<PAGE> 1
As filed with the Securities and Exchange Commission on November 25, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 18, 1998
CHRYSALIS INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-19659 22-2877973
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification Number)
incorporation)
575 Route 28
Raritan, New Jersey 08869
(Address of Principal Executive Offices) (Zip Code)
(908) 722-7900
(Registrant's Telephone Number, including Area Code)
<PAGE> 2
Item 5. Other Information
- ------- -----------------
On November 18, 1998, Chrysalis International Corporation, a
Delaware corporation ("Chrysalis"), announced that it had executed a definitive
Agreement and Plan of Merger (the "Merger Agreement") with Phoenix International
Life Sciences Inc., a corporation constituted under the laws of Canada
("Phoenix"). In accordance with the terms of the Merger Agreement, Phoenix will
acquire Chrysalis pursuant to a merger of one of Phoenix's wholly-owned
subsidiaries with and into Chrysalis (the "Merger"). Pursuant to the Merger,
Chrysalis stockholders will receive, for each share of Common Stock, par value
$.01 per share, of Chrysalis ("Common Stock"), consideration equal to
approximately $0.71, based on shares of Common Stock and options to purchase
shares of Common Stock outstanding on September 30, 1998. The actual per share
consideration will be calculated by dividing $8.29 million by the number of
outstanding shares of Common Stock on the date immediately prior to the Merger
and the number of shares of Common Stock subject to options having an exercise
price less than $0.71. Phoenix has agreed to apply for listing of its common
shares on The Nasdaq Stock Market's National Market System. If such listing
approval is received within the time frame specified in the Merger Agreement,
then the merger consideration will consist of Phoenix common shares (valued as
set forth in the Merger Agreement). If such approval is not received within the
time frame specified in the Merger Agreement, then the merger consideration will
be paid in cash. Consummation of the Merger Agreement is subject to receipt of
necessary regulatory approvals (including the expiration or termination of the
waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended), receipt of the approval of Chrysalis'
stockholders and satisfaction of certain other closing conditions, some of which
are beyond the parties' control. Chrysalis anticipates that the Merger Agreement
will be submitted to Chrysalis' stockholders for their approval in the first
quarter of 1999. A copy of Chrysalis' press release announcing the execution of
the Merger Agreement is filed herewith as Exhibit 99.1 and is incorporated
herein by reference. A copy of the Merger Agreement is filed herewith as Exhibit
2.1 and is incorporated herein by reference.
Certain stockholders of Chrysalis holding in the aggregate
approximately 13.9% of the outstanding shares of Common Stock and options to
purchase an additional 1,277,000 shares of Common Stock (based on September 30,
1998 data) have entered into support/voting agreements with Phoenix pursuant to
which, among other things, such stockholders have agreed to vote their shares of
Common Stock in favor of the approval and adoption of the Merger Agreement. A
form of the support/voting agreement is filed herewith as Exhibit 99.2 hereto
and is incorporated herein by reference.
As reported in Chrysalis' Form 10-Q for the fiscal quarter
ended September 30, 1998, as of such date, Chrysalis was in default under its
senior secured term loan. In connection with the execution of the Merger
Agreement, Chrysalis and the lender executed a forbearance agreement pursuant to
which the lender has agreed not to exercise its rights and remedies with respect
to such defaults until March 31, 1999 unless the Company breaches another
provision of the loan agreement or a material breach of the Merger Agreement
occurs. In connection with the forbearance agreement, Phoenix delivered to the
lender a guaranty of Chrysalis' debt to such lender and a pledge of cash
collateral to secure such guaranty and obtained an option to purchase Chrysalis'
debt to such lender. A copy of the forbearance agreement is filed herewith as
Exhibit 99.3 and is incorporated herein by reference.
2
<PAGE> 3
In connection with entering into the Merger Agreement,
Chrysalis amended its Rights Agreement, dated July 1, 1998, between Chrysalis
and American Stock Transfer & Trust Company, as Rights Agent to make the
provisions of the Rights Agreement inapplicable to the execution of the Merger
Agreement and the consummation of the Merger and other transactions contemplated
by the Merger Agreement, in each case in accordance with the terms of the Merger
Agreement. The Amendment to the Rights Agreement, dated as of November 18, 1998,
between Chrysalis and American Stock Transfer & Trust Company, as Rights Agent,
is filed herewith as Exhibit 4.1 hereto and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- --------------------------------------------------------------------------
The following exhibits are filed as part of this report:
2.1 Agreement and Plan of Merger, dated as of November 18, 1999, by and
among Chrysalis, Phoenix and Phoenix Merger Sub Corp.
4.1 Amendment to Rights Agreement dated as of November 18, 1998 between
Chrysalis and American Stock Transfer & Trust Company, as Rights Agent.
99.1 Press Release
99.2 Form of Support/Voting Agreement, dated as of November 18, 1998, by and
between Phoenix on the one hand, and the following stockholders of
Chrysalis: Jack Barbut, John G. Cooper, J. Chris Jensen, Lief Modeweg,
Desmond H. O'Connell, Photios Paulson, Paul J.
Schmitt, Barry M. Sherman, and W. Leigh Thompson.
99.3 Forbearance Agreement, dated as of November 18, 1998, by and among
Chrysalis, its subsidiaries named therein and First Union National
Bank.
3
<PAGE> 4
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, Chrysalis has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned thereunto duly authorized.
CHRYSALIS INTERNATIONAL CORPORATION
By /s/ John G. Cooper
--------------------------
John G. Cooper
Date: November 25, 1998
4
<PAGE> 5
EXHIBIT INDEX
-------------
Number Exhibit
- ------ -------
2.1 Agreement and Plan of Merger, dated as of November 18, 1999, by and
among Chrysalis, Phoenix and Phoenix Merger Sub Corp.
4.1 Amendment to Rights Agreement dated as of November 18, 1998 between
Chrysalis and American Stock Transfer & Trust Company, as Rights Agent.
99.1 Press Release
99.2 Form of Support/Voting Agreement, dated as of November 18, 1998, by and
between Phoenix on the one hand, and the following stockholders of
Chrysalis: Jack Barbut, John G. Cooper, J. Chris Jensen, Lief Modeweg,
Desmond H. O'Connell, Photios Paulson, Paul J. Schmitt, Barry M.
Sherman, and W. Leigh Thompson.
99.3 Forbearance Agreement, dated as of November 18, 1998, by and among
Chrysalis, its subsidiaries named therein and First Union National
Bank.
5
<PAGE> 1
EXHIBIT 2.1
-----------
================================================================================
AGREEMENT AND PLAN OF MERGER
dated as of
November 18, 1998
among
PHOENIX INTERNATIONAL LIFE SCIENCES INC.
CHRYSALIS INTERNATIONAL CORPORATION
and
PHOENIX MERGER SUB CORP.
<PAGE> 2
TABLE OF CONTENTS
----------
<TABLE>
PAGE
----
<S> <C>
ARTICLE 1...............................................................................................................1
THE MERGER.....................................................................................................1
Section 1.01 Merger............................................................................................1
Section 1.02 Surrender and Payment.............................................................................2
Section 1.03 The Merger Date...................................................................................4
Section 1.04 Stock Options and Warrants of the Company.........................................................4
Section 1.05 Adjustments.......................................................................................6
Section 1.06 Fractional Shares.................................................................................6
Section 1.07 Failure to Obtain Approval for Listing; Cash Merger Consideration.................................7
Section 1.08 Dissenting Shares.................................................................................8
Section 1.09 Purchase Price; Exchange Ratio; Valuation of Buyer Common Stock...................................8
ARTICLE 2...............................................................................................................9
THE SURVIVING CORPORATION......................................................................................9
Section 2.01 Certificate of Incorporation; Bylaws..............................................................9
Section 2.02 Directors and Officers............................................................................9
Section 2.03 Subscription.....................................................................................10
ARTICLE 3..............................................................................................................10
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................................10
Section 3.01 Corporate Existence and Power....................................................................10
Section 3.02 Corporate Authorization..........................................................................10
Section 3.03 Governmental Authorization.......................................................................11
Section 3.04 Non-Contravention................................................................................12
Section 3.05 Capitalization...................................................................................12
Section 3.06 Subsidiaries.....................................................................................13
Section 3.07 SEC Filings......................................................................................14
Section 3.08 Financial Statements.............................................................................14
Section 3.09 Disclosure Documents.............................................................................15
Section 3.10 Information Supplied.............................................................................15
Section 3.11 Absence of Certain Changes.......................................................................16
Section 3.12 No Undisclosed Material Liabilities..............................................................17
Section 3.13 Litigation; Investigations; Orders and Decrees...................................................17
Section 3.14 Taxes............................................................................................18
Section 3.15 ERISA and Labor Matters..........................................................................19
Section 3.16 Compliance with Laws.............................................................................21
Section 3.17 Intellectual Property Rights.....................................................................22
Section 3.18 Environmental Matters............................................................................24
Section 3.19 Opinion of Financial Advisor.....................................................................26
</TABLE>
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<TABLE>
<S> <C>
Section 3.20 Antitakeover Statutes and Certificate of Incorporation Provisions................................26
Section 3.21 Rights Agreement.................................................................................26
Section 3.22 Finders Fees.....................................................................................26
Section 3.23 Title to and Condition of Properties.............................................................27
Section 3.24 Contracts........................................................................................27
Section 3.25 Accounts Receivable..............................................................................28
Section 3.26 Relationships....................................................................................28
Section 3.27 Product Warranties and Liabilities...............................................................28
Section 3.28 Affiliate Transactions. .........................................................................28
Section 3.29 Insurance........................................................................................29
ARTICLE 4..............................................................................................................29
REPRESENTATIONS AND WARRANTIES OF BUYER.......................................................................29
Section 4.01 Corporate Existence and Power. ..................................................................29
Section 4.02 Corporate Authorization..........................................................................30
Section 4.03 Governmental Authorization.......................................................................30
Section 4.04 Non-Contravention................................................................................30
Section 4.05 Capitalization...................................................................................30
Section 4.06 Public Filings...................................................................................31
Section 4.07 Financial Statements.............................................................................31
Section 4.08 Disclosure Documents.............................................................................31
Section 4.09 Information Supplied.............................................................................32
Section 4.10 Absence of Certain Changes.......................................................................32
Section 4.11 No Undisclosed Material Liabilities..............................................................33
Section 4.12 Ownership of Company Stock.......................................................................33
Section 4.13 Finders Fees.....................................................................................33
Section 4.14 Sufficient Cash to Repay Certain Debt............................................................34
ARTICLE 5..............................................................................................................34
COVENANTS OF THE COMPANY......................................................................................34
Section 5.01 Conduct of the Company...........................................................................34
Section 5.02 Stockholder Meeting; Proxy Materials.............................................................38
Section 5.03 Other Offers.....................................................................................38
Section 5.04 Shut-Downs.......................................................................................39
Section 5.05 Intellectual Property Matters....................................................................40
Section 5.06 Notice of Prepayment.............................................................................40
Section 5.07 Shared Services..................................................................................40
Section 5.08 Hackel Affiliate Letter and Support/Voting Agreement.............................................40
ARTICLE 6..............................................................................................................40
COVENANTS OF BUYER............................................................................................40
Section 6.01 Conduct of Buyer.................................................................................40
Section 6.02 Listing of Stock.................................................................................41
Section 6.03 Repayment of Certain Debt........................................................................41
Section 6.04 Financing........................................................................................41
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 7..............................................................................................................41
COVENANTS OF BUYER AND THE COMPANY............................................................................41
Section 7.01 Commercially Reasonable Efforts..................................................................41
Section 7.02 Cooperation......................................................................................41
Section 7.03 Public Announcements.............................................................................42
Section 7.04 Access to Information............................................................................42
Section 7.05 Further Assurances...............................................................................43
Section 7.06 Notices of Certain Events........................................................................43
Section 7.07 Director and Officer Liability...................................................................44
Section 7.08 Registration Statement...........................................................................45
Section 7.09 Governmental Authorization.......................................................................45
Section 7.10 Certain Corporate Matters........................................................................45
Section 7.11 Employment.......................................................................................45
ARTICLE 8..............................................................................................................45
CONDITIONS TO THE MERGER......................................................................................45
Section 8.01 Conditions to the Obligations of Each Party......................................................45
Section 8.02 Conditions to the Obligations of Buyer...........................................................46
Section 8.03 Conditions to the Obligations of the Company.....................................................47
ARTICLE 9..............................................................................................................48
TERMINATION...................................................................................................48
Section 9.01 Termination......................................................................................48
Section 9.02 Effect of Termination............................................................................49
Section 9.03 Termination Upon Bankruptcy......................................................................49
ARTICLE 10.............................................................................................................50
MISCELLANEOUS.................................................................................................50
Section 10.01 Notices.........................................................................................50
Section 10.02 Entire Agreement; Non-Survival of Representations and Warranties; No
Third Party Beneficiaries.......................................................................52
Section 10.03 Amendments; No Waivers..........................................................................52
Section 10.04 Expenses........................................................................................52
Section 10.05 Dollar Amounts..................................................................................53
Section 10.06 Successors and Assigns..........................................................................53
Section 10.07 Governing Law...................................................................................53
Section 10.08 Jurisdiction....................................................................................53
Section 10.09 Counterparts; Effectiveness.....................................................................53
Section 10.10 Relief from Automatic Stay. ...................................................................54
EXHIBITS
EXHIBIT A - Form of Support/Voting Agreement
EXHIBIT B - Form of Affiliate Letter
EXHIBIT C - Form of Representation Related to D&O Insurance
</TABLE>
iii
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================================================================================
TABLE OF DEFINITIONS
TERM SECTION
- ---- -------
191 Patent........................................................3.17
1933 Act..........................................................3.03
1934 Act..........................................................3.03
Acquisition Proposal..............................................5.03
Action............................................................3.13
Adjusted Option...................................................1.04(a)(i)
Adjusted Warrant..................................................1.04(a)(i)
Affiliate.........................................................1.01(b)
Affiliate Letter..................................................3.02(c)
Applicable Laws...................................................3.16(a)
Barbut Agreement..................................................3.02(a)
Benefit Arrangements..............................................3.15(d)
Buyer.............................................................Preamble
Buyer Balance Sheet...............................................4.07
Buyer Balance Sheet Date..........................................4.07
Buyer Common Stock ...............................................1.01(b)(ii)
Buyer Disclosure Documents........................................4.08(a)
Buyer Disclosure Schedule.........................................Article 4
Buyer Option Plan.................................................1.04(c)
Buyer Party.......................................................4.02
Buyer Preferred Stock.............................................4.05
Buyer Prospectus..................................................4.08(b)
Buyer Public Documents............................................4.06
Buyer SEC Disclosure Documents....................................4.08(a)
Buyer Common Stock................................................1.01(b)(ii)
Canadian GAAP.....................................................4.07
Canadian Securities Commission....................................4.06
Certificate of Merger.............................................1.03
Chrysalis DNX.....................................................3.13
Claim.............................................................7.07(a)
Code..............................................................1.04(b)
Company...........................................................Preamble
Company 10-K......................................................3.07
Company 10-Qs.....................................................3.07
Company Balance Sheet.............................................3.08
Company Balance Sheet Date........................................3.08
i
<PAGE> 6
Company Disclosure Documents......................................3.09(a)
Company Disclosure Schedule.......................................Article 3
Company Proxy Statement...........................................3.09(a)
Company SEC Documents.............................................3.07
Company Securities................................................3.05
Company Stockholder Meeting.......................................5.02(a)
Company Stock.....................................................1.01(b)(i)
Company Stock Options.............................................1.04(a)(i)
Company Stock Plans...............................................1.04(a)(i)
Company Subsidiary Securities.....................................3.06(b)
Company Warrants..................................................1.04(a)(i)
Confidentiality Agreement.........................................5.03
Contract..........................................................3.24
Costs.............................................................9.02
DEA...............................................................3.16(a)
D&O Insurance.....................................................7.08(c)
Delaware Law......................................................1.03
EMEA..............................................................3.16(a)
Employee Plans....................................................3.15(a)
Environmental Laws................................................3.18(f)(i)
Environmental Permits.............................................3.18(f)(ii)
ERISA.............................................................3.15(a)
ERISA Affiliate...................................................3.15(a)
Excess Shares.....................................................1.06
Exchange Agent....................................................1.02(a)
Exchange Ratio....................................................1.09(b)
FDA...............................................................3.16(a)
FDCA..............................................................3.16(b)
First Union.......................................................5.06
First Union Agreements............................................5.06
Forbearance Agreement.............................................3.02(a)
Form F-4..........................................................4.08(a)
Governmental Authority............................................3.03
Hazardous Substance...............................................3.18(f)(iii)
HSR Act...........................................................3.03
Iffa..............................................................5.07
Indemnified Party.................................................7.07(a)
Intellectual Property.............................................3.17(a)
Lien..............................................................3.04
Listing Failure...................................................1.07
Listing Period....................................................1.07
MDS Amendment.....................................................3.02(a)
MDS Note..........................................................6.03
Material Adverse Effect...........................................3.01
Material Insolvency Event.........................................9.03(b)
ii
<PAGE> 7
TERM SECTION
- ---- -------
Merger............................................................1.01(a)
Merger Consideration..............................................1.01(b)(ii)
or 1.07(a)
Merger Date.......................................................1.03
Merger Sub........................................................Preamble
Merger Sub Common Stock...........................................1.02(b)(iii)
NMS...............................................................6.02
Nasdaq............................................................1.06
Nasdaq Letter.....................................................1.07
Organizational Documents..........................................4.01
Pension Plans.....................................................3.15(a)
Person............................................................1.01(b)
Pre-Merger Matters................................................7.08(a)
Product Liability.................................................3.27
Providing Party...................................................7.04
Purchase Price....................................................1.09(a)
Receiving Party...................................................7.04
Regulation S-X....................................................3.11(i)
Required Stockholder Vote.........................................3.02(a)
Rights Agreement..................................................3.21(a)
SEC...............................................................3.07
Shut-Downs........................................................5.04
Subscription Stock................................................2.03
Subsequent Buyer Public Documents.................................4.06
Subsequent Company SEC Documents..................................3.07
Subsidiary........................................................1.01(b)
Superior Proposal.................................................5.03
Support/Voting Agreement..........................................3.02(c)
Surviving Corporation.............................................1.01(a)
Surviving Corporation Common Stock................................1.01(b)(iii)
Tax Return........................................................3.14(b)
Taxes.............................................................3.14(b)
Taxing Authorities................................................3.14(b)
USDA..............................................................3.16(a)
US GAAP...........................................................3.08
iii
<PAGE> 8
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 18, 1998, among
Phoenix International Life Sciences Inc., a corporation constituted under the
laws of Canada ("BUYER"), Chrysalis International Corporation, a Delaware
corporation (the "COMPANY"), and Phoenix Merger Sub Corp., a Delaware
corporation and a wholly-owned subsidiary of Buyer ("MERGER SUB"). The parties
intend that the Merger (as defined herein) be the adoption of a plan of
reorganization qualifying under Section 368(a) of the Code (as defined herein).
The parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.01. MERGER. (a) Upon the terms and subject to the conditions
set forth herein, on the Merger Date, Merger Sub shall merge into the Company
(the "MERGER") and the separate existence of Merger Sub shall cease. The Company
shall be the surviving corporation in the Merger (hereinafter sometimes referred
to as the "SURVIVING CORPORATION") and its separate corporate existence, with
all its purposes, objects, rights, privileges, powers and franchises, shall
continue unaffected and unimpaired by the Merger.
(b) Pursuant to the Merger:
(i) Each share of common stock, $.01 par value, of
the Company (the "COMPANY STOCK") held by the Company or any
Subsidiary of the Company as treasury stock or by Buyer, in
each case immediately prior to the Merger Date, shall be
canceled and no payment shall be made with respect thereto;
(ii) Subject to Section 1.07, each share of Company
Stock outstanding immediately prior to the Merger Date shall,
except as otherwise provided in Section 1.01(b)(i), be
converted into the right to receive a number of common shares
of Buyer ("BUYER COMMON STOCK") equal to the Exchange Ratio
(the "MERGER CONSIDERATION") (determined in accordance with
Section 1.09(b)); and
(iii) At the Merger Date, each share of common stock,
par value $0.01 per share, of Merger Sub ("MERGER SUB COMMON
STOCK") outstanding immediately prior to the Merger Date shall
be converted into an equal number of shares of common stock,
par value $.01 per share, of the Surviving Corporation
("SURVIVING CORPORATION COMMON STOCK").
From and after the Merger Date, all shares of Company Stock converted in
accordance with Section 1.01(b)(ii) shall no longer be outstanding and shall
automatically be canceled and retired
<PAGE> 9
and shall cease to exist, and each holder of such shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration, the right to exercise appraisal rights in accordance with and
subject to the provisions of the Delaware Law if Section 1.08 is applicable and
the other rights specified in this Agreement. From and after the Merger Date,
all certificates representing Merger Sub Common Stock shall be deemed for all
purposes to represent the number of shares of Surviving Corporation Common Stock
into which they were converted in accordance with Section 1.01(b)(iii). For
purposes of this Agreement, "SUBSIDIARY", when used with respect to any Person,
means any other Person, whether incorporated or unincorporated, of which
securities or other ownership interests having ordinary power to elect a
majority of the board of directors or other persons performing similar functions
are directly or indirectly owned or controlled by such Person or by any one or
more of its Subsidiaries. For purposes of this Agreement, "PERSON" means an
individual, a corporation, a limited liability company, a partnership (general
or limited), an association, a trust or any other entity or organization,
including, without limitation, a government or political subdivision or any
agency or instrumentality thereof. For purposes of this Agreement, an
"AFFILIATE", when used with respect to any Person, means any other Person who
is, or is deemed to be, an affiliate of such Person within the meaning of the
1933 Act.
SECTION 1.02. SURRENDER AND PAYMENT. (a) Prior to the Merger Date,
Buyer shall appoint an agent reasonably satisfactory to the Company (the
"EXCHANGE AGENT") for the purpose of exchanging certificates representing shares
of Company Stock for the Merger Consideration. Buyer will make available to the
Exchange Agent, as needed, certificates representing the Buyer Common Stock (or,
if a Listing Failure occurs, United States Dollars) in respect of the Merger
Consideration to be paid in respect of shares of Company Stock, in accordance
with the terms of Section 1.01(b), together with any Excess Shares (as defined
below). The Exchange Agent shall invest any cash amounts delivered by Buyer to
the Exchange Agent as directed by Buyer. Any interest and other income resulting
from such investments shall be paid to Buyer pursuant to Section 1.02(e).
Promptly after the Merger Date, Buyer shall send, or shall cause the Exchange
Agent to send, to each holder of shares of Company Stock whose shares were
converted into a right to receive the Merger Consideration in accordance with
Section 1.01(b)(ii) at the Merger Date a letter of transmittal for use in such
exchange (which shall specify that delivery of the Merger Consideration shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
the certificates representing shares of Company Stock, to the Exchange Agent).
(b) Each holder of shares of Company Stock that have been converted
into a right to receive the Merger Consideration, upon surrender to the Exchange
Agent of a certificate or certificates representing such shares of Company
Stock, together with a properly completed letter of transmittal covering such
shares of Company Stock, will be entitled to receive (i) the Merger
Consideration payable in respect of such shares of Company Stock, (ii) subject
to Section 1.07, cash in lieu of any fractional shares pursuant to Section 1.06
and (iii) subject to Section 1.07,
2
<PAGE> 10
certain dividends or other distributions in accordance with Section 1.02(g).
