ -- 300 300
Accounts payable............................. 2,455 1,791 4,246
Accrued expenses............................. 3,533 2,810 6,343
Deferred revenues............................ 2,598 3,472 6,070
-------- -------- ----- --------
Total current liabilities............ 8,832 18,056 -- 26,888
Long-term debt, excluding current portion...... 7,431 -- 7,431
Deferred income taxes.......................... 1,779 -- 1,779
Other liabilities.............................. 876 103 979
-------- -------- ----- --------
Total liabilities.................... 18,918 18,159 -- 37,077
-------- -------- ----- --------
Stockholders' equity
Serial preferred stock....................... -- 1 (1) --
Common stock................................. 87 191 (165) 113
Additional paid-in-capital................... 57,157 125 166 57,448
Foreign currency translation adjustment...... 640 (139) 501
Employee stock purchase loans................ -- (86) (86)
Accumulated deficit.......................... (30,552) (10,219) (40,771)
Net unrealized gain on marketable debt
securities................................ -- 77 77
-------- -------- ----- --------
Total stockholders' equity........... 27,332 (10,050) -- 17,282
-------- -------- ----- --------
$ 46,250 8,109 -- 54,359
======== ======== ===== ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
80
<PAGE> 3
DNX CORPORATION AND SUBSIDIARIES
AND THE BIOCLIN GROUP
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------------------
BIOCLIN PRO FORMA PRO FORMA
DNX GROUP ADJUSTMENTS COMBINED
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues...................................... $21,957 9,155 31,112
Operating expenses:
Direct costs.................................... 16,966 5,061 (1,560) 20,467
Research and development........................ 329 -- (4) 325
General, administrative and marketing........... 4,530 3,453 (158) 7,825
Depreciation and amortization................... -- 328 1,722 2,050
------- ------ ------- -------
21,825 8,842 -- 30,667
------- ------ ------- -------
Income from operations............................ 132 313 -- 445
Other income (expense)............................ 618 (294) 324
------- ------ ------- -------
Income before income taxes........................ 750 19 -- 769
Income tax expense................................ 454 5 459
------- ------ ------- -------
Net income........................................ 296 14 -- 310
======= ====== ======= =======
Earnings per common and common equivalent share
Primary...................................... $ 0.03 0.03
======= =======
Fully Diluted................................ $ 0.03 0.03
======= =======
Shares used in computing per share amounts
Primary...................................... 9,287 11,920
======= =======
Fully Diluted................................ 9,343 11,976
======= =======
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
81
<PAGE> 4
DNX CORPORATION AND SUBSIDIARIES
AND THE BIOCLIN GROUP
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1995
-------------------------------------------------
BIOCLIN PRO FORMA PRO FORMA
DNX GROUP ADJUSTMENTS COMBINED
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues...................................... 19,101 11,032 30,133
Operating expenses:
Direct costs.................................... 15,529 7,296 (1,606) 21,219
Research and development........................ 773 -- (29) 744
General, administrative and marketing........... 4,600 3,112 (282) 7,430
Depreciation and amortization................... -- 343 1,917 2,260
------- ------ ------- -------
20,902 10,751 -- 31,653
------- ------ ------- -------
Income (loss) from operations..................... (1,801) 281 -- (1,520)
Other income (expense)............................ 107 (703) (596)
------- ------ ------- -------
Loss before equity in net loss of Nextran, gain on
sale of Nextran and income taxes................ (1,694) (422) -- (2,116)
Equity in net loss of Nextran..................... 2,700 -- 2,700
Gain on sale of Nextran........................... 17,266 -- 17,266
Income tax expense (benefit)...................... (45) 61 16
------- ------ ------- -------
Net income (loss)................................. $12,917 (483) -- 12,434
======= ====== ======= =======
Earnings per common and common equivalent share
Primary......................................... $ 1.43 1.07
======= =======
Fully Diluted................................... $ 1.43 1.06
======= =======
Shares used in computing per share amounts
Primary......................................... 9,018 11,651
======= =======
Fully Diluted................................... 9,056 11,689
======= =======
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
82
<PAGE> 5
DNX CORPORATION AND SUBSIDIARIES
AND THE BIOCLIN GROUP
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------
BIOCLIN PRO FORMA PRO FORMA
DNX GROUP ADJUSTMENTS COMBINED
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues..................................... $25,323 14,286 39,609
Operating expenses:
Direct costs................................... 21,323 8,456 (2,088) 27,691
Research and development....................... 1,095 -- (32) 1,063
General, administrative and marketing.......... 5,506 4,467 (342) 9,631
Depreciation and amortization.................. -- 445 2,462 2,907
------- ------ ------- -------
27,924 13,368 -- 41,292
------- ------ ------- -------
Income (loss) from operations.................... (2,601) 918 -- (1,683)
Other income (expense)........................... 310 (945) (635)
------- ------ ------- -------
Loss before equity in net loss of Nextran, gain
on sale of Nextran and income taxes............ (2,291) (27) -- (2,318)
Equity in net loss of Nextran.................... 2,700 -- 2,700
Gain on sale of Nextran.......................... 17,266 -- 17,266
Income tax expense (benefit)..................... (291) 114 (177)