Until so surrendered, each such certificate shall, after the Merger Date,
represent for all purposes only the right to receive (i) the Merger
Consideration, (ii) subject to Section 1.07, cash in lieu of any fractional
shares pursuant to Section 1.06 and (iii) subject to Section 1.07, certain
dividends or other distributions in accordance with Section 1.02(g). All Buyer
Common Stock issued and/or cash paid pursuant to this Article 1 upon surrender
of certificates representing shares of Company Stock shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Stock represented thereby.
(c) If any portion of the Merger Consideration is to be paid to a
Person other than the registered holder of the shares of Company Stock
represented by the certificate or certificates surrendered in exchange therefor,
it shall be a condition to such payment that the certificate or certificates so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the Person requesting such payment shall pay to the Exchange
Agent any transfer or other taxes required as a result of such payment to a
Person other than the registered holder of such shares of Company Stock or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(d) After the Merger Date, there shall be no further registration of
transfers of shares of Company Stock. If, after the Merger Date, certificates
representing shares of Company Stock are presented to the Surviving Corporation,
they shall be canceled and exchanged for the consideration provided for, and in
accordance with the procedures set forth, in this Article 1.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 1.02(a) that remains unclaimed by the holders
of shares of Company Stock twelve months after the Merger Date shall be returned
to Buyer, upon demand, and any such holder who has not exchanged his shares of
Company Stock for the Merger Consideration in accordance with this Section 1.02
prior to that time shall thereafter look only to Buyer for his claim for (i)
Merger Consideration, (ii) subject to Section 1.07, any cash in lieu of any
fractional shares pursuant to Section 1.06 and (iii) subject to Section 1.07,
certain dividends or other distributions in accordance with Section 1.02(g).
Notwithstanding the foregoing, Buyer shall not be liable to any holder of shares
of Company Stock for any amount paid to a public official pursuant to applicable
escheat or abandoned property laws. Any amounts remaining unclaimed by holders
of shares of Company Stock two years after the Merger Date (or such earlier date
immediately prior to such time as such amounts would otherwise escheat to or
become property of any governmental entity) shall, to the extent permitted by
applicable law, become the property of Buyer free and clear of any claim or
interest of any Person previously entitled thereto.
(f) If a Listing Failure occurs, any portion of the Merger
Consideration made available to the Exchange Agent pursuant to Section 1.02(a)
to pay for shares of Company Stock in respect of which appraisal rights have
been perfected shall be returned to Buyer, upon demand.
3
<PAGE> 11
(g) No dividends or other distributions with respect to the Buyer
Common Stock constituting all or a portion of the Merger Consideration shall be
paid to the holder of any unsurrendered certificate representing Company Stock
until such certificates are surrendered as provided in this Section 1.02.
Subject to the effect of applicable laws and Section 1.07, following such
surrender, there shall be paid, without interest, to the record holder of the
certificates representing the Buyer Common Stock (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Merger Date payable prior to or on the date of such surrender with
respect to such whole shares of Buyer Common Stock, and not paid, and the amount
of cash payable in lieu of any fractional shares pursuant to Section 1.06, less
the amount of any withholding taxes which may be required thereon under any
provision of federal, state, local or foreign tax law, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Merger Date but prior to the date of surrender and a
payment date subsequent to the date of surrender payable with respect to such
whole shares of Buyer Common Stock, less the amount of any withholding taxes
which may be required thereon under any provision of federal, state, local or
foreign tax law. Buyer shall make available to the Exchange Agent cash for these
purposes.
(h) If any certificate representing Company Stock that was converted
into a right to receive the Merger Consideration in accordance with Section
1.01(b)(ii) shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed and, if required by Buyer, the posting by such Person of a
bond in such reasonable amount as Buyer may direct as indemnity against any
claim that may be made against it with respect to such certificate, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed certificate (i)
the Merger Consideration, (ii) subject to Section 1.07, cash in lieu of any
fractional shares pursuant to Section 1.06, and (iii) subject to Section 1.07
and if applicable, any unpaid dividends and distributions on shares of Buyer
Common Stock deliverable in respect thereof in accordance with Section 1.02(g).
SECTION 1.03. THE MERGER DATE. As soon as practicable (but in no event
more than two business days) after the satisfaction or, to the extent permitted
hereunder or under applicable law, waiver of all conditions to the Merger, (a)
Merger Sub and the Company shall file a copy of this Agreement (or, to the
extent permitted by the Delaware General Corporation Law ("DELAWARE LAW"), a
Certificate of Merger) (the "CERTIFICATE OF MERGER") with the Delaware Secretary
of State and make all other filings or recordings required by the Delaware Law
in connection with the Merger, and (b) the Merger shall become effective at such
time as the Certificate of Merger is duly filed with the Secretary of State, or
at such later date or time as Buyer and the Company shall agree and shall be
specified in the Certificate of Merger (such time and date are referred to as
the "MERGER DATE").
SECTION 1.04. STOCK OPTIONS AND WARRANTS OF THE COMPANY. (a) As soon as
practicable following the date of this Agreement, the Board of Directors of the
Company (or, if appropriate,
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any committee of the Board of Directors administering the Company Stock Plans,
as defined below) shall adopt such resolutions or take such other actions as may
be required to effect the following:
(i) adjust the terms of all outstanding options to purchase
shares of Company Stock (the "COMPANY STOCK OPTIONS") granted under any
plan or arrangement providing for the grant of options to purchase
shares of Company Stock to current or former officers, directors,
employees or consultants of the Company (the "COMPANY STOCK PLANS"),
whether vested or unvested, and all outstanding warrants to purchase
shares of Company Stock (the "COMPANY WARRANTS"), whether vested or
unvested, as necessary to provide that, at the Merger Date, each
Company Stock Option and Company Warrants outstanding immediately prior
to the Merger Date shall be amended and converted into an option or
warrant, as the case may be, to acquire, on the same terms and
conditions as were applicable under the Company Stock Option or Company
Warrant, as the case may be, the number of shares of Buyer Common Stock
(rounded down to the nearest whole share) determined by multiplying the
number of shares of Company Stock subject to such Company Stock Option
or Company Warrant by the Exchange Ratio, at a price per share of Buyer
Common Stock equal to (A) the aggregate exercise price for the shares
of Company Stock otherwise purchasable pursuant to such Company Stock
Option or Company Warrant divided by (B) the aggregate number of shares
of Buyer Common Stock deemed purchasable pursuant to such Company Stock
Option (each, as so adjusted, an "ADJUSTED OPTION") or Company Warrant
(each as so adjusted, an "ADJUSTED WARRANT"); provided that such
exercise price shall be rounded up to the nearest whole cent; and
(ii) make such other changes to the Company Stock Plans,
Company Stock Options and Company Warrants as Buyer and the Company may
agree are appropriate solely to give effect to the Merger.
(b) Notwithstanding Section 1.04(a), the adjustments provided in
Section 1.04(a) with respect to any Company Stock Options that are "incentive
stock options" as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "CODE") shall be and are intended to be effected in a manner
which is consistent, to the extent permitted by applicable law, with Section
424(a) of the Code.
(c) Prior to the Merger Date, Buyer shall amend its option plan to
provide, or shall adopt an option plan which shall provide (in each case, the
"BUYER OPTION PLAN"), for the issuance of the Adjusted Options at the Merger
Date and by virtue of the Merger and without the need of any further corporate
action, Buyer shall assume all obligations of the Company under the Company
Stock Plans, including with respect to the Company Stock Options outstanding at
the Merger Date.
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(d) Within two (2) business days after the Merger Date, Buyer shall
prepare and file with the SEC a registration statement on Form S-8 (or another
appropriate form) registering a number of shares of Buyer Common Stock equal to
the number of shares subject to the Adjusted Options. Such registration
statement shall be kept effective (and the current status of the initial
offering prospectus or prospectuses required thereby shall be maintained) at
least for so long as any Adjusted Options may remain outstanding.
(e) As soon as practicable after the Merger Date, Buyer shall deliver
to the holders of Company Stock Options appropriate notices setting forth such
holders' rights pursuant to the respective Company Stock Plans and the
agreements evidencing the grants of such Company Stock Options and that such
Company Stock Options and agreements shall be assumed by Buyer and shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 1.04 after giving effect to the Merger).
(f) A holder of an Adjusted Option may exercise such Adjusted Option in
accordance with its terms.
(g) Buyer shall issue the Adjusted Warrants, if any, at the Merger Date
and by virtue of the Merger and without the need for any further corporate
action, Buyer shall assume all obligations of the Company under any Company
Warrant outstanding at the Merger Date.
(h) As soon as practicable after the Merger Date, Buyer shall deliver
to any holders of Company Warrants, upon due surrender of the Company Warrants,
warrants evidencing the Assumed Warrants.
(i) Except to the extent required under the respective terms of the
Company Stock Options or Company Warrants or other applicable agreements, all
restrictions or limitations on transfer and vesting with respect to Company
Stock Options awarded under the Company Stock Plans or any other plan, program
or arrangement of the Company, and with respect to Company Warrants, to the
extent that such restrictions or limitations shall not have already lapsed,
shall remain in full force and effect with respect to such options or warrants
after giving effect to the Merger and the assumption by Buyer as set forth
above.
SECTION 1.05. ADJUSTMENTS. If at any time during the period between the
date of this Agreement and the Merger Date, any change in the outstanding shares
of Buyer Common Stock shall occur by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any stock dividend thereon with a record date during such period or
any similar transaction or event, the Merger Consideration shall be
appropriately adjusted to provide to the holders of Company Stock the same
economic effect as contemplated prior to such change or dividend. If at any time
during the period between the date of this Agreement and the Merger Date, any
change in the outstanding shares of Company Stock shall occur by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of
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shares, or any stock dividend thereon with a record date during such period or
any similar transaction or event, the Merger Consideration shall be
appropriately adjusted to provide to the Buyer the same economic effect as
contemplated prior to such change or dividend.
SECTION 1.06. FRACTIONAL SHARES. No fractional shares of Buyer Common
Stock shall be issued in the Merger, but in lieu thereof each holder of Company
Stock otherwise entitled to a fractional share of Buyer Common Stock will be
entitled, subject to Section 1.07, to receive, from the Exchange Agent in
accordance with the provisions of this Section 1.06, a cash payment in lieu of
such fractional shares of Buyer Common Stock representing such holder's
proportionate interest, if any, in the net proceeds from the sale by the
Exchange Agent in one or more transactions (which sale transactions shall be
made at such times, in such manner and on such terms as the Exchange Agent shall
determine in its reasonable discretion) on behalf of all such holders of the
aggregate of the fractional shares of Buyer Common Stock which would otherwise
have been issued (the "EXCESS SHARES"). The sale of the Excess Shares by the
Exchange Agent shall be executed on The Nasdaq Stock Market ("NASDAQ") through
one or more member firms of the National Association of Securities Dealers, Inc.
and shall be executed in round lots to the extent practicable. Until the net
proceeds of such sale or sales have been distributed to the appropriate holders
of shares of Company Stock, the Exchange Agent will hold such proceeds in trust
for the appropriate holders of Company Stock. Buyer shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs, including, without
limitation, the expenses and compensation of the Exchange Agent, incurred in
connection with such sale of the Excess Shares. As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of Company
Stock in lieu of any fractional shares of Buyer Common Stock the Exchange Agent
shall make available such amounts to such holders of shares of Company Stock
without interest.
SECTION 1.07 FAILURE TO OBTAIN APPROVAL FOR LISTING; CASH MERGER
CONSIDERATION. If Buyer is unable to obtain, within sixty (60) days after the
filing of the applications and forms referred to in Section 6.02 ("LISTING
PERIOD"), a letter from Nasdaq ("NASDAQ LETTER") indicating that the Buyer
Common Stock has been approved for listing on the Nasdaq NMS subject to
customary conditions to be contained in such approval letter for a transaction
of this type (a "LISTING FAILURE"), then:
(a) Section 1.01(b)(ii) shall be deemed to be amended and restated in
its entirety as follows without any action by the parties hereto:
"(ii) Each share of Company Stock outstanding immediately
prior to the Merger Date shall, except as otherwise provided
in Section 1.01(b)(i) or in Section 1.08 with respect to
shares of Company Stock as to which appraisal rights have been
exercised (which shares shall be treated in accordance with
Section 262 of the Delaware Law), be converted into the right
to receive an amount of cash (in United States dollars and
rounded to the nearest cent) equal to (A) the Purchase
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Price (as determined in accordance with Section 1.09) divided
by (B) (x) the number of shares of Company Stock outstanding
on the date immediately prior to the Merger Date PLUS (y) the
number of shares of Company Stock subject to Company Options
and Company Warrants that have an exercise or conversion price
less than $.71 MINUS (z) the number of shares of Company Stock
owned by Buyer. As of the date of this Agreement, (B) in the
immediately preceding sentence would be 11,695,549 (the
"MERGER CONSIDERATION").
(b) Section 1.02(g) shall be deemed to be deleted in its entirety
without any action by the parties hereto;
(c) Section 1.06 shall be deemed to be deleted in its entirety without
any action by the parties hereto; and
(d) (i) The (A) representations and warranties of the Company contained
in Section 3.10(i), (B) representations and warranties of Buyer contained in
Sections 4.05 through 4.08 and Sections 4.10 through 4.11, (C) covenants
contained in Sections 6.01, 6.02, the last sentence of Section 7.02 and Section
7.08 and (D) the closing conditions set forth in Sections 8.01(e) and 8.01(f)
shall cease to be applicable, and (ii) the accuracy of any such representation
and warranty or failure to comply with any such covenant will not be a condition
to the closing of the Merger and the breach of any such representation and
warranty or failure to perform any such covenant shall not serve as the basis
for any termination right set forth in Section 9.01.
SECTION 1.08 DISSENTING SHARES. Notwithstanding Section 1.01, in the
event of a Listing Failure, shares of Company Stock outstanding immediately
prior to the Merger Date and held by a holder who has not voted in favor of the
Merger and who has exercised appraisal rights in respect of such shares of
Company Stock in accordance with the Delaware Law shall not be converted into a
right to receive the Merger Consideration unless such holder fails to perfect or
withdraws or otherwise loses his appraisal or objecting stockholders' rights.
Shares of Company Stock in respect of which appraisal rights have been exercised
shall be treated in accordance with Section 262 of the Delaware Law. If after
the Merger Date such holder fails to perfect or withdraws or otherwise loses his
right to demand the payment of fair value for shares of Company Stock under
Delaware Law, such shares of Company Stock shall be treated as if they had been
converted as of the Merger Date into a right to receive the Merger
Consideration. The Company shall give Buyer prompt notice of any demands
received by the Company for the exercise of appraisal rights with respect to
shares of Company Stock and Buyer shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Buyer, make any payment with
respect to, or settle or offer to settle, any such demands. In the event any
amounts shall become due and payable in respect of any such demands, such
amounts shall be paid by the Surviving Corporation.
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SECTION 1.09 PURCHASE PRICE; EXCHANGE RATIO; VALUATION OF BUYER COMMON
STOCK. (a) For purposes of this Agreement, the term "PURCHASE PRICE" shall mean
Eight Million Two Hundred Ninety Thousand United States Dollars
(U.S.$8,290,000). On or before the date immediately prior to the Merger Date,
Buyer and the Company shall agree on the appropriate calculation of the Merger
Consideration (pursuant to Section 1.01(b)(ii)) and the Exchange Ratio (pursuant
to Sections 1.09(b) and (c)) and will cause the Merger Consideration (as so
calculated) to be reflected correctly in the Certificate of Merger to be
effective on the Merger Date.
(b) For purposes of this Agreement, the term "EXCHANGE RATIO" shall
mean a fraction of which (i) the numerator shall be (x) the Purchase Price
divided by (y) (A) the number of shares of Company Stock outstanding on the date
immediately prior to the Merger Date PLUS (B) the number of shares of Company
Stock subject to Company Options and Company Warrants that have an exercise or
conversion price less than $.71 MINUS (C) the number of shares of Company Stock
owned beneficially by Buyer other than beneficial ownership arising from the
execution of the Support/Voting Agreements, and (ii) the denominator shall be
the value of Buyer Common Stock (determined in accordance with Section 1.09(c)).
As of the date of this Agreement, (y) in the immediately preceding sentence is
11,695,549.
(c) For purposes of Section 1.09(b), the value of Buyer Common Stock
shall be determined by dividing by two the following sum: (I) the average of the
closing prices for the Buyer Common Stock on the Toronto Stock Exchange for each
business day commencing on the 30th day prior to the public announcement of the
transactions contemplated by this Agreement and (II) the average of the closing
prices for the Buyer Common Stock on the Toronto Stock Exchange for each
business day commencing on the day immediately following such announcement and
ending on the 30th day following such public announcement. Such value shall then
be converted from Canadian dollars into U.S. dollars based upon the average
applicable exchange rate for such calculation period as published in THE WALL
STREET JOURNAL (Exchange Rate table in Currency Trading section).
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.01. CERTIFICATE OF INCORPORATION; BYLAWS. The certificate of
incorporation and bylaws of the Merger Sub in effect at the Merger Date shall be
the certificate of incorporation and bylaws, respectively, of the Surviving
Corporation until amended in accordance with applicable law, except for Article
I thereof which shall include the name of the Surviving Corporation designated
by Buyer. The Surviving Corporation shall succeed to all of the rights,
privileges, powers and franchises, of a public as well as of a private nature,
of the Company and Merger Sub, all of the properties and assets and all of the
debts of the Company and Merger Sub, choses in action and other interests due or
belonging to the Company and Merger Sub and shall be subject
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to, and responsible for, all of the debts, liabilities and duties of the Company
and Merger Sub with the effect set forth in the Delaware Law.
SECTION 2.02. DIRECTORS AND OFFICERS. From and after the Merger Date,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (a) the directors of Merger Sub immediately prior to the Merger
Date shall be the directors of the Surviving Corporation, and (b) the officers
of Merger Sub immediately prior to the Merger Date shall be the officers of the
Surviving Corporation. On or prior to the Merger Date, the Company shall deliver
to Buyer evidence satisfactory to Buyer of the resignations (to be effective as
of the Merger Date) of each of the directors of the Company and/or its
Subsidiaries, and, without affecting their employment status or any rights they
may have under any severance agreement, employment agreement or similar
arrangement disclosed in the Company Disclosure Schedule, each of the officers
of the Company and/or its Subsidiaries.
SECTION 2.03. SUBSCRIPTION. As part of the overall transactions
described in this Agreement, in consideration of Buyer agreeing to issue and
deliver Buyer Common Stock in accordance with Section 1.02 of this Agreement,
Buyer will be entitled to subscribe and agrees to subscribe, at the Merger Date,
for a number of shares of common stock ( par value $.01 per share), of the
Surviving Corporation equivalent to the number of shares of Company Stock
outstanding immediately prior to the Merger Date (the "SUBSCRIPTION STOCK"). The
acquisition of the Subscription Stock shall occur simultaneously with the
conversions provided for under Sections 1.01(b)(ii) and 1.01(b)(iii) of this
Agreement. The Subscription Stock will, at the Merger Date, have been duly
authorized and, when issued to Buyer pursuant to this Agreement, will be validly
issued and outstanding, fully paid and non-assessable.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule (each section of which
qualifies the correspondingly numbered representation and warranty only, except
where the information in any such section is disclosed in such a way to make its
relevance to any other representation or warranty readily apparent, in which
case, such section shall be deemed to also qualify such other representation and
warranty) of the Company attached hereto (the "COMPANY DISCLOSURE SCHEDULE")
(and except as to any matter set forth in or contemplated by Section 2.03 hereof
as to which the representations and warranties in this Article 3 do not apply)
or as otherwise provided herein, the Company represents and warrants to Buyer
that:
SECTION 3.01. CORPORATE EXISTENCE AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers required to carry on
its business as now conducted and is duly qualified
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to do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified or in good standing is not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on the Company. For purposes of this Agreement, a "MATERIAL ADVERSE
EFFECT" means, with respect to any Person, a material adverse effect on the
financial condition, business, operations, assets or results of operations of
such Person and its Subsidiaries taken as a whole or on the ability of such
Person to perform its obligations under this Agreement in all material respects.
Section 3.01(a) of the Company Disclosure Schedule includes true and complete
copies of the Company's certificate of incorporation and bylaws as currently in
effect. Section 3.01(b) of the Company Disclosure Schedule includes a list of
all jurisdictions in which the Company or any Subsidiary of the Company is duly
qualified to conduct business.
SECTION 3.02. CORPORATE AUTHORIZATION. (a) The execution, delivery and
performance by the Company of each of (I) this Agreement, (ii) the letter
agreement dated October 29, 1998 between the Company and Dr. Jack Barbut (the
"BARBUT AGREEMENT"), (iii) the Agreement dated November 16, 1998 among the
Company, Panlabs International, Inc. and MDS, Inc. (the "MDS AMENDMENT") and
(iv) the Forbearance Agreement dated the date hereof among the Company, its
Subsidiaries named therein and First Union National Bank (the "FORBEARANCE
AGREEMENT") and the consummation by the Company of the transactions contemplated
by this Agreement, the Barbut Agreement, the MDS Amendment and the Forbearance
Agreement are within the Company's corporate powers and, except for the required
approval of the stockholders of the Company in connection with the consummation
of the Merger, have been duly authorized by all necessary corporate action. The
affirmative vote of a majority of the shares of Company Stock outstanding as of
the record date for the Company Stockholder Meeting (the "REQUIRED STOCKHOLDER
VOTE") is the only vote of any class or series of the Company's capital stock
necessary to approve and adopt this Agreement and the transactions contemplated
by this Agreement. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding agreement of the Company enforceable
against the Company in accordance with its terms.
(b) The Board of Directors of the Company, at a meeting duly called and
held, has (i) determined that this Agreement and the transactions contemplated
by this Agreement (including the Merger) are fair to and in the best interests
of the stockholders of the Company, (ii) approved this Agreement and the
transactions contemplated by this Agreement (including the Merger), and (iii)
resolved to recommend adoption of this Agreement and the transactions
contemplated hereby by the stockholders of the Company, subject to the terms
hereof.
(c) Each of the persons identified in Section 3.02(c) of the Company
Disclosure Schedule has (i) entered into a Support/Voting Agreement in the form
attached hereto as Exhibit A (each a "SUPPORT/VOTING AGREEMENT"), whereby each
such individual has agreed, among
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other things, to vote all shares of Company Stock beneficially owned by them in
favor of adoption of this Agreement and (ii) a written undertaking in the form
attached hereto as Exhibit B (each an "AFFILIATE LETTER"), whereby each such
individual has agreed, among other things, to comply with the requirements of
Rule 145 under the 1933 Act with respect to public sales of Buyer Common Stock
received by them in the Merger. The persons identified in Section 3.02(c) are
the only persons which the Company believes may be Affiliates of the Company.
SECTION 3.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated by this Agreement require no action, by or in
respect of, or filing with, any federal, state, local or foreign governmental
body, agency, official or authority ("GOVERNMENTAL AUTHORITY") other than (a)
the filing of the Certificate of Merger in accordance with the Delaware Law; (b)
compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"); (c) compliance with any
applicable requirements of the Securities and Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder (the "1934 ACT"); (d)
compliance with any applicable requirements of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "1933 ACT");
(e) compliance with any applicable foreign or state securities or Blue Sky laws;
and (f) immaterial actions or filings relating to ordinary operational matters.
SECTION 3.04. NON-CONTRAVENTION. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated by this Agreement do not and will not, assuming
receipt of the Required Stockholder Vote, (a) contravene or conflict with the
certificate of incorporation or bylaws of the Company or any Subsidiary of the
Company, (b) assuming compliance with the matters referred to in Section 3.03
and Section 3.03 of the Company Disclosure Schedule, contravene or conflict with
or constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to the Company or any
Subsidiary of the Company, (c) constitute a default (or an event which with
notice, the lapse of time or both would become a default) under or give rise to
a right of termination, cancellation or acceleration of any right or obligation
of the Company or any Subsidiary of the Company or to a loss of any benefit to
which the Company or any Subsidiary of the Company is entitled under any
provision of any agreement, contract or other instrument binding upon the
Company or any Subsidiary of the Company or any license, franchise, permit or
other similar authorization held by the Company or any Subsidiary of the
Company, (d) require any action or consent or approval of any Person other than
a Governmental Authority or (e) result in the creation or imposition of any Lien
on any asset of the Company or any Subsidiary of the Company, other than, (i) in
the case of the events specified in clauses (b), (c), and (e) (other than
indebtedness of the Company or any Subsidiary of the Company) and (ii) in the
case of the events specified in clause (d) (other than indebtedness of the
Company and licenses and sublicenses related to the 191 patent to which the
Company or any
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Subsidiary is a party on the date hereof), any such event which, individually or
in the aggregate, has not had, and is not reasonably likely to have, a Material
Adverse Effect on the Company. For purposes of this Agreement, "LIEN" means,
with respect to any asset, any mortgage, claim, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset.
SECTION 3.05. CAPITALIZATION. The authorized capital stock of the
Company consists of 20,000,000 shares of Company Stock and 5,000,000 shares of
serial preferred stock. As of September 30, 1998, there were (i)11,523,257
shares of Company Stock (together with associated Rights as described in Section
3.21) outstanding and (ii) no shares of serial preferred stock outstanding. As
of September 30, 1998, there were (i) employee and director stock options to
purchase an aggregate of 1,962,851 shares of Company Stock outstanding (none of
which options were exercisable, other than options in respect of 1,367,241
shares of Company Stock) and (ii) warrants to purchase 2,110,000 shares of
Company Stock outstanding (all of which were exercisable). All outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable and, as to shares issued and sold by
the Company within the three years prior to the date of this Agreement, to the
Company's knowledge, have been issued in compliance with all federal and state
securities laws. Except (i) as set forth in this Section 3.05, (ii) for changes
since September 30, 1998 resulting from the expiration, vesting, termination or
exercise in accordance with their respective terms of stock options or warrants
outstanding on such date, (iii) modifications of the Rights as described in
Section 3.21, (iv) acceleration of vesting of stock options resulting from the
execution of this Agreement as set forth in Section 3.04 of the Company
Disclosure Schedule, and (v) issuances after September 30, 1998 in the ordinary
course of business consistent with past practice of shares of Company Stock to
the Company's 401(k) plan, there are outstanding (a) no shares of capital stock
or other voting securities of the Company, (b) no securities of the Company
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, and (c) no options, warrants, calls, subscriptions or
other rights to acquire from the Company, and no obligation of the Company to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company (the items in
clauses (a), (b) and (c) being referred to collectively as the "COMPANY
SECURITIES"). There are no outstanding obligations of the Company or any
Subsidiary of the Company to repurchase, redeem or otherwise acquire any Company
Securities. Section 3.05 of the Company Disclosure Schedule sets forth, with
respect to each stock option and warrant for Company Stock outstanding at
September 30, 1998, the name of the optionee or warrant holder, as the case may
be, the number of shares of Company Stock subject thereto, the per share
exercise price thereof and the initial vesting date thereof. Section 3.05 of the
Company Disclosure Schedule sets forth (i) every agreement pursuant to which the
Company has granted to any Person registration rights related to shares of
Company Stock and (ii) every agreement of which the Company has knowledge
relating to the voting of any shares of Company Stock.
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SECTION 3.06. SUBSIDIARIES. (a) Each Subsidiary of the Company is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers to carry on its business
as now conducted and is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where failure to be so qualified or
licensed is not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on the Company.
(b) The Company does not own, directly or indirectly, any equity or
other ownership interest in any corporation, partnership, joint venture or other
entity or enterprise, except for the Subsidiaries of the Company set forth in
Section 3.06 of the Company Disclosure Schedule. Except as set forth in Section
3.06 of the Company Disclosure Schedule, the Company is not subject to any
obligation or requirement to provide funds to or make any investment (in the
form of a loan, capital contribution or otherwise) in any such entity. The
ownership interests having by their terms ordinary voting power to elect a
majority of directors (or others performing similar functions with respect to
such Subsidiary) of each of the Company's Subsidiaries is held of record by the
Company or one of its other Subsidiaries, free and clear of any Liens. Each of
the outstanding shares of capital stock of each of the Company's Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable. The following
information for each Subsidiary of the Company is set forth in Section 3.06 of
the Company Disclosure Schedule, as applicable: (i) its name and jurisdiction of
incorporation or organization; (ii) its authorized capital stock or share
capital; and (iii) the number of issued and outstanding shares of capital stock
or share capital and the record owner(s) thereof. There are no outstanding
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to the issuance, sale
or transfer of any securities of any Subsidiary of the Company (collectively,
the "COMPANY SUBSIDIARY SECURITIES"), nor are there outstanding any securities
which are convertible into or exchangeable for any Company Subsidiary
Securities; and no Subsidiary of the Company has any obligation of any kind to
issue any additional Company Subsidiary Securities or to pay for any Company
Subsidiary Securities.
SECTION 3.07. SEC FILINGS. The Company has delivered to Buyer (i) the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997
(the "COMPANY 10-K"), (ii) its Quarterly Reports on Form 10-Q for its fiscal
quarters ended after December 31, 1997 and filed with the Securities and
Exchange Commission (the "SEC") prior to the date of this Agreement (the
"COMPANY 10-QS"), and (iii) its proxy or information statements relating to
meetings of, or actions taken without a meeting by, the stockholders of the
Company held since December 31, 1997, and (iv) all of its other reports,
statements, schedules and registration statements filed with the SEC since
January 1, 1998 and through the date of this Agreement. The Company has timely
filed all required reports, schedules, forms, statements and other documents
with the SEC since January 1, 1998 (collectively, the "COMPANY SEC DOCUMENTS").
As of their respective dates, or if amended, as of the date of the last such
amendment, the Company SEC
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Documents complied, and all documents required to be filed by the Company with
the SEC after the date hereof and prior to the Merger Date (the "SUBSEQUENT
COMPANY SEC DOCUMENTS") will comply, in all material respects with the
requirements of the 1933 Act or the 1934 Act, as the case may be, and the
applicable rules and regulations promulgated thereunder, and none of the Company
SEC Documents contained, and the Subsequent Company SEC Documents when filed
will not contain, any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 3.08. FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in the Company SEC Documents at the time such Company SEC
Documents were filed with the SEC complied as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles applied in the United States ("U.S.
GAAP") applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto or, in the case of the unaudited statements,
as permitted by Form 10-Q of the SEC), and fairly present (subject in the case
of unaudited statements to normal, recurring audit adjustments) the consolidated
financial position of the Company as at the dates thereof and the consolidated
results of its operations and cash flows for the periods then ended. For
purposes of this Agreement, "COMPANY BALANCE SHEET" means the consolidated
balance sheet of the Company as of December 31, 1997 set forth in the Company
10-K and "COMPANY BALANCE SHEET DATE" means December 31, 1997.
For purposes of financial presentation, the Company and its
Subsidiaries recognize net revenue from their contracts on a percentage of
completion basis as work is performed. The percentage of completion, and
consequently the revenue to be recorded, of each individual contract is
determined through detailed analysis and discussion between all appropriate
operational and financial department management. Although the Company and its
Subsidiaries do not require collateral for unpaid balances, credit losses have
consistently been within management's expectations. Certain contracts contain
provisions for price adjustment for cost overruns. Such adjusted amounts are
included in service revenue when realization is assured and the amounts can be
reasonably determined. In the period in which it is determined that a loss will
result from the performance of a contract, the entire amount of the estimated
ultimate loss is charged against income.
SECTION 3.09. DISCLOSURE DOCUMENTS. (a) Each document required to be
filed by the Company with the SEC in connection with the transactions
contemplated by this Agreement (the "COMPANY DISCLOSURE DOCUMENTS"), including,
without limitation, the proxy or information statement of the Company (the
"COMPANY PROXY STATEMENT") to be filed with the SEC in connection with the
adoption of this Agreement by the holders of Company Stock, and any
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<PAGE> 23
amendments or supplements thereto, will, when filed, comply as to form in all
material respects with the applicable requirements of the 1934 Act.
(b) At the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company, and at the
time such stockholders vote on the adoption of this Agreement, the Company Proxy
Statement, as supplemented or amended, if applicable, will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. At the time of the filing of any
Company Disclosure Document other than the Company Proxy Statement and at the
time of any distribution thereof, such Company Disclosure Document will not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in this Section 3.09(b) will not apply to statements
included in or omissions from the Company Disclosure Documents based upon
information furnished to the Company by Buyer specifically for use therein.
SECTION 3.10. INFORMATION SUPPLIED. The information supplied or to be
supplied by the Company for inclusion or incorporation by reference in (i) the
Buyer's Form F-4 or any amendment or supplement thereto will not, at the time
the Form F-4 or any amendment or supplement thereto becomes effective under the
1933 Act and on the Merger Date, contain any 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 not misleading and (ii) any Buyer Disclosure
Documents (other than the Form F-4 and any amendments or supplements to either)
will not, at the time of effectiveness of such Buyer Disclosure Document and at
the time of any distribution thereof, contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
SECTION 3.11. ABSENCE OF CERTAIN CHANGES. From the Company Balance
Sheet Date, except (i) as set forth in the Company SEC Documents, (ii) as
contemplated by this Agreement (including, without limitation, Sections 1.04 and
3.21 hereof) or (iii) related to the Shut-Downs, the Company and its
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:
(a) any event, occurrence or development of a state of circumstances or
facts which has had or is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on the Company other than any of the
foregoing (i) relating to the economy or securities markets in general, (ii)
relating to the Company's industry in general or (iii) arising from the
announcement or thereafter the pendency of this Agreement or the transactions
contemplated by this Agreement;
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(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any Subsidiary of
the Company of any amount of outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company or any of its
Subsidiaries;
(c) any amendment of any material term of any outstanding security of
the Company or any Subsidiary of the Company;
(d) any incurrence, assumption or guarantee by the Company or any
Subsidiary of the Company of any indebtedness from any third party for borrowed
money;
(e) any creation or assumption by the Company or any Subsidiary of the
Company of any Lien on any material asset other than Liens arising solely by
operation of applicable law;
(f) any making of any loan, advance or capital contribution to or
investment in any Person other than (i) loans and advances to any employees of
the Company in an amount not in excess of $5,000 per employee and (ii) loans,
advances or capital contributions to or investments in wholly-owned Subsidiaries
of the Company;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or any
Subsidiary of the Company which, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on the Company;
(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any Subsidiary of the Company relating to its
assets or business (including, without limitation, the acquisition or
disposition of any assets) (other than transactions and commitments contemplated
by this Agreement) inconsistent with the Company's budget and/or spending plans
disclosed to Buyer prior to the date of this Agreement or any relinquishment by
the Company or any Subsidiary of the Company of any material contract, license
or right;
(i) any change in any method of accounting or accounting principle or
practice by the Company or any Subsidiary of the Company, except for any such
change required by U.S. GAAP or SEC Regulation S-X promulgated under the 1934
Act and, as to changes occurring prior to the date of this Agreement, as set
forth in Section 3.11 of the Company Disclosure Schedule ("REGULATION S-X");
(j) any (i) grant by the Company or any of its Subsidiaries of any
severance or termination pay to, or entry into any employment, termination or
severance arrangement with, any director, officer or employee of the Company or
any Subsidiary of the Company; (ii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any
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<PAGE> 25
such existing agreement) with any director, officer or employee of the Company
or any Subsidiary, (iii) increase in benefits payable under any existing
severance or termination pay policies or employment agreements or (iv) increase
in compensation, bonus or other benefits payable to directors, officers or
employees of the Company or any Subsidiary of the Company, other than in the
ordinary course of business and consistent with past practice.
SECTION 3.12. NO UNDISCLOSED MATERIAL LIABILITIES. There are no
liabilities, commitments or obligations (whether pursuant to contracts or
otherwise) of the Company or any Subsidiary of the Company of any kind
whatsoever which, individually or in the aggregate, have had or are reasonably
likely to have a Material Adverse Effect on the Company, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which is reasonably likely
to result in such a liability, commitment or obligation, including, without
limitation, any fines, disciplinary actions or other adverse actions that may be
taken or reported concerning the conduct of the Company or any of its
Subsidiaries, other than:
(a) liabilities, commitments or obligations disclosed or provided for
in the Company Balance Sheet (including the notes thereto) or disclosed in the
Company SEC Documents;
(b) liabilities, commitments or obligations incurred in the ordinary
course of business consistent with past practice since the Company Balance Sheet
Date;
(c) liabilities, commitments or obligations arising from the Shut-Downs
and disclosed to Buyer; and
(d) liabilities, commitments or obligations under this Agreement.
SECTION 3.13. LITIGATION; INVESTIGATIONS; ORDERS AND DECREES. There is
no action, claim, suit, investigation, proceeding or examination ("ACTION")
pending against or affecting, or to the knowledge of the Company, threatened or
reasonably likely to be brought against or affecting, the Company or any
Subsidiary of the Company or any of their respective properties before any
arbitrator or any Governmental Authority which, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
the Company or on Chrysalis DNX Transgenic Sciences Corporation ("CHRYSALIS
DNX"). The foregoing representation and warranty does not include or relate to
any Action, pending or threatened, challenging or seeking to prevent, enjoin,
alter or delay the Merger or any of the transactions contemplated by this
Agreement. Neither the Company nor any Subsidiary is subject to any outstanding
order, writ, injunction or decree which, individually or in the aggregate, would
have a Material Adverse Effect on the Company or Chrysalis DNX. Since December
31, 1993, (i) there has not been any Action asserted or, to the knowledge of the
Company, threatened before any Governmental Authority against the Company or any
Subsidiary of the Company relating to the Company or any of its
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Subsidiary's method of doing business or its relationship with past, existing or
future users or purchasers of any goods or services of the Company or any
Subsidiary of the Company which has had, individually or in the aggregate, a
Material Adverse Effect on the Company and (ii) neither the Company nor any
Subsidiary of the Company has been subject to any outstanding order, writ,
injunction or decree relating to the Company's or any of its Subsidiary's method
of doing business or its relationship with past, existing or future lessees,
users, purchasers, licensees or sublicensees of any Intellectual Property, goods
or services of the Company or any Subsidiary of the Company which has had,
individually or in the aggregate, a Material Adverse Effect on the Company.
SECTION 3.14. TAXES. (a) Except as set forth in the Company Balance
Sheet (including the notes thereto), (i) all Tax Returns for the Company or any
Subsidiary of the Company required to be filed with any taxing authority by, or
with respect to, the Company and its Subsidiaries have been filed in accordance
with all applicable laws and are true, correct and complete in all material
respects; (ii) the Company and its Subsidiaries have timely paid all Taxes shown
as due and payable on the Tax Returns for the Company or any Subsidiary of the
Company that have been so filed; (iii) the Company and its Subsidiaries have
made provision for all Taxes payable by the Company and its Subsidiaries for
which no Tax Return for the Company or any Subsidiary of the Company has yet
been filed; (iv) there is no action, suit, proceeding, audit or claim now
proposed or pending against or with respect to the Company or any of its
Subsidiaries in respect of any Tax where there is a reasonable possibility of an
adverse determination; (v) neither the Company nor any of its Subsidiaries has
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code; (vi) neither the Company nor any of its
Subsidiaries has been a member of an affiliated, consolidated, combined or
unitary group other than one of which the Company was the common parent and no
members of that group have left the group; (vii) all Tax Returns filed with
respect to tax years of the Company and its Subsidiaries through the tax year
ended December 31, 1994, have been examined and closed or are returns with
respect to which the applicable period for assessment under applicable law,
after giving effect to extensions or waivers, has expired; (viii) neither the
Company nor any Subsidiary (or any member of any affiliated, consolidated,
combined or unitary group of the Company or any Subsidiary of the Company is or
has been a member) has been granted any extension or waiver of the statute of
limitations period applicable to any Tax Return, which period (after giving
effect to such extension or waiver) has not yet expired; and (ix) neither the
Company nor any Subsidiary of the Company is a party to a tax sharing agreement,
including, without limitation, any agreement with respect to the shifting of
losses or income among parties or has been a party to a tax sharing agreement
that imposes obligations of the Company or any Subsidiary of the Company as of
the date of this Agreement. For purposes of the representations contained in
this Section 3.14, none of these representations shall be deemed to have been
breached unless such breach would have, individually or in the aggregate, a
Material Adverse Effect on the Company.
(b) For purposes of this Agreement, "TAXES" means all United States
Federal, state, local and foreign taxes, levies and other assessments,
including, without limitation, all income,
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sales, use, goods and services, value added, capital, capital gains, net worth,
transfer, profits, withholding, payroll, PAYE, employer health, unemployment
insurance payments, excise, real property and personal property taxes, and any
other taxes, assessments or similar charges in the nature of a tax, including,
without limitation, interest, additions to tax, fines and penalties, imposed by
a governmental or public body, agency, official or authority (the "TAXING
AUTHORITIES"). "TAX RETURN" means any return, report, information return or
other document (including any related or supporting information) required to be
filed with any Taxing Authority in connection with the determination,
assessment, collection, administration or imposition of any Taxes.
SECTION 3.15. ERISA AND LABOR MATTERS. (a) Section 3.15(a) of the
Company Disclosure Schedule contains a list identifying each "EMPLOYEE BENEFIT
PLAN", as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"), which is subject to any provision of ERISA and is maintained,
administered or contributed to by the Company or any ERISA Affiliate of the
Company and covers any employee or former employee of the Company or any
Subsidiary of the Company or in connection with which the Company or any
Subsidiary of the Company has any liability. Copies of such plans (and, if
applicable, related trust agreements) and all amendments thereto and written
interpretations thereof, if any, have been furnished to Buyer together with the
three most recent annual reports (Form 5500 including, if applicable, Schedule B
thereto) prepared in connection with, and any favorable determination letter
issued in connection with, any such plan. Such plans are referred to
collectively herein as the "EMPLOYEE PLANS". For purposes of this Section,
"ERISA AFFILIATE" of the Company means any other Person which, together with the
Company, would be treated as a single employer under Section 414 of the Code.
The only Employee Plans which individually or collectively would constitute an
"EMPLOYEE PENSION BENEFIT PLAN" as defined in Section 3(2) of ERISA (the
"PENSION PLANS") are identified as such in the list referred to above.
(b) Neither the Company nor any ERISA Affiliate has ever maintained or
been obligated to contribute to or had any liability in connection with any
"MULTIEMPLOYER PLAN", as defined in Section 3(37) of ERISA, or any "DEFINED
BENEFIT PLAN", as defined in Section 3(35) of ERISA. Nothing done or omitted to
be done and no transaction or holding of any asset under or in connection with
any Employee Plan has or will make the Company or any Subsidiary of the Company,
any officer or director of the Company or any Subsidiary of the Company subject
to any liability under Title I of ERISA or liable for any tax pursuant to
Section 4975 of the Code that is reasonably likely to have a Material Adverse
Effect on the Company.
(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the IRS
that it is so qualified. The Company has furnished to Buyer copies of the most
recent IRS determination letters with respect to each such Employee Plan. Each
Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
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including but not limited to ERISA and the Code, which are applicable to the
Employee Plan, excluding any instances of non-compliance that would not
individually or in the aggregate be reasonably likely to have a Material Adverse
Effect on the Company.
(d) Section 3.15(d) of the Company Disclosure Schedule contains a list
of each employment, severance (including the duration of severance periods or,
in the case of stay bonuses, the amount) or other similar contract, arrangement
or policy and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which is not an Employee
Plan, is entered into, maintained or contributed to, as the case may be, by the
Company or any Subsidiary of the Company and covers any employee or former
employee of the Company or any of its Subsidiaries or in connection with which
the Company or any Subsidiary of the Company could have liability. Such
contracts, plans and arrangements as are described above, copies or descriptions
of all of which have been furnished previously to Buyer, are referred to
collectively herein as the "BENEFIT ARRANGEMENTS". Each Benefit Arrangement has
been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Benefit Arrangement, excluding any instances of
non-compliance that would not individually or in the aggregate be reasonably
likely to have a Material Adverse Effect on the Company.
(e) Except as would not be reasonably likely to have a Material Adverse
Effect on the Company, no Employee Plan, Benefit Arrangement or related document
contains any provision that would prevent the Company or any Subsidiary of the
Company from amending or terminating any post-retirement health, medical or life
insurance benefits and no agent or representative of the Company or of any
Subsidiary of the Company has made any statements that would limit the ability
of the Company or any of its Subsidiaries to amend or terminate any such
benefits.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any Subsidiary of the
Company relating to, or change in employee participation or coverage under, any
Employee Plan or Benefit Arrangement which would increase materially the expense
of maintaining such Employee Plan or Benefit Arrangement above the level of the
expense incurred in respect thereof for the fiscal year ended on the Company
Balance Sheet Date.
(g) The execution of, and performance of the transactions contemplated
in, this Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Employee Plan,
Benefit Arrangement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect
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to any employee or former employee of the Company or any of its Subsidiaries, or
result in the triggering or imposition of any restrictions or limitations on the
right of Buyer, the Company or any Subsidiary of the Company to amend or
terminate any Employee Plan and receive the full amount of any excess assets
remaining or resulting from such amendment or termination, subject to applicable
taxes. Except as otherwise identified in Section 3.15(d) of the Company
Disclosure Schedule, there is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company or any Subsidiary that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Sections 162(a)(1), 162(a)(2)
or 280G of the Code.
(h) Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement. There are no labor unions voluntarily
recognized or certified to represent any bargaining unit of employees at the
Company or any of its Subsidiaries. No work stoppage, labor strike or slowdown
against the Company or any of its Subsidiaries is pending or threatened nor has
any of the foregoing occurred since December 18, 1996. Neither the Company nor
any of its Subsidiaries is involved in or threatened with any labor dispute or
grievance which individually or in the aggregate has had or is reasonably likely
to have a Material Adverse Effect on the Company. To the knowledge of the
Company, there is no organizing effort or representation question at issue with
respect to any employee of the Company or any of its Subsidiaries. No collective
bargaining agreement to which the Company or any of its Subsidiaries is or may
be a party is currently under negotiation or renegotiation and no existing
collective bargaining agreement is due for expiration, renewal or renegotiation
within the one year period after the date hereof.