------- ------ ------- -------
Net income (loss)................................ $12,566 (141) -- 12,425
======= ====== ======= =======
Earnings per common and common equivalent
share.......................................... $ 1.39 1.06
======= =======
Shares used in computing per share amounts....... 9,042 11,675
======= =======
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
83
<PAGE> 6
DNX CORPORATION AND SUBSIDIARIES
AND THE BIOCLIN GROUP
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-------------------------------------------------
BIOCLIN PRO FORMA PRO FORMA
DNX GROUP ADJUSTMENTS COMBINED
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues..................................... $26,529 9,659 36,188
Operating expenses:
Direct costs................................... 19,981 7,528 (2,010) 25,499
Research and development....................... 4,359 -- (419) 3,940
General, administrative and marketing.......... 7,237 3,537 (799) 9,975
Depreciation and amortization.................. -- 366 3,228 3,594
------- ------ ------- -------
31,577 11,431 -- 43,008
------- ------ ------- -------
Loss from operations............................. (5,048) (1,772) -- (6,820)
Other income (expense)........................... 30 (555) (525)
------- ------ ------- -------
Loss before equity in net loss of Nextran and
income taxes................................... (5,018) (2,327) -- (7,345)
Equity in net loss of Nextran.................... 1,329 -- 1,329
Income tax expense............................... 332 58 390
------- ------ ------- -------
Net loss......................................... $(6,679) (2,385) -- (9,064)
======= ====== ======= =======
Loss per common and common equivalent share...... $ (0.76) (0.80)
======= =======
Shares used in computing per share amounts....... 8,755 11,388
======= =======
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
84
<PAGE> 7
DNX CORPORATION AND SUBSIDIARIES
AND THE BIOCLIN GROUP
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
--------------------------------------------------
BIOCLIN PRO FORMA PRO FORMA
DNX GROUP ADJUSTMENTS COMBINED
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues.................................... $ 23,719 7,175 30,894
Operating expenses:
Direct costs.................................. 17,902 6,072 (1,632) 22,342
Research and development...................... 11,134 -- (1,258) 9,876
General, administrative and marketing......... 7,247 2,824 (556) 9,515
Depreciation and amortization................. -- 237 3,446 3,683
Special charge................................ 7,095 -- 7,095
------- ------ ------- -------
43,378 9,133 -- 52,511
------- ------ ------- -------
Loss from operations............................ (19,659) (1,958) -- (21,617)
Other income (expense).......................... 220 (451) (231)
------- ------ ------- -------
Loss before income taxes........................ (19,439) (2,409) -- (21,848)
Income tax expense (benefit).................... (50) 28 (22)
------- ------ ------- -------
Net loss........................................ $(19,389) (2,437) -- (21,826)
======= ====== ======= =======
Loss per common and common equivalent share..... $ (2.23) (1.93)
======= =======
Shares used in computing per share amounts...... 8,700 11,333
======= =======
</TABLE>
See Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
85
<PAGE> 8
DNX CORPORATION AND SUBSIDIARIES
AND THE BIOCLIN GROUP
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(1) PRO FORMA ADJUSTMENTS
The pro forma stockholders' equity accounts of the Company and the BioClin
Group as of September 30, 1996 have been adjusted to reflect the issuance by the
Company of 2,632,600 shares of Common Stock in connection with the acquisition
by the Company of all of the outstanding capital stock of, and equity interests
in, the BioClin Group pursuant to the Transaction Agreements.
The historical statements of operations of the Company reflect depreciation
and amortization in direct costs, research and development and general,
administrative and marketing expenses, as appropriate. The historical statements
of operations of the BioClin Group reflect depreciation and amortization as a
separate line item. The pro forma combined condensed statements of operations
reflect a pro forma adjustment to reclassify the Company's depreciation and
amortization previously reported in direct costs, research and development and
general, administrative and marketing expenses to a separate line item,
consistent with CRO industry standards.
The unaudited pro forma data are presented for information purposes only
and do not give effect to any synergies that may occur due to the integration of
the BioClin Group with the Company's existing operations. Additionally, the
adjustments to the unaudited pro forma combined condensed statements of
operations do not include costs and expenses associated with the Proposed
Transaction which are currently estimated to range between $2.0 million and $2.5
million. Accordingly, the pro forma data are not necessarily indicative of the
operating results or financial position that would have occurred had the
Proposed Transaction been consummated at the dates indicated, nor necessarily
indicative of future operating results or financial position.
(2) PRO FORMA PER SHARE DATA
The unaudited pro forma per share data are based on the weighted average
number of shares of Common Stock that would have been outstanding had the
Proposed Transaction occurred at the beginning of the earliest period presented,
including the issuance by the Company of 2,632,600 shares of Common Stock in
connection with the acquisition by the Company of all of the outstanding capital
stock of, and equity interests in, the BioClin Group pursuant to the Transaction
Agreements.
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