SECTION 3.16. COMPLIANCE WITH LAWS. (a) Each of the Company and its
Subsidiaries has all permits, licenses, authorizations, consents, approvals and
franchises necessary to own, lease and operate its respective properties and to
carry on its respective business as it is now being conducted except for any of
the foregoing, the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect on the Company or Chrysalis DNX. The Company and
each Subsidiary is in compliance in all material respects with the terms and
conditions of all such permits, licenses, authorizations, consents, approvals
and franchises. Section 3.16 of the Company Disclosure Schedule sets forth, as
of the date of this Agreement, a list of all material permits, licenses,
authorizations, consents, approvals and franchises of the Company and each
Subsidiary of the Company along with their expiration dates, each one of which
is currently valid and in full force. The Company and each Subsidiary has filed
such timely and complete renewal applications as may be required with respect to
its material permits, licenses, authorizations, consents, approvals and
franchises. No suspension, revocation, cancellation or withdrawal of, or any
Action related to, any material permits, licenses, authorizations, consents,
approvals or franchises of the Company and any Subsidiary of the Company has
been filed or, to the knowledge of the Company or its Subsidiaries, has been
commenced or is threatened. The Company and each Subsidiary is currently in
compliance with, and at all times since December 31, 1993, has been in
compliance with, all applicable federal, state, local or foreign laws, statutes,
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orders, judgments, decisions, rules, regulations, policies or guidelines
(collectively "APPLICABLE LAWS"), including those promulgated or entered by the
United States Food and Drug Administration ("FDA"), United States Department of
Agriculture ("USDA"), United States Drug Enforcement Agency ("DEA"), European
Medicines Evaluation Agency ("EMEA"), relating to the Company, any Subsidiary of
the Company or its respective businesses or properties, except for any
non-compliance which has not had, and is not reasonably likely to have, a
Material Adverse Effect on the Company.
(b) As to each product or service (including preclinical and clinical
trials) subject to the jurisdiction of any Governmental Authority that is
manufactured, tested, distributed, held, performed, offered and/or marketed by
the Company or its Subsidiaries, such product or service is being, and since
December 31, 1993 has been, manufactured, tested, distributed, held, performed,
offered and/or marketed in compliance, to the extent required, with all
Applicable Laws including, but not limited to, those provisions of the Federal
Food, Drug and Cosmetic Act ("FDCA") relating to investigational use, informed
consent, premarket clearance, good manufacturing practices, good laboratory
practices, good clinical practices, labeling, advertising, record keeping,
filing of report and security, except for any non-compliance which has not had,
and is not reasonably likely to have, a Material Adverse Effect on the Company,
and during the past five years there have been no deaths or serious adverse
events, as defined in Title 21 of CFR, related or alleged to have been related
to any drug, device or biologic product being studied in any such clinical
trials or to the negligence of the Company or any of its Subsidiaries or agents.
(c) Section 3.16(c) of the Company Disclosure Schedule lists (i) all
notices of violation issued by the FDA, USDA, DEA or EMEA during the five years
prior to the date of this Agreement to the Company or any of its Subsidiaries;
(ii) all audit reports performed during the five years prior to the date of this
Agreement by the Company, any Subsidiary, or any outside consultant retained by
the Company or one of its Subsidiaries with respect to matters over which the
FDA, USDA, DEA or EMEA has jurisdiction; and (iii) any document concerning any
oral or written communication received from the FDA, the USDA, the DEA or the
Department of Justice during the five years prior to the date of this Agreement.
SECTION 3.17. INTELLECTUAL PROPERTY RIGHTS. (a) Set forth in Section
3.17 of the Company Disclosure Schedule is a true and complete list, as of the
date of this Agreement, of (i) all of the Company's and each of its Subsidiary's
foreign and domestic material patents, patent applications, invention
disclosures, trademarks, service marks, trade names (and any registrations or
applications for registration for any of the foregoing) and all material design
right and copyright applications and registrations, including all patents,
trademarks, copyrights and applications under which the Company or any
Subsidiary has obtained rights from others, and (ii) all material agreements to
which the Company or any Subsidiary of the Company is a party which may concern
any of the Intellectual Property. "INTELLECTUAL PROPERTY" shall mean all
intellectual property or other proprietary rights of every kind, including,
without limitation, all domestic or
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foreign patents, patent applications, inventions (whether or not patentable)
processes, products, technologies, discoveries, copyrightable and copyrighted
works, apparatus, trade secrets, trademarks and trademark applications and
registrations, service marks and service mark applications and registrations,
trade names, trade dress, copyright regulations, design rights, customer list,
marketing and customer information, mask works rights, know-how, licenses,
technical information (whether confidential or otherwise), software, and all
documentation thereof). Other than the Intellectual Property set forth in
Section 3.17 of the Company Disclosure Schedule, no name, patent invention,
trade secret, proprietary right, computer software, trademark, trade name,
service mark, logo, copyright, franchise, license, sublicense, or other such
right is necessary for the operation of the business of the Company or any
Subsidiary in substantially the same manner as such business is presently or
proposed to be conducted. Except as set forth in Section 3.17 of the Company
Disclosure Schedule, (i) the Company or its Subsidiaries, as applicable, owns,
free and clear of any Liens the Intellectual Property set forth in Section 3.17
of the Disclosure Schedule and has the exclusive right to bring actions for the
infringement thereof; (ii) no person or entity has asserted to the Company or
any Subsidiary of the Company (and the Company or any Subsidiary is not
otherwise aware) that, with respect to the Intellectual Property and the
research, development and commercial activities of the Company or any
Subsidiary, the Company or any Subsidiary of the Company is infringing or has
infringed any domestic or foreign patent, trademark, service mark, trade name,
or copyright or design right or misappropriated or improperly used or disclosed
any trade secret, or know-how, (iii) all working requirements and all
maintenance fees, annuities, and other payments which are due from or controlled
by the Company or any Subsidiary of the Company on or before the date of this
Agreement for any of the Intellectual Property, including, without limitation,
all material foreign or domestic patents, patent applications, trademarks
registrations service mark registrations, copyright registrations and any
applications for any of the preceding, have been met or paid; (iv) the Company
is not aware of any part of the Intellectual Property having been obtained
through inequitable conduct or fraud in the United States Patent and Trademark
Office or any foreign Governmental Authority; (v) neither the Company nor any
Subsidiary of the Company is aware of any conduct or use by the Company or any
Subsidiary of the Company that would, to the Company's knowledge, void or
invalidate or constitute misuse of, any of the Intellectual Property (vi) the
execution, delivery and performance of this Agreement by the Company, and the
consummation of the transactions contemplated by this Agreement will not
materially impair the right of Buyer or the Surviving Corporation, after the
Merger Date, to use, sell, license or dispose of, or to bring any action for the
infringement of, any Intellectual Property; (vii) the Company or any Subsidiary
of the Company is not aware of any prior art that has been identified to the
Company or any Subsidiary of the Company as invalidating or potentially
invalidating prior art with respect to U.S. Patent No. 4,873,191 (the "191
PATENT"); (viii) the Company or any Subsidiary of the Company is not aware of
any Person who has made or asserted a claim of ownership, inventorship, license
or material interest in the 191 patent; and (ix) there are no material
royalties, honoraria, fees or other payments payable to any Person by reason of
the ownership, use, license, sublicense, sale or disposition of the Intellectual
Property.
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SECTION 3.18. ENVIRONMENTAL MATTERS. (a) (i) No notice, notification,
demand, request for information, citation, summons or order has been received by
the Company, no complaint has been filed, no penalty has been assessed, no
Action or review is pending before any Governmental Authority or, to the
knowledge of the Company or any Subsidiary of the Company, threatened by any
Governmental Authority or other Person with respect to any matters relating to
the Company or any Subsidiary of the Company and arising out of any
Environmental Law or Environmental Permit which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on the
Company; and
(ii) the Company and each Subsidiary of the Company are in
compliance with all Environmental Laws and have, and are in compliance
with, all Environmental Permits, except where any noncompliance or
failure to obtain or comply with Environmental Permits is not,
individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Company; and
(iii) there are no liabilities of, or relating to, the Company
or any Subsidiary of the Company of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise,
arising under or relating to any Environmental Law or Environmental
Permit which, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on the Company.
(b) There are no liabilities disclosed in any environmental assessment,
investigation, study, audit, test, review or other analysis conducted at the
request of the Company or any Subsidiary of the Company in relation to the
current or prior business of the Company or any Subsidiary of the Company or any
property or facility now or previously owned, leased or operated by the Company
or any Subsidiary of the Company and of which the Company has knowledge which
individually or in the aggregate are reasonably likely to exceed $25,000 which
have not been disclosed to Buyer in writing as of the date hereof.
(c) Neither the Company nor any Subsidiary of the Company has knowledge
in relation to the current or prior business of the Company or any Subsidiary of
the Company owning or operating or having owned or operated any underground
storage tank which has been closed or abandoned in place, other than in
compliance with Environmental Laws and Environmental Permits, as in effect on
the date of such closure or abandonment, and each underground storage tank
presently owned, leased or operated by the Company or any Subsidiary of the
Company is in compliance with Environmental Laws and Environmental Permits and,
as of the date hereof, meets applicable local, state, federal and foreign
standards, including new system performance standards and upgrading requirements
contained in Subtitle I of the Resource Conservation and Recovery Act, 42 U.S.
C. 6991, ET SEQ., as amended, and any rules or regulations promulgated
thereunder, including 40 C.F.R. Section 280.20, ET SEQ., except to the extent
that any non-compliance, assessment or remediation costs arising from or
relating to underground
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storage tanks would not, individually or in the aggregate, be reasonably likely
to result in liabilities in excess of $10,000.
(d) Neither the Company nor any Subsidiary of the Company has knowledge
of any releases of Hazardous Substances at, to or from a facility or property
while owned or operated by the Company or any Subsidiary that either (i)
required reporting to a Governmental Authority under Environmental Laws or
Environmental Permits, or (ii) are reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company.
(e) To the knowledge of the Company or any Subsidiary of the Company,
no Hazardous Substances (exclusive of inventory and finished products) have been
transferred from any facility or property while owned or operated by the Company
or any Subsidiary of the Company to any off-site location for treatment,
storage, disposal, recycling or other waste management activity.
(f) For purposes of this Section 3.18, the following terms shall have
the meanings set forth below:
(i) "ENVIRONMENTAL LAWS" means any federal, state, local and
foreign law (including, without limitation, common law), treaty,
judicial decision, regulation, rule, judgment, order, decree,
injunction, agreement or contract with any Governmental Authority
relating to protection of human health and safety, the environment or
to the regulation or remediation of pollutants, contaminants, wastes or
chemicals or toxic, radioactive, ignitable, corrosive, reactive or
otherwise hazardous substances, wastes or materials;
(ii) "ENVIRONMENTAL PERMITS" means all permits, licenses,
franchises, certificates, approvals and other similar authorizations of
Governmental Authorities relating to or required by Environmental Laws
for operation of the business of the Company or any Subsidiary of the
Company as currently conducted;
(iii) "HAZARDOUS SUBSTANCE" means any material, substance,
chemical, raw material, product, byproduct or waste whose release to
the environment, including remediation of such releases, is regulated
under any Environmental law or Environmental Permit; and
(iv) "COMPANY" AND "SUBSIDIARY OF THE COMPANY" shall include
any entity which is, in whole or in part, a predecessor of the Company
or any Subsidiary of the Company.
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SECTION 3.19. OPINION OF FINANCIAL ADVISOR. The Board of Directors of
the Company has received the opinion of Vector Securities International, Inc.,
financial advisor to the Company, to the effect that, as of the date of this
Agreement, the Merger Consideration (whether in the form of Buyer Common Stock
or United States dollars) is fair to the stockholders of the Company from a
financial point of view, and such opinion has not been withdrawn.
SECTION 3.20. ANTITAKEOVER STATUTES AND CERTIFICATE OF INCORPORATION
PROVISIONS. The Board of Directors of the Company have taken all appropriate and
necessary actions such that, assuming the truth and accuracy of the
representations and warranties contained in Section 4.12, Section 203 of the
Delaware Law and Article Eighth of the Company's Third Amended and Restated
Certificate of Incorporation will not have any effect (including, without
limitation, a required vote of the stockholders of the Company owning more than
a majority of the outstanding shares of Company Stock as of the record date for
the Company Stockholder Meeting) on the Merger or the other transactions
contemplated by this Agreement. No other "fair price," "moratorium," "control
share acquisition," or other similar antitakeover statute or regulation of the
Delaware Law or, to the knowledge of the Company, any other jurisdiction is
applicable to the Merger or the other transactions contemplated by this
Agreement.
SECTION 3.21. RIGHTS AGREEMENT. (a) The Company has adopted an
amendment to the Rights Agreement, dated July 1, 1998, between the Company and
American Stock Transfer & Trust Company (the "RIGHTS AGREEMENT") with the effect
that as a result of entering into this Agreement or consummating the Merger
and/or the other transactions contemplated by this Agreement in accordance with
the terms of this Agreement (i) neither Buyer nor Merger Sub shall be deemed to
be an Acquiring Person (as defined in the Rights Agreement), (ii) neither the
Distribution Date (as defined in the Rights Agreement) nor a Flip-In Event or
Flip-Over Event (each as defined in the Rights Agreement) shall be deemed to
occur, (iii) the Rights (as defined in the Rights Agreement) will not separate
from the Company Stock, and (iv) the Rights will expire immediately prior to the
Merger Date.
(b) The Company has taken or will take all necessary action with
respect to all of the outstanding Rights (as defined in the Rights Agreement) so
that, as of immediately prior to the Merger Date, as a result of entering into
this Agreement and/or consummating in accordance with the terms of this
Agreement the Merger and/or the other transactions contemplated by this
Agreement, (i) neither the Company nor Buyer will have any obligations under the
Rights or the Rights Agreement as a result of the Merger and (ii) the holders of
the Rights will have no rights under the Rights or the Rights Agreement as a
result of the Merger.
SECTION 3.22. FINDERS FEES. Except for Vector Securities International,
Inc., a copy of whose engagement agreement has been provided to Buyer, there is
no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of the
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Company or any of its Subsidiaries who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement.
SECTION 3.23. TITLE TO AND CONDITION OF PROPERTIES. The Company and
each Subsidiary owns or holds under valid leases all real property, plants,
machinery and equipment necessary for the conduct of the business of the Company
and such Subsidiary as presently conducted, except where the failure to own or
hold such property, plants, machinery and equipment would not have a Material
Adverse Effect on the Company. Section 3.23 of the Company Disclosure Schedule
lists, and the Company has furnished to Buyer copies of, all appraisals and
valuations prepared by or on behalf of the Company during the two years
preceding the date of this Agreement with respect to the real property owned,
leased or used by the Company or any Subsidiary. There are no Liens on any
assets, rights or properties of the Company or any Subsidiary other than Liens
arising solely by operation of law.
SECTION 3.24. CONTRACTS. Schedule 3.24 lists all written or oral
contracts, agreements, guarantees, leases and executory commitments (each a
"CONTRACT") to which the Company or any Subsidiary is a party as of the date of
this Agreement and which fall within any of the following categories: (a)
contracts not entered into in the ordinary course of the Company's or any of its
Subsidiary's business; (b) joint venture, partnership and like agreements; (c)
Contracts which are service contracts (excluding contracts for delivery services
entered into in the ordinary course of business) or equipment leases involving
payments by the Company or any Subsidiary of more than $250,000 per year, (d)
Contracts containing covenants purporting to limit the freedom of the Company or
any Subsidiary of the Company to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (e) Contracts
which contain minimum purchase conditions or requirements or other terms that
restrict or limit the purchasing relationships of the Company or any Subsidiary
of the Company, (f) Contracts relating to any outstanding commitment for capital
expenditures of the Company or any Subsidiary of the Company in excess of
$50,000, (g) indentures, mortgages, promissory notes, loan agreements,
guarantees, in each case involving amounts in excess of $50,000, letters of
credit or other agreements or instruments of the Company or any Subsidiary of
the Company or commitments for the borrowing or the lending of amounts, in each
case in excess of $50,000, by the Company or any Subsidiary of the Company or
providing for the creation of any charge, security interest, encumbrance or lien
upon any of the assets of the Company or any Subsidiary of the Company, (h)
Contracts relating to the lease or sublease of or sale or purchase of real or
personal property involving any annual expense or price in excess of $50,000 and
not cancelable by the Company or any Subsidiary (without premium or penalty)
within one month, (i) Contracts involving annual revenues or expenditures to the
business of the Company or any Subsidiary of the Company in excess of 1.0% of
the Company's consolidated annual revenues, and (j) Contracts providing for
"earn-outs" or other contingent payments involving more than $20,000 over the
term of the Contract. All such Contracts are valid and binding obligations of
the Company and its Subsidiaries, as applicable, and, to the knowledge of the
Company, the valid and binding obligation of each other party thereto except
such Contracts which if not so valid and binding
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would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. None of the Company, any Subsidiary of the Company nor, to the
knowledge of the Company, any other party thereto is in violation of or in
default in respect of, nor has there occurred any event or condition which with
the passage of time or giving of notice (or both) would constitute a default
under, any such Contract except such violations or defaults under such Contracts
which, individually or in the aggregate, would not have a Material Adverse
Effect on the Company.
SECTION 3.25 ACCOUNTS RECEIVABLE. All accounts receivable and accrued
interest receivable of the Company and its Subsidiaries have arisen out of the
ordinary course of business and the accounts receivable reserves reflected on
the consolidated balance sheet of the Company as of September 30, 1998 are as of
such date established in accordance with U.S. GAAP and to the knowledge of the
Company will be collectible in the aggregate, in an amount not less than the
amounts carried on the balance sheet of the Company as of such date, net of any
reserves included therein, except for any uncollectible amounts which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
SECTION 3.26 RELATIONSHIPS. As of the date of this Agreement, (i) to
the Company's knowledge, the relationship of the Company and its Subsidiaries
with its respective customers and suppliers are satisfactory and, (ii) to the
Company's knowledge, the execution of this Agreement and consummation of the
transactions contemplated by this Agreement to be undertaken by the Company will
not have a Material Adverse Effect on the relationships of the Company or any
Subsidiary with such customers or suppliers, the effect of which, individually
or in the aggregate, would have a Material Adverse Effect on the Company or
Chrysalis DNX.
SECTION 3.27 PRODUCT WARRANTIES AND LIABILITIES. Neither the Company
nor any Subsidiary of the Company has any forms of warranties or guarantees of
its products and services that are in effect or proposed to be used by it. There
are no pending or, to the knowledge of the Company, threatened Actions under any
warranty or guaranty against the Company or any Subsidiary of the Company.
Neither the Company nor any Subsidiary of the Company has incurred, nor does the
Company know or have any reason to believe that there is any basis for alleging,
any material liability, damage, loss, cost or expense as a result of any
material defect or other deficiency (whether of design, materials, workmanship,
labeling instructions or otherwise) ("PRODUCT LIABILITY") with respect to any
product sold or services rendered by or on behalf of the Company or any
Subsidiary of the Company whether such Product Liability is incurred by reason
of any express or implied warranty (including, without limitation, any warranty
of merchantability or fitness), any doctrine of common law (tort, contract or
other), any statutory provision or otherwise and irrespective of whether such
Product Liability is covered by insurance, except for any Product Liability
which would not have a Material Adverse Effect on the Company.
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SECTION 3.28 AFFILIATE TRANSACTIONS. Except as contemplated by the
transactions contemplated by this Agreement, there are no Contracts or other
transactions between the Company or any Subsidiary of the Company, on the one
hand, and any (i) officer or director of the Company or any Subsidiary of the
Company, (ii) record or beneficial owner of five percent (5%) or more of the
voting securities of the Company or (iii) affiliate (as such term is defined in
Regulation 12b-2 promulgated under the Exchange Act) of any such officer,
director or beneficial owner, on the other hand.
SECTION 3.29 INSURANCE. The Company and its Subsidiaries are presently
insured, and during each of the past five calendar years have been insured
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. The policies of
fire, theft, errors and omission, liability and other insurance maintained with
respect to the assets or businesses of the Company and its Subsidiaries provide
adequate coverage against loss and may be continued by the Company or any
Subsidiary of the Company without modification or premium increase after the
Merger Date and for the duration of their current terms.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the disclosure schedule (each section of which
qualifies the correspondingly numbered representation and warrant only, except
where the information in any such section is disclosed in such a way to make its
relevance to any other representation or warranty readily apparent, in which
case, such section shall be deemed to also qualify such other representation and
warranty) of Buyer attached hereto (the "BUYER DISCLOSURE SCHEDULE"), Buyer
represents and warrants to the Company that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. (a) Buyer is a corporation
duly incorporated, validly existing and in good standing under the Canada
Business Corporations Act, and has all corporate powers and has or has applied
for all permits, licenses, authorizations, consents, approvals and franchises
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except (i) where the failure to have such permits,
licenses, authorizations, consents, approvals and franchises and (ii) for those
jurisdictions where the failure to be so qualified or in good standing is not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on Buyer. Buyer has heretofore delivered to the Company true and complete
copies of Buyer's Articles of Amalgamation and Certificate of Amalgamation
("ORGANIZATIONAL DOCUMENTS") as currently in effect.
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(b) Merger Sub is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation, and has
all corporate powers and all permits, licenses, authorizations, consents,
approvals and franchises required to carry on its business as it is now being
conducted except where the failure to have such permits, licenses,
authorizations, consents, approvals and franchises is not individually, or in
the aggregate, reasonably likely to have a Material Adverse Effect on Merger
Sub. Since its date of incorporation, Merger Sub has not engaged in any
activities other than in connection with the transactions contemplated by this
Agreement.
SECTION 4.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance by each of Buyer and Merger Sub (each, a "BUYER PARTY") of this
Agreement and the consummation by each Buyer Party of the transactions
contemplated by this Agreement are within the corporate powers of such Buyer
Party and have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by each Buyer Party and
constitutes a valid and binding agreement of such Buyer Party enforceable
against such Buyer Party in accordance with its terms.
SECTION 4.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by each Buyer Party of this Agreement and the consummation by such
Buyer Party of the transactions contemplated by this Agreement require no
action, by or in respect of, or filing with, any Governmental Authority other
than (a) the filing of the Certificate of Merger in accordance with the Delaware
Law; (b) compliance with any applicable requirements of the HSR Act; (c)
compliance with any applicable requirements of the 1934 Act; (d) compliance with
any applicable requirements of the 1933 Act; (e) compliance with any applicable
foreign or state securities or Blue Sky laws; (f) filings and notices not
required to be made or given until on or after the Merger Date; and (g)
immaterial actions or filings relating to ordinary operational matters.
SECTION 4.04. NON-CONTRAVENTION. The execution, delivery and
performance by each Buyer Party of this Agreement and the consummation by such
Buyer Party of the transactions contemplated by this Agreement do not and will
not (a) contravene or conflict with the Organizational Documents or certificate
of incorporation or bylaws, as the case may be, of such Buyer Party, (b)
assuming compliance with the matters referred to in Section 4.03 and Section
4.03 of the Buyer Disclosure Schedule, contravene or conflict with or constitute
a violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to Buyer or any Subsidiary of Buyer, (c)
constitute a default (or an event which with notice, the lapse of time or both
would become a default) under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of Buyer or any
Subsidiary of Buyer or to a loss of any benefit to which Buyer or any Subsidiary
of Buyer is entitled under any provision of any agreement, contract or other
instrument binding upon Buyer or any Subsidiary of Buyer or any license,
franchise, permit or other similar authorization held by Buyer or any Subsidiary
of
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Buyer, (d) require any action or consent or approval of any Person other than a
Governmental Authority, or (e) result in the creation or imposition of any Lien
on any asset of Buyer or any Subsidiary of Buyer, other than, in the case of the
events specified in clauses (b), (c), (d) and (e) (other than indebtedness of
Buyer or any subsidiary of Buyer), any such event which, individually or in the
aggregate, has not had, and is not reasonably likely to have, a Material Adverse
Effect on Buyer.
SECTION 4.05. CAPITALIZATION. The authorized capital stock of (a) Buyer
consisted of (i) an unlimited number of shares of Buyer Common Stock and (ii) an
unlimited number of preferred shares issuable in series ("BUYER PREFERRED
STOCK"), and (b) on the date hereof, Merger Sub consisted of 3,000 shares of
Merger Sub Common Stock. As of August 31, 1998, there were 24,857,059 shares of
Buyer Common Stock outstanding and no shares of Buyer Preferred Stock
outstanding. As of August 31, 1998, an aggregate of 2,428,920 shares of Buyer
Common Stock were reserved for issuance or issuable under employee benefit or
other compensation plans or programs of Buyer. All outstanding shares of capital
stock of each Buyer Party have been duly authorized and validly issued and are
fully paid and nonassessable. All shares of Buyer Common Stock, when issued in
the Merger, will be duly authorized and validly issued and will be fully paid
and non-assessable.
SECTION 4.06. PUBLIC FILINGS. Buyer has delivered to the Company all
documents, reports, schedules, registration statements and proxy statements
filed by Buyer with the Ontario Securities Commission or the Quebec Securities
Commission (each, a "CANADIAN SECURITIES COMMISSION") on or after August 1,
1997. Buyer has filed all required documents, reports, schedules, forms and
statements with either Canadian Securities Commission since August 1, 1997
(collectively, the "BUYER PUBLIC DOCUMENTS"). As of their respective dates, or
if amended, as of the date of the last such amendment, the Buyer Public
Documents complied, and all documents required to be filed by Buyer with the
either Canadian Securities Commission after the date hereof and prior to the
Merger Date (the "SUBSEQUENT BUYER PUBLIC DOCUMENTS") will comply, in all
material respects with the requirements of the Ontario or Quebec securities
laws, as the case may be, and none of the Buyer Public Documents contained, and
the Subsequent Buyer Public Documents will not contain, any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 4.07. FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Buyer
included in the Buyer Public Documents at the time filed (and, in the case of
registration statements and proxy statements, on the date of effectiveness and
the date of mailing, respectively) complied as to form in all material respects
with applicable accounting requirements of the Ontario or Quebec securities
laws, as the case may be, were prepared in accordance with generally accepted
accounting principles applied in Canada ("CANADIAN GAAP") applied on a
consistent basis during the periods involved (except
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as may be indicated in the notes thereto) and fairly present (subject in the
case of unaudited statements to normal, recurring audit adjustments) the
consolidated financial position of Buyer as at the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended. For purposes of this Agreement, "BUYER BALANCE SHEET" means the
consolidated balance sheet of Buyer as of August 31, 1998 set forth in the Buyer
Annual Report filed with the Canadian Securities Commissions and "BUYER BALANCE
SHEET DATE" means August 31, 1998.
SECTION 4.08. DISCLOSURE DOCUMENTS. (a) Each document required to be
filed by Buyer with the SEC in connection with the transactions contemplated by
this Agreement (the "BUYER SEC DISCLOSURE DOCUMENTS"), including, without
limitation, the registration statement of Buyer to be filed with the SEC on Form
F-4 (or other appropriate form) in connection with the issuance of Buyer Common
Stock pursuant to this Agreement (the "FORM F-4") and any amendments or
supplements thereto, will, when filed, comply as to form in all material
respects with the applicable requirements of the 1933 Act. Buyer is eligible to
use Form F-4 for the registration of the Buyer Common Stock to be issued
pursuant to the Merger. Each document required to be filed by Buyer under the
Ontario or Quebec Securities laws in connection with the transactions
contemplated by this Agreement (together with the Buyer SEC Disclosure
Documents, the "BUYER DISCLOSURE DOCUMENTS"), will, when filed, comply as to
form in all material respects with the applicable requirements of the Ontario or
Quebec securities laws, as applicable.
(b) At the time the prospectus which forms a part of the Form F-4 (the
"BUYER PROSPECTUS") or any amendment or supplement thereto is first mailed to
stockholders of the Company, and at the time such stockholders vote on the
Merger, and at the Merger Date the Buyer Prospectus, as supplemented or amended,
if applicable, will not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. At the time of the filing of any Buyer Disclosure Document and at
the time of any distribution thereof, such Buyer Disclosure Document will not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in this Section 4.08 will not apply to statements
included in or omissions from the Buyer Disclosure Documents based upon
information furnished to Buyer by the Company specifically for use therein.
SECTION 4.09. INFORMATION SUPPLIED. The information supplied or to be
supplied by Buyer for inclusion or incorporation by reference in (i) the Company
Proxy Statement or any amendment or supplement thereto will not, at the time the
Company Proxy Statement is first mailed to stockholders of the Company and at
the time such stockholders vote on the adoption of this Agreement, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading, and (ii) any Company Disclosure
Document (other than the
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Company Proxy Statement, and any amendments or supplements thereto) will not, at
the time of effectiveness of such Company Disclosure Document and at the time of
any distribution by the Company thereof, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
SECTION 4.10. ABSENCE OF CERTAIN CHANGES. Since the Buyer Balance Sheet
Date and except as set forth in the Buyer Public Documents, Buyer and its
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:
(a) any event, occurrence or development of a state of circumstances or
facts which has had or is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Buyer other than any of the foregoing
(i) relating to the economy or securities markets in general, (ii) relating to
Buyer's industry in general or (iii) arising from the announcement or thereafter
the pendency of this Agreement or the transactions contemplated by the
Transaction Document;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Buyer, or any
repurchase, redemption or other acquisition by Buyer or any Subsidiary of Buyer
of any amount of outstanding shares of capital stock or other securities of, or
other ownership interests in, Buyer or any of its Subsidiaries;
(c) any amendment of any material term of any outstanding security of
Buyer or any Subsidiary of Buyer; or
(d) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of Buyer or any
Subsidiary of Buyer which, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on Buyer.
SECTION 4.11. NO UNDISCLOSED MATERIAL LIABILITIES. There are no
liabilities, commitments or obligations (whether pursuant to contracts or
otherwise) of Buyer or any Subsidiary of Buyer of any kind whatsoever which,
individually or in the aggregate, have had or are reasonably likely to have a
Material Adverse Effect on Buyer, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which is reasonably likely to result in such a
liability, commitment or obligation, including, without limitation, any fines,
disciplinary actions or other adverse actions that may be taken or reported
concerning the conduct of Buyer or any of its Subsidiaries, other than:
(a) liabilities, commitments or obligations disclosed or provided for
in the Buyer Balance Sheet (including the notes thereto) or in the Buyer Public
Documents;
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(b) liabilities, commitments or obligations incurred in the ordinary
course of business consistent with past practice since the Buyer Balance Sheet
Date; and
(c) liabilities, commitments or obligations under this Agreement.
SECTION 4.12. OWNERSHIP OF COMPANY STOCK. None of Buyer nor its
associates or affiliates (as such terms are defined in Section 203(c) of the
Delaware Law) owns, or has owned (within the meaning of Section 203(c)(9) of the
Delaware Law) at any time during the three years immediately prior to the date
of this Agreement, any shares of Company Common Stock.
SECTION 4.13. FINDERS FEES. Except for Pennsylvania Merchant Group, a
copy of whose engagement agreement has been provided to the Company, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of the Buyer or any of its Subsidiaries who
might be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
SECTION 4.14. SUFFICIENT CASH TO REPAY CERTAIN DEBT. Buyer will have
sufficient cash on hand (or amounts available for borrowing under loan
facilities which would permit the borrowings to be used for such purpose) to pay
immediately after the Merger Date the amounts referred to in Section 6.03.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.01. CONDUCT OF THE COMPANY. From the date hereof until the
Merger Date, except (i) as provided in the Company Disclosure Schedule, (ii)
actions related to the Shut-Downs contemplated by Section 5.04, or (iii) as
otherwise consented to by Buyer (which consent shall not be unreasonably
withheld or delayed), the Company shall, and shall cause its Subsidiaries to,
conduct their business in the ordinary course consistent with past practice and
use their commercially reasonable efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing, except as expressly permitted in this Agreement
(including, without limitation, the preceding sentence), from the date hereof
until the Merger Date without prior consent of Buyer (which consent shall not be
unreasonably withheld or delayed):
(a) Neither the Company, nor any Subsidiary of the Company, will adopt
or propose any change in its respective certificate of incorporation or bylaws;
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(b) The Company will not, and will not permit any Subsidiary of the
Company to, merge or consolidate with any other Person or, other than as
provided in the Company's capital expenditure budget (included as Section
5.01(b) of the Company Disclosure Schedule) in the ordinary course of business,
acquire a material amount of assets of any other Person;
(c) The Company will not, and will not permit any Subsidiary of the
Company to, sell, lease, license or otherwise dispose of any material assets or
property except pursuant to (i) existing contracts or commitments and (ii) any
sale of operating procedures, computerized project tracking systems and training
manuals to BML Japan (provided, however, that any such sale to BML Japan shall
not obligate the Company to provide any services or training beyond January 31,
1999); PROVIDED, however, that the Company and its Subsidiaries may continue to
grant non-exclusive sublicenses related to the 191 patent in the ordinary course
of business consistent with past practice.
(d) The Company will not, and will not permit any Subsidiary of the
Company to, declare, set aside or pay any dividend or make any other
distribution with respect to any shares of the capital stock of the Company or
any Subsidiary of the Company or in respect of any securities convertible or
exchangeable for, or any rights, options or warrants to acquire, any capital
stock of the Company or any Subsidiary of the Company;
(e) The Company will not, and will not permit any Subsidiary of the
Company to, create or assume any Lien on any material asset other than Liens
arising solely by operation of law;
(f) The Company will not, and will not permit any Subsidiary of the
Company to, issue, grant, deliver or sell, or authorize or propose the issuance,
grant, delivery or sale of, any Company Securities, any Company Subsidiary
Securities or any securities convertible into or exchangeable for, or any
rights, warrants or options to acquire, any Company Securities or Company
Subsidiary Securities other than (i) pursuant to the exercise of a stock option
or warrant to purchase shares of Company Stock outstanding on the date of this
Agreement, or (ii) the issuance in the ordinary course of business consistent
with past practice of shares of Company Stock to the Company's 401(k) plan.
(g) The Company (i) will not adjust, split, combine or reclassify, or
take any other similar action with respect to, any capital stock of the Company,
and (ii) the Company will not, and will not permit any Subsidiary of the Company
to, directly or indirectly, repurchase, redeem or otherwise acquire an amount of
shares of capital stock of, or in respect of any securities convertible or
exchangeable for, or any rights, options or warrants to acquire, any capital
stock of, or other ownership interests in, the Company or any Subsidiary of the
Company, or (iii) enter into any agreement, understanding or arrangement with
respect to the sale or voting of any capital stock of the Company or any
Subsidiary;
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(h) The Company will not, and will not permit any Subsidiary of the
Company to, incur or assume any indebtedness from any Person (other than, in the
case of a Subsidiary of the Company, the Company or any other subsidiary of the
Company) for borrowed money or guarantee any such indebtedness;
(i) Except for (i) loans, advances or capital contributions to or
investments in Subsidiaries of the Company, (ii) loans or advances to employees
in the ordinary course of business consistent with past practice and in amounts
not exceeding $5,000 per employee or (iii) investments in securities in the
ordinary course of business consistent with past practices, the Company will
not, and will not permit any Subsidiary of the Company to, make any material
loans, advances or capital contributions to, or investments in, any other
Person;
(j) The Company will not, and will not permit any of its Subsidiaries
to, (i) grant any severance or termination pay to, or enter into any employment,
termination or severance arrangement with, any director, officer, consultant or
employee of the Company or any Subsidiary of the Company, (ii) enter into any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, officer or employee of the
Company or any Subsidiary, (iii) increase or decrease benefits payable under any
existing severance or termination pay policies or employment agreements, (iv)
increase compensation, bonus or other benefits payable to directors, officers,
consultant or employees of the Company or any Subsidiary of the Company, other
than in the ordinary course of business consistent with past practice; (v) adopt
any new Employee Plan or Benefit Arrangement; or (vi) otherwise amend or modify,
any existing Employee Plan or Benefit Arrangement except to the extent required
by applicable law;
(k) The Company will not, and will not permit any of its Subsidiaries
to, authorize, recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation or dissolution of the Company or any Subsidiary
of the Company, or any plan of division or share exchange involving the Company
or any of its Subsidiaries;
(l) The Company will not, and will not permit any Subsidiary of the
Company to, change any method of accounting or any accounting principle or
practice used by the Company or any Subsidiary of the Company, except for any
such change required by reason of a change in U.S. GAAP or Regulation S-X;
(m) Neither the Company nor any Subsidiary shall, to the extent it may
affect or relate to the Company or any Subsidiary, make or change any tax
election, change any annual tax accounting period, adopt or change any method of
tax accounting, file any amended Tax Return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax refund,
consent to any extension or waiver of the limitations period applicable to any
Tax claim or assessment or take or omit to take any other action, if any such
action or omission would have the effect of, in the aggregate, increasing the
Tax liability, or in the aggregate, reducing any
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Tax asset of the Company or any Subsidiary of the Company except to the extent
such increase or reduction is adequately provided for, under U.S. GAAP, on the
Company Balance Sheet;
(n) All Tax Returns not required to be filed on or before the date
hereof (i) shall be filed when due in accordance with all applicable laws and
(ii) as of the time of filing, shall correctly reflect in all material respects
the facts regarding the income, business, assets, operations, activities and
status of the Company, its Subsidiaries and any other information required to be
shown therein;
(o) Neither the Company nor any Subsidiary of the Company shall reserve
any amount for or make any payment of Taxes to any Person or any Taxing
Authority, except for such Taxes as are due or payable or have been properly
estimated in accordance with applicable law as applied in a manner consistent
with past practice of the Company or any such Subsidiary, as the case may be;
(p) Neither the Company nor any of its Subsidiaries will:
(i) settle any Actions, whether now pending or hereafter made
or brought, for an amount in excess of $25,000;
(ii) modify, amend or terminate, or waive, release or assign
any material rights or claims with respect to, any Contract set forth
in Section 3.24 of the Company Disclosure Schedule, or, except to the
extent required by Applicable Law and advised by outside counsel, any
confidentiality agreement to which the Company or any Subsidiary of the
Company is a party;
(iii) incur or commit to any capital expenditures, obligations
or liabilities in respect thereof which exceed or would exceed $10,000,
individually, or $50,000 in the aggregate, other than capital
expenditures related to the Company's on-going construction of
facilities which do not exceed amounts previously disclosed by the
Company to Buyer;
(iv) make any material changes or modifications to any pricing
policy or investment policy;
(v) take any action that would result in the representations
and warranties set forth in Article III being false or incorrect in any
material respect, other than inadvertent actions that do not result in
the representations and warranties being unable to be true and correct
in all material respects by the Merger Date;
(vi) enter into any customer contract or agreement, or any
other contract, lease, agreement or commitment not otherwise specified
in this Section 5.01, for an amount in excess of $100,000 individually;
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(vii) enter into, amend or terminate any real property lease
or any commitment in respect thereof;
(viii) terminate the employment or engagement of any employee
or consultant or agent of the Company or any Subsidiary; or
(ix) pay or approve any other expense or disbursement in
excess of $25,000 individually (except for payroll and related tax
withholding and other expenses (including insurance and 401(k)
contributions), Tax liabilities, utilities, lease payments, principal
and interest payments on outstanding indebtedness of the Company and/or
any of its Subsidiaries, payments to suppliers, Shut-Down expenses,
legal fees and expenses and, upon closing of the Merger, investment
banking fees and expenses).
(q) The Company will not, and will not permit any Subsidiary of the
Company to, agree to do any of the foregoing.
The Company and its Subsidiaries will consult regularly with the Buyer in
respect of the operation of its business prior to the Merger Date; provided,
however, that the provisions of this sentence will not be deemed to have been
breached unless and until Buyer has notified the Company in writing of such
breach and the Company and its Subsidiaries have failed to comply with the
specific terms of such notice.
SECTION 5.02. STOCKHOLDER MEETING; PROXY MATERIALS. (a) Subject to
Section 5.03, the Company shall cause a meeting of its stockholders (the
"COMPANY STOCKHOLDER MEETING") to be duly called and held as soon as reasonably
practicable for the purpose of voting on the adoption of this Agreement and, to
the extent submitted to the Company's stockholders for approval, the,
transactions contemplated by this Agreement, and the Board of Directors of the
Company shall recommend adoption of this Agreement by the Company's
stockholders; provided that such mailing shall not in any event be mailed during
the Listing Period unless Buyer has received the Nasdaq Letter; provided further
that such meeting need not be called and held and, prior to the Company
Stockholder Meeting, such recommendation may be withdrawn, modified or amended
to the extent that, as a result of the commencement or receipt of an Acquisition
Proposal with respect to the Company, the Board of Directors of the Company
determines in good faith, in accordance with Section 5.03, that such Acquisition
Proposal constitutes a Superior Proposal.
(b) Subject to Section 5.03, in connection with the Company Stockholder
Meeting, the Company will (i) promptly prepare and file with the SEC, will use
commercially reasonable efforts to have cleared by the SEC and will thereafter
mail to its stockholders as promptly as practicable after the time period
referred to in Section 1.07 for determination of whether a Listing Failure has
occurred the Company Proxy Statement and all other proxy materials for such
meeting, (ii) use commercially reasonable efforts to obtain the necessary
adoption by its
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stockholders of this Agreement and the approval of the transactions contemplated
by this Agreement, and (iii) otherwise comply with all legal requirements
applicable to such meeting.
SECTION 5.03. OTHER OFFERS. From the date hereof until the termination
of this Agreement, the Company will not, and will cause its Subsidiaries and the
directors, officers, employees, financial advisors and other agents or
representatives of the Company or any of its Subsidiaries not to, directly or
indirectly, take any action to solicit, initiate or encourage any Acquisition
Proposal with respect to the Company or engage in negotiations with, or disclose
any non-public information relating to the Company or any Subsidiary of the
Company or afford access to the properties, books or records of the Company or
any Subsidiary of the Company to, any Person that has informed the Company that
it is considering making, or has made, an Acquisition Proposal with respect to
the Company, or any Person that the Company after reasonable inquiry believes is
a potential purchaser of the Company, provided, however, that the Company may,
in response to an unsolicited bona fide written proposal regarding an
Acquisition Proposal by any Person, disclose such non-public information to or
engage in negotiations with such Person, if the Board of Directors of the
Company determines in good faith that such Acquisition Proposal is reasonably
likely to be a Superior Proposal, and, provided further, that prior to
furnishing non-public information to, or entering into discussions or
negotiations with, such Person, the Company receives from such Person an
executed confidentiality agreement with terms no less favorable to the Company
than those contained in the Letter Agreement dated as of July 21, 1998 between
Buyer and the Company ("CONFIDENTIALITY AGREEMENT"). The Company will promptly
(and in no event later than 24 hours after receipt of the relevant Acquisition
Proposal with respect to the Company), notify (which notice shall be provided
orally and in writing and shall identify the Person making the relevant
Acquisition Proposal with respect to the Company) Buyer after receipt of any
Acquisition Proposal or any indication from any Person that such Person is
considering making an Acquisition Proposal with respect to the Company or any
request for non-public information relating to the Company or any Subsidiary of
the Company or for access to any properties, books or records of the Company or
any Subsidiary of the Company by any Person that may be considering making, or
has made, an Acquisition Proposal with respect to the Company and will keep
Buyer fully informed of the status of any such Acquisition Proposal with respect
to the Company. The Company shall give Buyer at least one business day's advance
notice of any information to be supplied to, and at least two days' advance
notice of any agreement to be entered into with, any Person making such
Acquisition Proposal with respect to the Company. Except as provided herein, the
Company shall, and shall cause its Subsidiaries and the directors, officers,
employees, financial advisors and other agents or representatives of the Company
or any of its Subsidiaries to, cease immediately and cause to be terminated all
activities, discussions or negotiations, if any, with any Persons conducted
heretofore with respect to any Acquisition Proposal with respect to the Company.
For purposes of this Agreement, "ACQUISITION PROPOSAL" means any offer or
proposal for, or any indication of interest in, (i) a merger or other business
combination in any manner of an equity interest in an amount equal to or greater
than 20% of the class of such equity security then outstanding or a substantial
portion of the assets of, the Company or any Subsidiary of the Company, in each
case other than the
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transactions contemplated by this Agreement. For purposes of this Agreement,
"SUPERIOR PROPOSAL" means an Acquisition Proposal with respect to the Company
which the Board of Directors of the Company determines in good faith (based on
the written advice of an investment banking firm of national reputation taking
into account all of the terms and conditions of the Acquisition Proposal,
including any conditions to consummation) to be more favorable and provide
greater value to the Company's stockholders than the Merger.
SECTION 5.04. SHUT-DOWNS. After execution of this Agreement, the
Company shall commence the process of shutting down its facilities located in
Austin, Texas, Cham, Switzerland and Dusseldorf, Germany, and reducing expenses
in respect of its operations in Mannheim, Germany, and Israel (collectively, the
"SHUT-DOWNS") with the goal of completing each of the Shut-Downs as soon as
practicable (consistent with maintaining good client relationships). The Company
shall accrue, in accordance with U.S. GAAP, all costs and expenses related to
the ShutDowns. Notwithstanding the foregoing, Buyer acknowledges that the
Shut-Downs in the time and in the manner agreed to by Buyer and the Company may
not be completed prior to the Merger Date and that a significant portion of the
activities, costs and expenses related to the Shut-Downs will occur after the
Merger Date. The Company agrees to update Buyer on a regular basis (no less than
every two (2) weeks and within one (1) business day of request by Buyer) prior
to the Merger Date regarding the status, activities and costs and expenses (and
related accounting therefor) of the Shut-Downs. Schedule 5.04 sets forth a good
faith estimate of all costs and expenses (including reserves and accruals) the
Company and its Subsidiaries expect to incur after the date hereof until the
Merger Date in connection with the Shut-Downs, on a location-by- location and
item-by-item basis.
SECTION 5.05. INTELLECTUAL PROPERTY MATTERS. The Company and its
Subsidiaries shall use its respective commercially reasonable efforts to
preserve its ownership rights to the Intellectual Property free and clear of any
Liens and shall use its commercially reasonable efforts to assert, contest and
prosecute any infringement of any issued foreign or domestic patent, trademark,
service mark, or copyright that forms a part of the Intellectual Property or any
misappropriation or disclosure of any trade secret, confidential information or
know-how that forms the Intellectual Property; provided, however, that the
Company and its Subsidiaries need not preserve or prosecute any foreign
trademark if the failure to preserve or prosecute such trademark would not have
a Material Adverse Effect on the Company.
SECTION 5.06. NOTICE OF PREPAYMENT. The Company will provide written
notice of its intent to prepay immediately after the Merger Date all amounts
outstanding under the Term Loan and Security Agreement dated as of August 29,
1997, as amended, among the Company, its Subsidiaries listed therein and First
Union National Bank, as successor to CoreStates Bank, N.A. ("FIRST UNION"), and
the ancillary documents, as amended, related thereto (the "FIRST UNION
AGREEMENTS").
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SECTION 5.07. SHARED SERVICES. The Company shall use commercially
reasonably efforts to obtain written confirmation from Iffa Credo SA ("IFFA")
reasonably satisfactory to Buyer that Iffa will continue to provide after the
Merger Date to Buyer, the Surviving Corporation and/or its Subsidiaries services
of the same nature, type, quantity and on the same terms as have been provided
by Iffa to the Company and/or its Subsidiaries prior to the date of this
Agreement and consistent with past practice.
SECTION 5.08. HACKEL AFFILIATE LETTER AND SUPPORT/VOTING AGREEMENT. The
Company shall use commercially reasonable efforts to cause Alec Hackel to
execute an Affiliate Letter and Support/Voting Agreement prior to the mailing of
the Company Proxy Statement.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
SECTION 6.01. CONDUCT OF BUYER. From the date hereof until the Merger
Date, Buyer shall, and shall cause its Subsidiaries to, conduct their business
in all material respects in the ordinary course consistent with past practice
and use their commercially reasonable efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing, except as expressly permitted in this Agreement,
from the date hereof until the Merger Date:
(a) Buyer will not adopt or propose any change in its Organizational
Documents that would materially and adversely affect the rights of holders of
Company Stock as anticipated holders of Buyer Common Stock;
(b) Buyer will not declare, set aside or pay any dividend or make any
other distribution with respect to any shares of Buyer's capital stock.
SECTION 6.02. LISTING OF STOCK. Within five (5) business days of the
date of this Agreement, Buyer shall make application to Nasdaq and to all
applicable regulatory authorities, including, without limitation, the filing of
a Form 40-F with the SEC, for the listing on Nasdaq's National Market System
("NMS") of the Buyer Common Stock and to use its commercially reasonable efforts
to cause such Buyer Common Stock to be approved for listing on Nasdaq's NMS
effective on or prior to the Merger Date.
SECTION 6.03. REPAYMENT OF CERTAIN DEBT. Immediately after the Merger
Date, Buyer shall (or shall cause Merger Sub to) repay or refinance all amounts
outstanding under (i) the First
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Union Agreements and (ii) the 6% Subordinated Note due March 16, 2001 issued by
the Company to Panlabs International, Inc., as amended (the "MDS NOTE").
SECTION 6.04. FINANCING. If a Listing Failure occurs, Buyer shall use
its best efforts to secure any financing required to permit it to pay on the
Merger Date the Merger Consideration.
ARTICLE 7
COVENANTS OF BUYER AND THE COMPANY
SECTION 7.01. COMMERCIALLY REASONABLE EFFORTS. (a) Subject to the terms
and conditions of this Agreement, each party will use its commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the Merger and the other transactions
contemplated by this Agreement.
(b) Neither Buyer nor the Company shall take any action, or omit to
take any action, that would cause its representations and warranties contained
herein to be inaccurate such that the conditions in Article 8 would not be
satisfied.
SECTION 7.02. COOPERATION. Without limiting the generality of Section
7.01(a), Buyer and the Company shall together, or pursuant to an allocation of
responsibility to be agreed between them, coordinate and cooperate (i) in
connection with the preparation of the Company Disclosure Documents and the
Buyer Disclosure Documents, (ii) in determining whether any action by or in
respect of, or filing with, any Governmental Authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the Merger or
the other transactions contemplated by this Agreement, and (iii) in seeking any
such actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith or with the Company
Disclosure Documents and the Buyer Disclosure Documents, and timely seeking to
obtain any such actions, consents, approvals or waivers. Subject to the terms
and conditions of this Agreement, Buyer and the Company will each use its
reasonable best efforts to have the Form F-4 declared effective by the SEC under
the 1933 Act as promptly as practicable after the Form F-4 is filed with the
SEC.
SECTION 7.03. PUBLIC ANNOUNCEMENTS. Upon execution of this Agreement,
Buyer and the Company will each issue a press release, each in form satisfactory
to the other party, announcing the transactions contemplated by this Agreement.
Buyer and the Company will consult with each other before issuing any other
press release or making any public statement with respect to this Agreement and
the transactions contemplated by this Agreement and, except, as may be required
by applicable law or any listing or similar agreement with any securities
exchange
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on which the Buyer Common Stock is listed or Nasdaq, will not issue any such
press release or make any such public statement prior to such consultation.
SECTION 7.04. ACCESS TO INFORMATION. From the date hereof until the
Merger Date, the Company and Buyer (each, in such capacity, a "PROVIDING PARTY")
will give (or cause to be given) to the other party (the "RECEIVING PARTY"), its
counsel, financial advisors, auditors and other authorized representatives full
access, during regular business hours, to the offices, properties, employees and
consultants, books and records of the Providing Party, will furnish (or cause to
be furnished) to the Receiving Party, its counsel, financial advisors, auditors
and other authorized representatives such financial and operating data and other
information as such Receiving Party may reasonably request and will instruct the
employees, counsel and financial advisors of the Providing Party and its
Subsidiaries to cooperate with the Receiving Party in its investigation of the
business of the Providing Party and its Subsidiaries; provided that no
investigation pursuant to this Section shall affect any representation or
warranty given by the Providing Party to the Receiving Party hereunder. Unless
otherwise required by applicable law, each party hereto agrees that it shall,
and it shall cause its Subsidiaries and its and their respective officers,
directors, employees, auditors and agents to, hold, in confidence all non-public
information so acquired and to use such information solely for purposes of
effecting the transactions contemplated by this Agreement. From the date hereof
until the Merger Date, each Providing Party will cooperate with the efforts of
the Receiving Party, its counsel, financial advisors, auditors and other
authorized representatives to have reasonable access to the Providing Party's
customers and suppliers. The information obtained pursuant to this Section shall
be subject to any confidentiality agreements or other confidentiality
obligations currently binding upon the Providing Party or any of its
Subsidiaries; provided that the Providing Party shall use commercially
reasonable efforts to obtain any waivers under such agreements or obligations to
permit the Providing Party to comply with its obligations hereunder.
SECTION 7.05. FURTHER ASSURANCES. At and after the Merger Date, the
directors and officers of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of (x) the Company or Merger Sub,
and (y) Buyer, any deeds, bills of sale, assignments or assurances and to take
and do, in the name and on behalf of (x) the Company or Merger Sub, and (y)
Buyer, any other actions and things to vest, perfect or confirm of record or
otherwise in the Surviving Corporation any and all right, title and interest in,
to and under any of the rights, properties or assets of the Company acquired or
to be acquired by the Surviving Corporation as a result of the Merger or
otherwise carry out the provisions of the Agreement, and the Company and its
officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney in respect of the foregoing.
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SECTION 7.06. NOTICES OF CERTAIN EVENTS. Each of the Company and Buyer
shall promptly notify the other party of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement;
(c) any notice or any communication from any customer or supplier
indicating that such customer or supplier intends to terminate or restrict its
existing relationship as a result of the public announcement or the pendency of
the transactions contemplated by this Agreement;
(d) any Actions commenced or, to its knowledge threatened against,
relating to or involving or otherwise affecting such party that, if pending on
the date of this Agreement, would have been required to have been disclosed
pursuant to Section 3.13 only or that relate to the consummation of the
transactions contemplated by this Agreement; and
(e)(i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would cause any representation or warranty of such party
contained in this Agreement to be untrue or inaccurate at or prior to the Merger
Date, and (ii) any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by its
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 7.06(e) shall not limit or otherwise affect the remedies available
hereunder to either Buyer or the Company, as applicable.
SECTION 7.07. DIRECTOR AND OFFICER LIABILITY. (a) From and after the
Merger Date, Buyer shall cause the Surviving Corporation to indemnify, defend
and hold harmless any Person who is on the date hereof, or has been at any time
prior to the date hereof, or who becomes prior to the Merger Date, an officer,
director, or employee or agent (the "INDEMNIFIED PARTY") of the Company or any
of its Subsidiaries against all losses, claims, damages, liabilities, costs and
expenses (including attorney's fees and expenses), judgments, fines, losses, and
amounts paid in settlement in connection with any actual or threatened action,
suit, claim, proceeding or investigation (each a "CLAIM") to the extent that any
such Claim is based on, or arises out of, (i) the fact that such Person is or
was a director, officer, employee or agent of the Company or any of its
Subsidiaries at any time prior to the Merger Date or is or was serving at the
request of the Company or any of its Subsidiaries as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise at any time prior to the Merger Date, or (ii) this Agreement or
any of the transactions contemplated hereby or thereby in each case to the
extent that any such Claim pertains to any matter or fact arising, existing, or
occurring
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prior to or at the Merger Date, regardless of whether such Claim is asserted or
claimed prior to, at or after the Merger Date (the matters described in clauses
(i) and (ii) the "PRE-MERGER MATTERS") to the fullest extent indemnified under
the Company's certificate of incorporation, bylaws in effect as of the date
hereof or indemnification agreements in effect at the date hereof, including
provisions relating to advancement of expenses incurred in the defense of any
action or suit; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable laws. Buyer and the
Surviving Corporation shall also honor the indemnification agreements between
the Company or any of its Subsidiaries, as the case may be, and any current or
former officer or director of the Company or any such Subsidiary, as the case
may be, existing on the date of this Agreement and which are listed in the
Company Disclosure Schedule (and a form of which has been provided to Buyer).
(b) Buyer and the Surviving Corporation agree that all rights to
indemnification and all limitations or exculpation of liabilities existing in
favor of the Indemnified Party as provided in the Company's certificate of
incorporation and bylaws as in effect as of the date hereof shall continue in
full force and effect with respect to Pre-Merger Matters, without any amendment
thereto, for a period of six years from the Merger Date to the extent such
rights are consistent with Delaware Law; provided that, in the event any Claim
or Claims with respect to any such Pre-Merger Matters are asserted or made
within such six year period, all rights to indemnification in respect of any
such Claim or Claims shall continue until disposition of any and all such
Claims; provided however, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under Delaware Law, the Company's certificate of incorporation or
bylaws or such agreements, as the case may be, shall be made by independent
legal counsel selected by the Indemnified Party and reasonably acceptable to
Buyer, retained at Buyer's expense; and provided further, that nothing in this
Section 7.07 shall impair any rights or obligations of any present or former
directors or officers of the Company.
(c) Buyer or the Surviving Corporation shall provide directors and
officers of the Company officers' and directors' liability insurance coverage as
of the Merger Date ("D&O INSURANCE") with respect to Pre-Merger Matters for a
period of not less than six years after the Merger Date which coverage will be
substantially similar to the Company's existing D&O Insurance including, without
limitation, (i) an overall coverage amount not less than the overall coverage
amount under the Company's existing D&O Insurance and (ii) coverage for
liability under the 1933 and 1934 Acts in an amount not less than the coverage
amounts for such liabilities under the Company's existing D&O Insurance. Buyer's
obligations hereunder shall be expressly conditioned on all directors and
officers of the Company or any Subsidiary having executed representation letter
agreements at Buyer's request in respect of such insurance in the form attached
hereto as Exhibit C.
SECTION 7.08. REGISTRATION STATEMENT. Buyer shall (i) promptly prepare
and file with the SEC the Form F-4 with respect to the Buyer Common Stock
issuable in connection with the
46
<PAGE> 54
Merger and shall use its reasonable best efforts to cause the Form F-4 to be
declared effective by the SEC as soon as practicable and (ii) take any action
required to be taken under applicable Blue Sky law in connection with such
issuance of Buyer Common Stock or pursuant to any Adjusted Option or Adjusted
Warrant.
SECTION 7.09. GOVERNMENTAL AUTHORIZATION. Each of Buyer and the Company
shall take all actions by or in respect of, or filing with, any Governmental
Authority required for the execution, delivery and performance by Buyer and the
Company of this Agreement and the consummation by Buyer and the Company of the
transactions contemplated by this Agreement, including compliance with any
requirements referred to in Section 3.03 or Section 3.03 of the Company
Disclosure Schedule or Section 4.03 or Section 4.03 of the Buyer Disclosure
Schedule
SECTION 7.10. CERTAIN CORPORATE MATTERS. Buyer shall take all necessary
corporate action for the amendment to or establishment of the Buyer Stock Option
Plan contemplated by Section 1.04 hereof.
SECTION 7.11. EMPLOYMENT. As of the Merger Date, Buyer shall assume the
obligation of the Company to perform any and all employment and severance
agreements identified in the Company Disclosure Schedules.
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of Buyer and the Company to consummate the Merger are subject to the
satisfaction of the following conditions:
(a) this Agreement and the transactions contemplated by this Agreement
shall have been adopted by the stockholders of the Company in accordance with
the Delaware Law;
(b) any applicable waiting period under the HSR Act and any applicable
pre-merger notification or similar statutes and rules listed in Section 3.03 of
the Company Disclosure Schedule or Section 4.03 of the Buyer Disclosure Schedule
shall have expired;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree of a court of competent jurisdiction shall prohibit
the consummation of the Merger;
(d) no Action shall be instituted by any Governmental Authority which
seeks to prevent consummation of the Merger or seeking material damages in
connection with the transactions contemplated hereby which continues to be
outstanding.
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<PAGE> 55
(e) the Form F-4 shall have been declared effective under the 1933 Act
and no stop order suspending the effectiveness of the Form F-4 shall be in
effect and no proceedings for such purpose shall be pending before or threatened
by the SEC;
(f) (i) the Buyer Common Stock shall have been approved for listing,
effective on or before the Merger Date, on Nasdaq's NMS, (ii) Buyer shall have
received the approval of all applicable regulatory authorities related to such
listing; and (iii) Buyer's Common Stock shall have been registered with the SEC
under the Exchange Act; and
(g) all actions by or in respect of or filings with any Governmental
Authority required to permit the consummation of the Merger shall have been made
or obtained other than any such actions or filings, the failure of which to make
or obtain shall not be reasonably likely to have a Material Adverse Effect on
Buyer or the Company.
SECTION 8.02. CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligations
of Buyer to consummate the Merger are subject to the satisfaction of the
following further conditions:
(a) (i) The Company shall have performed in all material respects all
of its obligations hereunder required to be performed by it at or prior to the
Merger Date, (ii) the representations and warranties of the Company contained in
this Agreement shall be true and correct at and as of the Merger Date, as if
made at and as of the Merger Date (except to the extent expressly made as of an
earlier date, in which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving effect
to any limitation as to "materiality" or "Material Adverse Effect" set forth
therein) is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on the Company (or to the extent expressly set forth in
any specific representation or warranty, Chrysalis DNX) and (iii) Buyer shall
have received a certificate signed by an executive officer of the Company to the
foregoing effect.
(b) There shall not have been a breach of any obligation by any
stockholder which has entered into a Support/Voting Agreement other than any
breach which (i) does not result in the failure of the Company to obtain the
Required Stockholder Vote in favor of adoption of this Agreement and (ii) does
not result in the exercise of appraisal rights by any such stockholder.
(c) In the event of a Listing Failure, holders of no more than 10% in
the aggregate of outstanding shares of Company Stock shall be eligible to
exercise their appraisal rights.
(d) The Liens on (i) 7,989 shares of Chrysalis International in favor
of Institut Merieux and (ii) 11,995 shares of Chrysalis International in favor
of International Laboratories Holdings shall have been released.
(e) All consents and approvals of third parties (including, but not
limited to PIDA) to the transactions contemplated by this Agreement shall have
been obtained, and all notices with
48
<PAGE> 56
respect to the transactions contemplated by this Agreement and required to be
delivered prior to the Merger Date shall have been delivered.
(f) The Barbut Agreement shall be in full force and effect and shall
not have been revoked by Dr. Barbut. All loans (other than the loan to the
Company from Dr. Jules Barbut) by the Company or any Subsidiary to any
shareholder or affiliate shall have been repaid in full and there shall be no
outstanding debts (other than the debt of Dr. Jack Barbut which reduces amounts
payable under the loan to the Company from Dr. Jules Barbut) due from any
directors, shareholders or affiliates to the Company or any Subsidiary of the
Company. All directors, shareholders and affiliates of the Subsidiaries shall
have assigned their ownership interests (including but not limited to director
qualifying shares) in any Subsidiary of the Company to Buyer or a Person
designated by Buyer.
(g) The losses of the Company and its Subsidiaries for the fiscal
quarter ending December 31, 1998 shall not exceed $2,000,000 (excluding for
purposes of this calculation any losses attributable to non-cash expenses
required by U.S. GAAP or Regulation S-X to be expensed).
(h) Buyer shall have received written confirmation from Iffa in respect
of the matters set forth in Section 5.07 in form and substance reasonably
satisfactory to Buyer.
(i) Hackel shall have executed an Affiliate Letter.
(j) The Company shall have satisfied all of its obligations to BML
Japan.
SECTION 8.03. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) (i) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Merger
Date, (ii) the representations and warranties of Buyer and Merger Sub contained
in this Agreement shall be true and correct at and as of the Merger Date, as if
made at and as of the Merger Date (except to the extent expressly made as of an
earlier date, in which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving effect
to any limitation as to "materiality" or "Material Adverse Effect" set forth
therein) is not reasonably like to have, individually or in the aggregate, a
Material Adverse Effect on Buyer or Merger Sub and (iii) the Company shall have
received a certificate signed by an executive officer of Buyer to the foregoing
effect.
(b) If a Listing Failure occurs, Buyer shall have secured any financing
required to permit it to pay on the Merger Date the aggregate Merger
Consideration.
49
<PAGE> 57
ARTICLE 9
TERMINATION
SECTION 9.01. TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Merger Date (notwithstanding
any approval or adoption of this Agreement by the stockholders of the Company or
the shareholders of Buyer):
(a) by mutual written consent of the Company and Buyer;
(b) by either the Company or Buyer, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise prohibited
or if any judgment, injunction, order or decree enjoining Buyer or the Company
from consummating the Merger is entered and such judgment, injunction, order or
decree shall have become final and non-appealable; (provided that any judgment,
injunction, order or decree other than a temporary restraining order shall be
deemed to have become final and non-appealable thirty days following the entry
thereof);
(c) (i) by Buyer or, in connection with a Superior Proposal and upon
satisfaction of its obligations under Section 10.04(c), by the Company, if the
Board of Directors of the Company determines not to call or hold the Company
Stockholders' Meeting as provided in Section 5.02 or (ii) by either the Company
or Buyer if the adoption by the stockholders of the Company contemplated by this
Agreement shall not have been obtained by reason of the failure to obtain the
Required Stockholder Vote at a duly held meeting of stockholders of the Company
or any adjournment thereof;
(d) by the Company, if a Listing Failure occurs and, within two (2)
business days of the satisfaction of all closing conditions other than the
conditions set forth in Section 8.03, the condition set forth in Section 8.03(b)
has not been satisfied;
(e) by Buyer or, in connection with a Superior Proposal and upon
satisfaction of its obligations under Section 10.04(c), by the Company, if prior
to the Company Stockholder Meeting, the Board of Directors of the Company shall
have withdrawn, modified or changed in a manner adverse to Buyer their approval
or recommendation of this Agreement;
(f) by Buyer, upon a breach of any representation, warranty, covenant
or agreement of the Company, or if any representation or warranty of the Company
shall become untrue, the effect of which is a Material Adverse Effect on the
Company, in either case such that any of the conditions set forth in Section
8.02(a) would be incapable of being satisfied by March 31, 1999; and
(g) by the Company, upon a breach of any representation, warranty,
covenant or agreement of Buyer, or if any representation or warranty of Buyer
shall become untrue, the effect
50
<PAGE> 58
of which is a Material Adverse Effect on Buyer, in either case such that any of
the conditions set forth in Section 8.03(a) would be incapable of being
satisfied by March 31, 1999.
The party desiring to terminate this Agreement pursuant to this Section
9.01 shall give written notice of such termination to the other party in
accordance with Section 10.01.
SECTION 9.02. EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 9.01, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that the agreements
contained in the second sentence of Section 7.04, this Section 9.02 and Article
10 shall survive the termination hereof. Notwithstanding the foregoing, nothing
in this Section 9.02 shall relieve any party to this Agreement of liability for
a willful breach of any provision of this Agreement and provided further that if
it shall be judicially determined that the termination of this Agreement was
caused by a willful breach of this Agreement, then, in addition to other
remedies at law or equity for breach of this Agreement, the party found to have
willfully breached this Agreement shall be responsible for payment or
reimbursement of the other parties' costs, fees and expenses related to the
negotiation, preparation and execution of this Agreement and related consents
and related to the calling, holding and preparing, printing and distributing of
any documents related to a meeting of the other parties' stockholders ("COSTS").
SECTION 9.03. TERMINATION UPON BANKRUPTCY. (a) The affirmative vote
upon, consent to or adoption of a resolution or similar act by the Board of
Directors of the Company or any Subsidiary authorizing the filing or
commencement by the Company or any Subsidiary of the Company of a voluntary
petition for relief under title 11 of the United States Code or any other law
providing for relief to or liquidation of debtors, and to which Buyer shall not
have consented, shall cause this Agreement to be terminated immediately and
without notice.
(b) Upon the occurrence of a Material Insolvency Event, Buyer may
immediately seek relief from any court, if required, to effectuate termination
of this Agreement, provided, however, that termination of this Agreement due to
a Material Insolvency Event shall not be effective until the earlier of (i)
sixty (60) days after the occurrence of a Material Insolvency Event or (ii)
March 31, 1999. A "MATERIAL INSOLVENCY EVENT" shall mean any of the following:
(i) the Company or any Subsidiary shall (A) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or the like of
itself or its property, (B) admit in writing its inability to pay its debts
generally as they become due, (C) make a general assignment for the benefit of
creditors, or (D) if, without the application, approval or consent of the
Company or any Subsidiary, a proceeding shall be instituted by any Person other
than Buyer or any of its Affiliates in any court seeking in respect of the
Company or any Subsidiary an order for relief under Title 11 of the United
States Code, or an adjudication in bankruptcy, reorganization, dissolution,
winding up, liquidation, a composition or arrangement with creditors, the
appointment of a trustee, receiver, liquidator, custodian, fiscal agent or the
like of the Company or any Subsidiary or all or any material part of
51
<PAGE> 59
the Company's or any Subsidiary's assets, and, if such proceeding is being
contested by the Company, in good faith, the same shall (i) result in the entry
of an order for relief or any such adjudication or appointment, or (ii) continue
undismissed or pending for any period of sixty (60) consecutive days.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to either Buyer Party, to:
Phoenix International Life Sciences Inc.
2350 Cohen Street
Saint-Laurent, Montreal, Quebec
Canada H4R 2N6
Fax: (514) 333-8861
Attention: Jean-Yves Caloz
Senior Vice President,
Chief Financial Officer and Secretary
with a copy to:
Pepper Hamilton LLP
Suite 400
1235 Westlakes Drive
Berwyn, PA 19312-2401
Fax: (610) 640-7835
Attention: Michael P. Gallagher, Esq.
and
McCarthy Tetrault
1170 Peel Street
Montreal, Quebec
Canada H38 4S8
Fax: (514) 397-4170
Attention: Hubert T. Lacroix
if to the Company, to:
52
<PAGE> 60
Chrysalis International Corporation
575 Route 28
Raritan, New Jersey 08869
Fax: (908) 722-6677
Attention: President
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Fax: (216) 579-0212
Attention: Thomas C. Daniels
or to such other address or telecopy number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice, request
or other communication shall be effective (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section and the
appropriate telecopy confirmation is received (b) if by overnight delivery
service, with proof of delivery, the next business day or (c) if given by any
other means, when delivered at the address specified in this Section.
SECTION 10.02. ENTIRE AGREEMENT; NON-SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; NO THIRD PARTY BENEFICIARIES. (a) This Agreement and the
Confidentiality Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and negotiations, both written and oral, between the
parties with respect to such subject matter. None of this Agreement or any other
agreement contemplated hereby or thereby (or any provision hereof or thereof) is
intended to confer on or give any Person other than the parties hereto or
thereto any rights or remedies (except that Sections 7.07 and 7.11 are intended
to confer rights and remedies on the respective Persons specified therein).
(b) The representations and warranties contained herein shall not
survive the Merger Date.
SECTION 10.03. AMENDMENTS; NO WAIVERS. (a) Any provision of this
Agreement may be amended or waived prior to the Merger Date if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by the Company and Buyer or, in the case of a waiver, by the party against whom
the waiver is to be effective; provided that after the adoption of this
Agreement by (i) the stockholders of the Company, no such amendment or waiver
shall, without the further approval of such stockholders, alter or change (A)
the amount or kind of
53
<PAGE> 61
consideration to be received in exchange for any shares of capital stock of the
Company, or (B) any of the terms or conditions of this Agreement if such
alteration or change would adversely affect the holders of any shares of capital
stock of the Company and (ii) the shareholders of Buyer, no such amendment or
waiver shall, without the further approval of such shareholders, alter or change
any of the terms or conditions of this Agreement if such alteration or change
would adversely affect the holders of any shares of capital stock of Buyer.
Notwithstanding the foregoing, the provisions of Section 8.01(b) may not be
amended or waived.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.04. EXPENSES. (a) Except as otherwise provided in this
Section, all costs and expenses incurred in connection with this Agreement shall
be paid by the party incurring such cost or expense.
(b) Buyer agrees to pay to the Company, within three (3) business days
of the date of any termination of this Agreement by the Company pursuant to
Section 9.01(d) or 9.01(g), U.S.
$1,500,000 (inclusive of the Company's Costs).
(c) The Company agrees to pay to Buyer, within three (3) business days
of the date of any termination of this Agreement by Buyer or the Company
pursuant to Sections 9.01(c) or 9.01(e), or a termination of this Agreement
pursuant to Section 9.03, U.S. $1,500,000 (inclusive of Buyer's Costs).
(d) Buyer's right to receive any amounts contemplated by this Section
10.04, and its ability to enforce the provisions of Section 10.04 shall not be
subject to approval by the stockholders of the Company.
(e) Each of Buyer and the Company shall bear and pay one-half of the
costs and expenses incurred in connection with the filing, printing and mailing
of the Form F-4 and the Company Proxy Statement (including SEC filing fees but
excluding legal and accounting fees related thereto).
SECTION 10.05. DOLLAR AMOUNTS. All dollar amounts in this Agreement
refer to United States Dollars.
SECTION 10.06. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or
54
<PAGE> 62
obligations under this Agreement without the consent of the other parties
hereto; provided further that Buyer may assign its rights, but not its
obligations, under this Agreement to a wholly-owned subsidiary of Buyer.
SECTION 10.07. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware (without regard
to principles of conflict of laws).
SECTION 10.08. JURISDICTION. Any Action seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated by this Agreement may be brought
against any of the parties in the United States District Court for the District
of Delaware or any state court sitting in the City of Wilmington, Delaware and
each of the parties hereto hereby consents to the exclusive jurisdiction of such
courts (and of the appropriate appellate courts) in any such Action or waives
any objection to venue laid therein. Process in any such Action proceeding may
be served on any party anywhere in the world, whether within or without the
State of Delaware. Without limiting the generality of the foregoing, each party
hereto agrees that service of process upon such party at the address referred to
in Section 10.01, together with written notice of such service to such party,
shall be deemed effective service of process upon such party.
SECTION 10.09. COUNTERPARTS; EFFECTIVENESS. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
SECTION 10.10. RELIEF FROM AUTOMATIC STAY. In the event the Company or
any Subsidiary is the subject of an involuntary petition in bankruptcy,
insolvency, receivership or similar law, and the transactions contemplated by
this Agreement are subject to bankruptcy court approval, the Company or such
Subsidiary shall seek to obtain bankruptcy court approval of the transactions
contemplated by this Agreement, as soon as reasonably practicable, in accordance
with and subject to its terms.
[SIGNATURE PAGE FOLLOWS]
55
<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PHOENIX INTERNATIONAL LIFE
SCIENCES INC.
By: /s/ Jean-Yves Caloz
--------------------------------------
Name: Jean-Yves Caloz
Title: Senior Vice President and
Secretary
CHRYSALIS INTERNATIONAL
CORPORATION
By: /s/ Paul J. Schmitt
--------------------------------------
Name: Paul J. Schmitt
Title: Chairman, President and CEO
PHOENIX MERGER SUB CORP.
By: /s/ Jean-Yves Caloz
--------------------------------------
Name: Jean-Yves Caloz
Title: Treasurer and Secretary
56
<PAGE> 1
Exhibit 4.1
[Chrysalis Letterhead]
November 18, 1998
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Herbert J. Lemmer
Re: Amendment No. 1 to the Rights Agreement
---------------------------------------
Dear Mr. Lemmer:
Pursuant to and in accordance with Section 27 of the Rights
Agreement (the "Rights Agreement"), dated as of July 1, 1998, by and between
Chrysalis International Corporation (the "Company") and American Stock Transfer
& Trust Company, as rights agent, the Company, by resolution adopted by its
Board of Directors, hereby amends the Rights Agreement as follows:
1. Section 1(j) of the Rights Agreement is hereby amended to
read in its entirety as follows:
"EXPIRATION DATE" means the earliest of (i) the Close of
Business on the Final Expiration Date, (ii) the time at which
the Rights are redeemed as provided in Section 23, (iii) the
time at which all exercisable Rights are exchanged as provided
in Section 24, or (iv) immediately prior to the Merger Date
(as defined in the Merger Agreement (as defined in Section
1(nn)).
2. Section 1(n) of the Rights Agreement is hereby amended by
adding the following new Section 1(nn) immediately thereafter:
(nn) "MERGER AGREEMENT" means the Agreement and Plan of
Merger, dated as of November 18, 1998, among Phoenix
International Life Sciences Inc., a corporation constituted
under the laws of Canada("Buyer"), the Company, and Phoenix
Merger Sub Corp., a Delaware corporation and a wholly-owned
subsidiary of Buyer ("Merger Sub").
<PAGE> 2
American Stock Transfer & Trust Company
November 18, 1998
Page 2
3. Section 1 of the Rights Agreement is hereby amended by
adding the following new paragraph at the end of that Section:
Notwithstanding anything in this Agreement to the
contrary, none of Buyer, Merger Sub, any of their Affiliates
or Associates or any of their permitted assignees or
transferees shall be deemed an Acquiring Person and none of a
Distribution Date, a Share Acquisition Date, a Flip-in Event,
or a Flip-over Event shall be deemed to occur or to have
occurred, in each such case, by reason of (i) the approval,
execution or delivery of the Merger Agreement, or (ii) the
consummation of (X) the Merger (as defined in the Merger
Agreement) or (Y) the other transactions contemplated by the
Merger Agreement, in each case in accordance with the terms of
the Merger Agreement.
4. The Rights Agreement shall not otherwise be supplemented or
amended by virtue of this Amendment No. 1 to the Rights Agreement, but shall
remain in full force and effect.
5. Capitalized terms used without other definition in this
Amendment No. 1 to the Rights Agreement shall be used as defined in the Rights
Agreement.
6. This Amendment No. 1 to the Rights Agreement shall be
deemed to be a contract made under the internal substantive laws of the State of
Delaware and for all purposes will be governed by and construed in accordance
with the internal substantive laws of such State applicable to contracts to be
made and performed entirely within such State.
7. This Amendment No. 1 to the Rights Agreement may be
executed in any number of counterparts and each of such counterparts will for
all purposes be deemed to be an original, and all such counterparts will
together constitute but one and the same instrument.
8. This Amendment No. 1 to the Rights Agreement shall be
effective as of, and immediately prior to, the execution and delivery of the
Merger Agreement, and all references to the Rights Agreement shall, from and
after such time, be deemed to be references to the Rights Agreement as amended
hereby.
<PAGE> 3
American Stock Transfer & Trust Company
November 18, 1998
Page 3
9. Exhibits B and C to the Rights Agreement shall be deemed
amended in a manner consistent with this Amendment No. 1 to the Rights
Agreement.
Very truly yours,
CHRYSALIS INTERNATIONAL CORPORATION
By: /s/ Paul J. Schmitt
----------------------------------
Name: Paul J. Schmitt
Title: Chairman, President & CEO
Accepted and agreed to as of the
effective time specified above:
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By: /s/ Herbert J. Lemmer
----------------------------------
Name: Herbert J. Lemmer
Title: Vice President
<PAGE> 1
Exhibit 99.1
CHRYSALIS ANNOUNCES ACQUISITION BY PHOENIX
INTERNATIONAL LIFE SCIENCES INC. AND QUARTERLY EARNINGS
RARITAN, N.J., Nov. 18 /PRNewswire/ -- Chrysalis International Corporation
(Nasdaq: CRLS NEWS) announced today that it has executed an agreement with
Phoenix International Life Sciences Inc. (Toronto; Montreal: PHX) providing for
Phoenix to acquire all of the outstanding shares of Chrysalis, subject to
receipt of certain regulatory approvals, receipt of the approval of Chrysalis'
shareholders and satisfaction of certain other closing conditions, some of which
conditions are beyond the parties' control. Chrysalis anticipates that the
agreement will be submitted for approval to Chrysalis' shareholders in the first
quarter of 1999.
Phoenix is one of the world's largest contract research organizations (CRO)
providing a wide spectrum of clinical, analytical, preclinical, drug discovery
support and ancillary services to the pharmaceutical and biotechnology
industries.
The transaction contemplates the issuance of Phoenix common shares in an
aggregate value of US $8.29 million and the assumption by Phoenix of
Chrysalis' debt of which approximately $10.5 million will be retired at closing.
In order to issue Phoenix common shares, Phoenix has agreed to register its
common shares for a listing on Nasdaq's National Market System. In the event
such listing is not obtained, the aggregate consideration for the merger would
convert to $8.29 million cash. The per share consideration for this transaction
based on outstanding shares and options as of September 30, 1998 is
approximately $0.71. Phoenix intends to file a registration statement with the
Securities and Exchange Commission covering the Phoenix common shares to be
issued in the transaction. The offering of Phoenix common shares will only be by
means of the registration statement and related prospectus.
Because based on third quarter financial results, Chrysalis was in default under
its senior secured loan agreement, Chrysalis and the lender have executed a
forbearance agreement under which the lender has agreed not to exercise its
rights and remedies with respect to such current defaults under certain
conditions until March 31, 1999. In connection with the forbearance agreement,
Phoenix granted to the lender a guarantee of Chrysalis' debt and a pledge of
cash collateral in an amount sufficient to cover all principal payments and one
month's interest to secure such guarantee, and the lender waived
<PAGE> 2
the principal payment due in December, 1998. In connection with such guarantee
by Phoenix, Phoenix obtained from the lender an option to purchase Chrysalis'
debt.
Chrysalis has completed several large global Phase II-IV studies, but recently
experienced financial difficulties after its largest global project was canceled
when the sponsor elected to suspend development of the compound after Chrysalis
had incurred significant costs to develop and maintain clinical infrastructure
to service this and other anticipated contracts. The agreement between Chrysalis
and Phoenix provides that Chrysalis downsize and consolidate certain clinical
operations into Phoenix. This will be commenced immediately by Chrysalis with
the expenses of such action to be accrued prior to acquisition by Phoenix
International. This downsizing and consolidation is expected to be completed
shortly after acquisition. The combination of the two companies will also result
in a substantial reduction in Chrysalis' corporate overhead expenses. Chrysalis'
combined preclinical and transgenics businesses are profitable and will not be
affected by any consolidation activities.
Chrysalis' preclinical subsidiaries in Lyon, France and Scranton, Pennsylvania
as well as its transgenic services subsidiary in Princeton, New Jersey will be
unaffected by these consolidation activities in the clinical business.
In the time between this announcement and closing of the transaction, Phoenix
and Chrysalis will work closely together to ensure that ongoing clinical studies
are properly handled and to prepare for the integration of Chrysalis' remaining
clinical operations into Phoenix's existing Phase II-IV clinical research
infrastructure.
Key management and staff in each of Chrysalis' preclinical, transgenics and
Phase II-IV clinical research operations in Mannheim, Germany, Eastern Europe
and Israel are expected to be unaffected by consolidation activities.
Phoenix was advised by Pennsylvania Merchant Group and Chrysalis was advised by
Vector Securities International. Vector Securities International issued an
opinion that the transaction was fair from a financial point of view to
Chrysalis' shareholders.
In addition, Chrysalis today reported financial results for the third quarter
ended September 30, 1998.
Net revenues for the third quarter ended September 30, 1998 were $8.8 million,
as compared to $10.6 million for the same period of 1997. The net loss for the
third quarter was $2.9 million or $0.25 per share compared to a net loss of
$93,000 or $0.01 per share for the same period in 1997.
Net revenues for the nine months ended September 30, 1998 were $28.8 million
compared to $30.7 million for the same period in 1997. For the nine months ended
September 30, 1998, Chrysalis reported a net loss of $6.7 million or $0.58 per
share compared to a net loss of $1.4 million or $0.12 per share for the same
period in 1997.
Additionally, Chrysalis reported a cash position of $4.1 million, restricted
cash of $4.7 million (representing amounts owed under the senior debt),
short-term debt (including amounts owed under the senior debt) of $8.5 million
and long-term debt of $5.9 million.
The ability of Chrysalis to meet ongoing debt service requirements, to meet cash
funding requirements and to otherwise satisfy its obligations to vendors and
lenders from cash solely provided
<PAGE> 3
by operations has been adversely affected by significant losses from clinical
operations. Cash and cash equivalents (which was $4.1 million at September 30,
1998) and cash provided by operations is expected to fund certain of these cash
requirements. Chrysalis' preclinical and transgenics businesses working capital
requirements are being funded with cash from preclinical and transgenics
operations. In addition, as a result of the guarantee and pledge by Phoenix,
Chrysalis believes that it will have sufficient cash to fund operations until
March 31, 1999, which is after the expected closing date of the Phoenix
transaction. However, Chrysalis' cash will be expended in accordance with the
terms of the Merger Agreement for operations, planned capital expenditures, and
costs associated with downsizing, and consolidation of clinical operations.
As a result of these issues, Chrysalis must consummate the transaction with
Phoenix in a timely manner. If Chrysalis cannot consummate the transaction by
March 31, 1999, it is the intention of Chrysalis to pursue other financings,
transactions, or other alternatives. There is no assurance that other strategies
will be successful.
Chrysalis is a provider of drug development services including transgenic
discovery research, preclinical and clinical services. The Company provides
services to over 250 pharmaceutical and biotechnology industry clients in 26
countries.
Except for the historical statements contained herein, the statements made in
this release are forward-looking statements. Factors that could cause actual
results to differ materially from those described in the forward-looking
statements, include, among others, the success in obtaining the necessary
regulatory and stockholder approvals for the consummation of the transaction
with Phoenix, the satisfaction of the other closing conditions (some of which
are beyond the parties' control), the consummation of the transaction with
Phoenix, delays or unanticipated costs incurred in connection with the planned
shut-downs and consolidations; the degree of Chrysalis' success in obtaining new
contracts, the scope and duration of new clinical trials and preclinical
studies, the loss or downsizing of, or delay in, existing drug development
trials; the lengthening of the lead time to convert proposal into contracts and
revenues; Chrysalis' exposure to cost overruns under fixed-price contracts;
Chrysalis' dependence on certain clients, especially its larger clients, and on
the pharmaceutical and biotechnology industries; adverse trends in the
regulatory environment, including health care reform measures; unanticipated
costs in connection with the Year 2000 conversion; failure to retain key
management personnel; competition and consolidation in the drug development
services industry; liability for negligence or errors and omissions arising out
of drug development trials; foreign exchange rate fluctuations, the ability to
obtain future financing; and the costs associated with dispositions or
integrating future acquired businesses. In addition, the Chrysalis' quarterly
operating results will continue to be subject to variation depending upon
factors such as those discussed above as well as foreign exchange rate
fluctuations and the costs associated with integrating the preclinical and
clinical businesses. Additional information, including risks and uncertainties,
that also could cause actual results to materially differ from those in
forward-looking statements is contained in Chrysalis International Corporation's
SEC filings, including periodic reports under the Securities Exchange Act of
1934, as amended.
CHRYSALIS INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Summary Statements of Operations
(In thousands except share data/unaudited)*
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C> <C> <C>
Net Revenues $8,799 10,623 28,764 3O,674
Operating Expenses:
Direct costs 7,832 7,423 23,646 21,545
General, administrative
and marketing 2,924 3,123 9,257 8,973
Depreciation and
amortization 522 708 1,529 2,001
11,278 11,254 34,432 32,519
Loss from operations (2,479) (631) (5,668) (1,845)
Other income
(expense), net (315) 579 (812) 524
Net loss before
income taxes (2,794) (52) (6,480) (1,321)
Income tax expense (86) (41) (205) (81)
Net loss $(2,880) (93) (6,685) (1,402)
Net loss per share $ (0.25) (0.01) (0.58) (0.12)
Shares used in
computing net loss
per share amounts 11,481 11,405 11,455 ll,389
</TABLE>
CHRYSALIS INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Summary Balance Sheets
(In thousands/unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
<S> <C> <C>
Cash, cash equivalents
and investments $ 4,110 6,925
Restricted cash 4,688 460
Total current assets 15,748 18,510
Property, equipment
and leasehold
improvements, net 16,316 15,127
Total assets $38,265 35,240
Current liabilities,
excluding debt 15,802 12,295
Short-term debt 8,540 3,436
Long-term debt 5,929 6,561
Other liabilities 2,383 2,279
Total Stockholders,
equity 5,611 10,669
Total liabilities and
stockholders, equity $38,265 35,240
</TABLE>
The Consolidated Summary Statements of operations and Consolidated Summary
Balance Sheets should be read in conjunction with the disclosures contained in
Chrysalis' 1997 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for
the three months ended September 30, 1998.
<PAGE> 1
Exhibit 99.2
------------
November 18, 1998
Phoenix International Life Sciences Inc.
2350 Cohen Street
Saint Laurent (Montreal), Quebec
Canada H4R 2N6
Re: Support/Voting Agreement
-------------------------
Dear Sirs:
The undersigned understands that Phoenix International Life
Sciences Inc. ("Buyer"), Phoenix Merger Sub Corp., a wholly owned subsidiary of
Buyer and Chrysalis International Corporation (the "Company") are entering into
an Agreement and Plan of Merger, dated the date hereof (the "Agreement"),
providing for, among other things, a merger between Merger Sub and Chrysalis
(the "Merger"), in which all of the outstanding shares of capital stock of the
Company will be exchanged for the Merger Consideration, as defined in Sections
1.01 and 1.07 of the Agreement.
The undersigned, is a stockholder of the Company (the
"Stockholder") and is entering into this letter agreement to induce you to enter
into the Agreement and to consummate the transactions contemplated thereby. The
undersigned is entering into this letter agreement solely in the undersigned's
capacity as a stockholder of the Company.
The Stockholder, intending to be legally bound hereby agrees
as follows:
1. The Stockholder represents, warrants and agrees that
Schedule I annexed hereto sets forth the shares of the capital stock of the
Company of which the Stockholder or his, her, or its affiliates (as defined
under the Securities Exchange Act of 1934, as amended), other than the directors
of Stockholder, is the record or beneficial owner (the "Shares") and that the
Stockholder and his, her, or its affiliates, other than the directors of
Stockholder, are on the date hereof the lawful owners of the number of Shares
set forth in Schedule I, free and clear of all liens, charges, encumbrances,
voting agreements and commitments of every kind, except as disclosed in Schedule
I. Except as set forth in Schedule I, neither the Stockholder nor any of his,
her, or its affiliates, other than the directors of Stockholder, own or hold any
rights to acquire any additional shares of the capital stock of the Company (by
exercise of stock options or otherwise) or any interest therein or any voting
rights with respect to any additional shares.
<PAGE> 2
2. The Stockholder agrees that it will not, will not permit
any company, trust or other entity controlled by the Stockholder to, and will
not permit any of its affiliates to, contract to sell, sell or otherwise
transfer or dispose of any of the Shares of any interest therein or securities
convertible thereinto or any voting rights with respect thereto, other than (i)
pursuant to the Merger or (ii) with your prior written consent.
3. The Stockholder agrees to, will cause any company, trust or
other entity controlled by the Stockholder to, and will cause his, her, or its
affiliates to, cooperate fully with you in connection with the Agreement and the
transactions contemplated thereby. The Stockholder agrees that it will not, will
not permit any such company, trust or other entity to, and will not permit any
of his, her, or its affiliates to, directly or indirectly (including through
his, her, or its officers, directors, employees or other representatives) to
solicit, initiate, encourage or facilitate the making of any proposal with
respect to any recapitalization, merger, consolidation or other business
combination involving the Company, or acquisition of any capital stock or any
material portion of the assets of the Company, or any combination of the
foregoing (a "Competing Transaction"), or negotiate, explore or otherwise engage
in discussions with any person (other than Buyer, Merger Sub or their respective
directors, officers, employees, agents and representatives) with respect to any
Competing Transaction or enter into any agreement, arrangement or understanding
with respect to any Competing Transaction or agree to or otherwise assist in the
effectuation of any Competing Transaction.
4. The Stockholder agrees that all of the Shares beneficially
owned by the Stockholder or his, her, or its affiliates, or over which the
Stockholder or any of his, her, or its affiliates has voting power or control,
directly or indirectly (including any common shares of the Company acquired
after the date hereof), at the record date for any meeting of stockholders of
the Company called to consider and vote to approve the Merger and the Agreement
and/or the transactions contemplated thereby will be voted by the Stockholder or
his, her, or its affiliates in favor thereof and that neither the Stockholder
nor any of his, her, or its affiliates will vote such Shares in favor of any
Competing Transaction.
5. The Stockholder has all necessary power and authority to
enter into this letter agreement. This letter agreement is the legal, valid and
binding agreement of the Stockholder, and is enforceable against the Stockholder
in accordance with its terms.
6. The Stockholder agrees that damages are an inadequate
remedy for the breach by Stockholder of any term or condition of this letter
agreement and that you shall be entitled to a temporary restraining order and
preliminary and permanent injunctive relief in order to enforce our agreements
herein.
This letter agreement may be terminated at the option of any
party upon the earlier of (i) termination of the Agreement and (ii) the Merger
Date (as defined in the Agreement).
-2-
<PAGE> 3
Please confirm that the foregoing correctly states the
understanding between us by signing and returning to me a counterpart hereof.
Very truly yours,
------------------------------
[Stockholder Name]
Confirmed on the date
first above written.
PHOENIX INTERNATIONAL LIFE SCIENCES INC.
By: /s/ Jean-Yves Caloz
---------------------------------------
Name: Jean-Yves Caloz
Title: Senior Vice President and Secretary
-3-
<PAGE> 4
SCHEDULE I
----------
NUMBER OF SHARES OWNED
LIENS, CHARGES, ENCUMBRANCES, VOTING AGREEMENTS AND COMMITMENTS OF EVERY KIND IN
RESPECT OF SHARES
RIGHTS TO ACQUIRE ANY ADDITIONAL SHARES OF THE CAPITAL STOCK OF THE COMPANY (BY
EXERCISE OF STOCK OPTIONS OR OTHERWISE) OR ANY INTEREST THEREIN OR ANY VOTING
RIGHTS WITH RESPECT TO ANY ADDITIONAL SHARES
-4-
<PAGE> 1
Exhibit 99.3
------------
FORBEARANCE AGREEMENT
---------------------
This Forbearance Agreement ("AGREEMENT") is made this 18th day of
November, 1998 among Chrysalis International Corporation ("CHRYSALIS"), a
Delaware corporation, Chrysalis International Preclinical Services Corporation,
a Pennsylvania corporation, Chrysalis DNX Transgenic Sciences Corporation, an
Ohio corporation and Chrysalis International Clinical Services Corporation, a
Delaware corporation (the foregoing entities being hereinafter severally and
collectively referred to and obligated as "BORROWER"), and First Union National
Bank ("BANK"), a national banking association, the successor by merger to
CoreStates Bank, N.A. ("CORESTATES") and Phoenix International Life Sciences
Inc., a Canadian corporation ("BUYER").
BACKGROUND
----------
A. Pursuant to the terms and subject to the conditions set forth in
that certain Term Loan and Security Agreement dated as of August 29, 1997 among
Borrower and CoreStates, as amended pursuant to the terms and subject to the
conditions set forth in (i) that certain First Amendment to Term Loan and
Security Agreement dated as of September 24, 1997 among Borrower and CoreStates,
(ii) that certain Second Amendment to Loan Agreement dated as of March 16, 1998
among Borrower and CoreStates and (iii) that certain Third Amendment to Term
Loan and Security Agreement dated as of March 20, 1998, to be effective as of
February 1, 1998, among Borrower and Bank (as amended, the "LOAN AGREEMENT") and
related instruments, agreements and documents (collectively, as amended, along
with the Loan Agreement, the "FINANCING AGREEMENTS"), Borrower is currently
indebted to Bank for repayment of a term loan made by CoreStates to Borrower in
the original principal sum of Five Million ($5,000,000.00) Dollars (the "LOAN"
or "TERM LOAN"), which indebtedness is evidenced by that certain Term Note dated
August 29, 1997 in the principal sum of Five Million ($5,000,000.00) Dollars
executed and delivered by Borrower to CoreStates and held by Bank (the "NOTE").
B. To secure the existing and future debts, liabilities and obligations
of Borrower to Bank, pursuant to the terms and subject to the conditions of (i)
the Loan Agreement and that certain Security Agreement dated as of August 29,
1997 among Borrower and CoreStates (the "SECURITY AGREEMENT"), (ii) that certain
Collateral Assignment of Contracts dated as of August 29, 1997 between Chrysalis
and CoreStates (the "CONTRACT ASSIGNMENT") and (iii) that certain Stock Pledge
Agreement dated as of August 29, 1997 between Chrysalis and CoreStates (the
"STOCK PLEDGE"), Borrower granted to CoreStates and Bank holds continuing liens
on and security interests in and to the following assets and the cash and
noncash proceeds thereof (collectively, the "COLLATERAL"): all of Borrower's
existing and future accounts, chattel paper, instruments, contract rights,
investment accounts, documents, inventory, goods, equipment, general
intangibles; the issued and outstanding shares of stock of each subsidiary of
Chrysalis which is a party to the Loan Agreement and the other Financing
Agreements; and an assignment of, and a lien on and security interest in and to,
various contracts and agreements including, without limitation, certain
licensing agreements relating to DNA microinjection technology, all as more
fully described in the Loan Agreement and the Contract Assignment.
C. Borrower has acknowledged and confirms that Borrower is in default
of the Loan Agreement and the other Financing Agreements by virtue of Borrower's
failure to comply with the
<PAGE> 2
following financial covenants as of September 30, 1998 and December 31, 1998:
Section 6.1.1 of the Loan Agreement (maintenance of Current Ratio); Section
6.1.3 of the Loan Agreement (maintenance of Consolidated Tangible Net Worth);
and Section 6.1.4 (maintenance of ratio of Consolidated Total Liabilities to
Consolidated Tangible Net Worth) (collectively, the "EXISTING DEFAULTS").
Borrower further acknowledges and confirms that as a result of the occurrence of
the Existing Defaults, Bank has the unconditional right to accelerate the
Obligations and, at its option, to otherwise exercise its rights and remedies
under the Financing Agreements and applicable law against Borrower and the
Collateral.
D. Borrower has advised Bank that, concurrently herewith, pursuant to
an Agreement and Plan of Merger dated as of November 18, 1998, among Buyer,
Chrysalis and Phoenix Merger Sub Corp. ("MERGER SUB"), a Delaware corporation
and a wholly owned subsidiary of Buyer (the "AGREEMENT AND PLAN OF MERGER"), on
or before March 31, 1999 (the "MERGER DATE"), subject to the terms and
conditions set forth in the Agreement and Plan of Merger, Merger Sub shall merge
into Chrysalis (the "MERGER"), with Chrysalis being the surviving corporation in
the Merger.
E. Borrower has requested that Bank, among other things, (i) consent to
Borrower's execution of the Agreement and Plan of Merger and its consummation of
the transactions contemplated thereby (including the Merger), and (ii) refrain
from exercising its rights and remedies under the Financing Agreements and
applicable law for the period from the date of this Agreement through the
earliest of (i) the date on which the Merger is consummated, (ii) January 31,
1999 or (iii) the date on which any Terminating Event (as hereinafter defined)
occurs, and Bank is willing to do so under the terms and subject to the
conditions set forth in this Agreement and the instruments, agreements and
documents referred to in this Agreement.
F. Borrower has requested that Buyer execute and deliver to Bank an
Unconditional Guaranty ("GUARANTY") of Borrower's Obligations to Bank, secured
by a Pledge and Assignment Agreement ("PLEDGE"). Buyer's decision to execute and
deliver such Guaranty and Pledge to Bank is based in material part on the
representations, covenants and agreements herein.
NOW, THEREFORE, with the foregoing Background deemed incorporated
hereinafter by this reference and hereby made a part hereof, the parties hereto,
intending to be legally bound, hereby further covenant and agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise defined in this
Agreement shall have the meanings ascribed to such terms in the Loan Agreement.
2. CONFIRMATION OF EXISTING INDEBTEDNESS. Borrower hereby acknowledges
and confirms that: the unpaid principal indebtedness of Borrower to Bank
evidenced by the Note is, as of November 6, 1998, Four Million Six Hundred
Eighty-Seven Thousand Five Hundred ($4,687,500.00) Dollars; interest on the
Obligations has been paid through October 31, 1998; and the foregoing
indebtedness, together with continually accruing interest and related costs,
fees and expenses (including attorneys' fees) is, as of the date hereof, owing
without claim, counterclaim, right of recoupment, defense or set-off of any kind
or of any nature whatsoever.
2
<PAGE> 3
3. RATIFICATION OF FINANCING AGREEMENTS.
(a) Borrower hereby ratifies and confirms and reaffirms in all
respects and without condition, all of the terms, covenants and conditions set
forth in the Financing Agreements and agrees that Borrower remains liable to
Bank in accordance with the respective terms, covenants and conditions of such
instruments, agreements and documents, and that all liens, security interests,
assignments and pledges encumbering the Collateral, created pursuant to and/or
referred to in the Loan Agreement, the Security Agreement, the Contract
Assignment, the Pledge Agreement and the other Financing Agreements are first
priority liens, security interest, assignments and pledges (subject only to
Permitted Liens), continue unimpaired, are in full force and effect, and secure
and shall continue to secure all of the Obligations of Borrower to Bank
including, without limitation, the Obligations evidenced by the Note.
(b) Without limiting the generality of the foregoing, Borrower
hereby further ratifies and confirms and reaffirms that the Collateral includes
all right, title and interest of Borrower in, to and under Borrower's exclusive
license under U.S. Patent 4,873,191 entitled "The Genetic Transformation of
Zygotes" covering the use of DNA microinjection to create non- human transgenic
mammals (the "PATENT") and all nonexclusive fee- and royalty-based sublicenses
for three primary applications under the Patent and any future sublicenses under
the Patent.
4. CONSENT. Subject to satisfaction of all conditions precedent set
forth in this Agreement, Bank consents, for all purposes of the Financing
Agreements, to Borrower's (i) execution of the Transaction Documents (as that
term is defined in the Agreement and Plan of Merger, and (ii) consummation by
Borrower of the transactions (including the Merger) contemplated by the
Transaction Documents.
5. FORBEARANCE PERIOD; TERMINATING EVENTS. Bank agrees to forbear from
exercising its rights and remedies under the Financing Agreements and applicable
law which Bank is entitled to exercise as a result of the occurrence of the
Existing Default during the period (the "FORBEARANCE PERIOD") commencing on the
date of this Agreement and ending on the earliest to occur of (i) January 31,
1999, (ii) the date on which the Merger is consummated or (iii) the date on
which any Terminating Event (as hereinafter defined) occurs (the "FORBEARANCE
TERMINATION DATE"). For the purposes of this Agreement, the term "Terminating
Event" shall mean the occurrence of any of the following events:
(a) Any breach, default, violation or event of default (howsoever
defined) under any of the Financing Agreements, other than the Existing
Defaults, which remains unremedied for six (6) Business Days after the date of
Bank's written notice to Borrower and Buyer of such breach, default, violation
or event of default; provided, however, no notice shall be required for any
failure of Borrower to pay any principal, interest or other sum when due and no
grace, notice or cure period shall be applicable to any such payment failure;
(b) The occurrence of any breach of warranty or representation or
covenant set forth in this Agreement or the occurrence of any default, violation
or event of default (howsoever defined) under any of the instruments, agreements
or documents executed and/or delivered pursuant to Section 8 of this Agreement
(the "FORBEARANCE AGREEMENTS"); or
3
<PAGE> 4
(c) The occurrence of any breach, default, violation or event of
default (howsoever defined) which is material, or termination under the
instruments, agreements and documents now or hereafter executed and exchanged in
connection with the Merger including, without limitation, the Agreement and Plan
of Merger.
On the Forbearance Termination Date, without further notice to Borrower or any
other action on the party of Bank to be taken, all Obligations shall be
immediately due and payable.
6. EXTENSION OF FORBEARANCE TERMINATION DATE. Subject to satisfaction
of the following conditions (all instruments, agreements and documents to be in
form and substance satisfactory to Bank and its counsel), Bank agrees to (i)
extend the Forbearance Period through the earliest to occur of (A) March 31,
1999, (B) the date on which the Merger is consummated or (C) the date on which
any Terminating Event occurs, (ii) to release to Borrower the cash collateral
described in Subparagraph 8(e) of this Agreement for use by Borrower in the
ordinary course of its business consistent with the Agreement and Plan of
Merger, so long as the Agreement and Plan of Merger is in full force and effect;
(iii) should satisfaction of the following conditions occur prior to December
31, 1998, to waive the requirement that Borrower make a principal payment on
account of the Obligations on such date; and (iv) to waive any default (in
addition to the Existing Defaults) which may arise as of December 31, 1998 as a
result of the financial condition of Borrower as of such date:
(a) No Terminating Event shall have occurred and be continuing;
(b) Buyer shall execute and deliver to Bank the Guaranty and Pledge;
(c) Pursuant to the Pledge, to secure its liabilities and
obligations under the Guaranty, Buyer shall pledge and assign to Bank a
Bank-issued certificate of deposit (or other investment property satisfactory to
Bank in its sole and absolute discretion) in an amount (or having a value) equal
to the then-outstanding principal balance of the Loan and an amount equal to
thirty (30) days' accrual of interest on such outstanding principal balance at
the non-default rate set forth in the Note (which amount may be subject to
increase in the event the rate of interest set forth in the Note changes), it
being understood, acknowledged and agreed that under the Guaranty, Bank shall
have recourse as against Buyer only to the collateral described in this
Subparagraph; and
(d) Buyer and Borrower hereby unconditionally acknowledge and agree
that, upon the occurrence of any Terminating Event including, without
limitation, the occurrence of any of the Events of Default set forth at Section
7.1.7 of the Loan Agreement, [without further notice to Borrower or Buyer,] Bank
shall have the right, in its sole and absolute discretion, to apply the sums
pledged to secure the Guaranty to satisfy the Guaranty, upon the satisfaction of
which, Bank shall absolutely and irrevocably transfer, convey, assign, endorse
and deliver to Buyer all of Bank's right, title and interest in and to the
Financing Agreements, the Loan, the Note and all mortgages, security interests
and liens securing or evidencing the same, free and clear of liens, claims and
encumbrances, without representation, warranty or recourse of any kind, except
that Bank has not previously sold, assigned or transferred the same, has title
to, and the authority to do so, and that the amount applied to satisfy the
Guaranty is the amount due by Borrower to Bank, and Buyer shall be subrogated to
the rights of Bank in, to and under the Financing Agreements and the Forbearance
Agreements. Borrower acknowledges and agrees that
4
<PAGE> 5
upon Buyer's satisfaction of its obligations under the Guaranty, Buyer shall be
subrogated to the rights of Bank, shall be entitled to assert all rights and
remedies against Borrower under the Financing Agreements, the Loan and the Note
and shall hold all rights of Bank under the Financing Agreements, the Loan, the
Note and the Forbearance Agreement.
7. REPRESENTATIONS AND WARRANTIES. All representations and warranties
set forth in the Loan Agreement and the other Financing Agreements are hereby
reasserted and restated by Borrower, without qualification, as of the date
hereof as if set forth at length herein. As a further inducement to Bank and
Buyer to enter into this Agreement and the Guaranty and Pledge, Borrower further
represents and warrants to Bank and Buyer as follows:
(a) Borrower has the power, authority and capacity to enter into and
perform this Agreement and the Forbearance Agreements and have, as applicable,
taken all proper and necessary action to authorize the execution, delivery and
performance of this Agreement and the Forbearance Agreements;
(b) This Agreement and Forbearance Agreements are or, when delivered
will be, valid, binding and enforceable against the Borrower in accordance with
their respective terms;
(c) No consent, approval or authorization of, or filing,
registration or qualification with, any person or entity is required to be
obtained by Borrower in connection with the execution and delivery of this
Agreement and the Forbearance Agreements, or any undertaking or performance of
any liability or obligation hereunder or thereunder including, without
limitation, the consent or approval of any holder of any subordinated
indebtedness of Borrower;
(d) The execution and delivery of this Agreement and the Forbearance
Agreements and the performance by Borrower of their obligations hereunder and
thereunder will not conflict with, or result in breach of, any of the terms,
covenants and provisions of any charter or bylaw provision of Borrower, or any
judgment, writ, injunction or decree of any court or governmental authority, or
any material agreement or instrument to which any Borrower is a party or by
which any Borrower is or may be bound;
(e) To the best of Borrower's knowledge, no representation or
warranty by Borrower contained in the Agreement and Plan of Merger, this
Agreement, or any Forbearance Agreements contains any untrue statements of
material fact or omits to stating a material fact necessary to make such
representation or warranty not misleading in light of the circumstances under
which it was made;
(f) Except for the Existing Defaults, to the best of Borrower's
knowledge, no default, violation or Event of Default (howsoever defined) under
the Financing Agreements, and no event which, with the passage of time or the
giving of notice, or both, could constitute any such default, violation or Event
of Default, has occurred and is continuing;
(g) Except as disclosed is the Company Disclosure Schedule (as that
term is defined in the Agreement and Plan of Merger), there are no judgments or
judicial or administrative orders or proceedings pending, or to the knowledge of
any Borrower threatened against or affecting any Borrower or the property of any
Borrower in any court or before any
5
<PAGE> 6
governmental authority or arbitration board or tribunal that has had or
reasonably could be expected to have a material adverse effect on Borrowers; and
(h) The Agreement and Plan of Merger and all related instruments,
agreements and documents (collectively, the "MERGER AGREEMENTS") are valid,
binding and enforceable against the parties thereto in accordance with their
respective terms and is in full force and effect.
(i) All obligations and commitments of Bank or its predecessors to
loan or advance funds or to provide any financial accommodations under the
Financing Agreements have been fully and timely satisfied and performed, and
Borrower shall not increase the principal amount of the existing indebtedness as
of November 6, 1998.
Borrower hereby expressly acknowledges that the foregoing representations and
warranties are being specifically relied upon by Bank and Buyer as a material
inducement to Bank and Buyer to enter into this Agreement and to forbear from
exercising Bank's rights and remedies under the Financing Agreements. The
foregoing warranties and representations shall survive the execution and
exchange of this Agreement and the delivery of the instruments, agreements and
documents referred to in this Agreement.
8. CONDITIONS PRECEDENT. As a condition precedent to this Agreement,
including the agreement of Bank to forbear from exercising its rights and
remedies under the Financing Agreements, Borrower shall provide to Bank (or
cause to be provided to Bank) the following (all instruments, agreements and
documents to be in form and substance satisfactory to Bank and its counsel):
(a) This Agreement;
(b) Certified (as of the date of this Agreement) copies of
resolutions of Borrower's Board of Directors authorizing the execution, delivery
and performance of this Agreement and the Forbearance Agreements;
(c) Certificates (dated the date of this Agreement) of Borrower's
corporate secretary as to the incumbency and specimen signatures of the officers
of Borrower executing this Agreement and the Forbearance Agreements;
(d) Borrower shall cause Buyer and Merger Sub to acknowledge that
Bank holds a lien on and security interest in and to Borrower's right to receive
the consideration, if any, payable to Borrower upon termination of the Agreement
and Plan of Merger;
(e) The assignment and pledge to Bank of not less than Three Million
($3,000,000.00) Dollars of United States Treasury securities acceptable to Bank
in its exclusive discretion, together with the establishment of a pledge account
(the "Pledge Account") for such securities and the execution and exchange of
such instruments, agreements and documents as may be necessary to perfect Bank's
liens on and security interests in and to such pledged securities;
(f) An instrument (in form recordable with the United States Patent
and Trademark Office) pursuant to which Borrower confirms that Bank has a lien
on and security
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interest, and all rights of Borrower in, to and under, the exclusive license for
the Patent and all rights in, to and under all existing and future sublicenses
for the Patent and processes thereunder;
(g) Evidence of the execution and delivery of the Agreement and Plan
of Merger and the other Merger Agreements;
(h) Payment to Bank of a forbearance fee in the amount of Fifty
Thousand ($50,000.00) Dollars;
(i) Payment of all outstanding fees and reasonable expenses of Bank
in connection with the Financing Agreements, including fees and disbursements of
counsel to Bank; and
(j) Such other instruments, agreements and documents as may be
required by Bank and/or its counsel.
9. COVENANTS DURING THE FORBEARANCE PERIOD.
(a) Borrower shall comply with all terms, covenants and conditions
set forth in the Loan Agreement and the other Financing Agreements. Without
limiting the generality of the foregoing, Borrower shall continue to pay
interest as and when due on the outstanding principal balance of the Term Loan;
provided, however, absent the existence of any Terminating Event, on December
31, 1998, Bank agrees that Three Hundred Twelve Thousand Five Hundred
($312,500.00) Dollars of the Cash Collateral maintained in the Pledge Account
referred to above may be used to pay the principal payment owing as of such
date, if such Cash Collateral is then being maintained in the Pledge Account.
(b) Borrower shall comply in all material respects with all
covenants to be performed by it under the Agreement and Plan of Merger and the
other Merger Agreements.
(c) Borrower shall furnish to Bank a copy of any notice received
from Buyer or Merger Sub, and shall give prompt, written notice to Bank of any
knowledge of the occurrence of any default, violation or event of default under
the Agreement and Plan of Merger and the other Merger Agreements.
(d) Borrower shall not borrow, and Bank shall not advance funds so
as to cause an increase in the principal amount of the indebtedness, except as
Bank may deem necessary to preserve and protect its loan and Collateral
positions.
10. SUBORDINATED INDEBTEDNESS. Reference is made to that certain
Subordination Agreement dated March 16, 1998 among Chrysalis, Panlabs
International, Inc. ("CREDITOR"), a Washington corporation, and CoreStates (the
"SUBORDINATION AGREEMENT"). Borrower acknowledges that, pursuant to Paragraph
2.3 of the Subordination Agreement, Bank has the right to declare that all
payments on account of Subordinated Indebtedness owing Creditor, with a
denominated principal, interest, indemnification payments or otherwise, shall
cease for the Blockage Period (as defined in the Subordination Agreement).
Nothing set forth in this Agreement, including the agreement on the part of Bank
to forbear through the Forbearance Termination Date, shall impair the ability of
Bank to give notice to Creditor of the commencement
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<PAGE> 8
of a "Blockage Period" (as defined in the Subordination Agreement), and all
rights of Bank to give such notice and otherwise take action in respect of the
Subordination Agreement are hereby expressly reserved.
11. POWER OF ATTORNEY. Each of the officers of Bank or its successor in
interest is hereby irrevocably made, constituted and appointed the true and
lawful attorney for each Borrower (without requiring any of them to act as such)
with full power of substitution to do the following: endorse the name of any
Borrower upon any and all checks, drafts, money orders and other instruments for
the payment of monies that are payable to any Borrower and constitute proceeds
of assets liened in favor of Bank.
12. DISGORGEMENT. If Bank is, for any reason, compelled by a court or
other tribunal of competent jurisdiction to surrender or disgorge any payment,
interest or other consideration described hereunder to any person because the
same is determined to be void or voidable as a preference, fraudulent
conveyance, impermissible set-off or for any other reason, such Obligations or
part thereof intended to be satisfied by virtue of such payment, interest or
other consideration shall be revived and continue as if such payment, interest
or other consideration had not been received by Bank, and Borrower shall be
liable to, and shall indemnify, defend (engaging counsel acceptable to Bank) and
hold Bank harmless for, the amount of such payment or interest surrendered or
disgorged. The provisions of this Paragraph shall survive execution and exchange
or this Agreement and the termination of the Financing Agreements.
13. NO DEFENSES; RELIANCE. Borrower hereby confirm and reconfirm that
there are no existing defenses, claims, counterclaims or rights of recoupment or
set-off against Bank in connection with the negotiation, preparation, execution,
performance or any other matters relating to the Financing Agreements or this
Agreement. It is hereby and thereby further acknowledged and agreed that
notwithstanding anything to the contrary set forth in this Agreement, Bank has
and shall have no obligation to (i) further amend the Financing Agreements, or
otherwise further restructure the Obligations, (ii) make any further loans,
advances or extension of credit to or for the benefit of Borrower, (iii) extend
the Forbearance Period or the Forbearance Termination Date, (iv) refrain from
terminating the Forbearance Period upon the occurrence of any Terminating Event
or (v) enter into any other instruments, agreements or documents regarding any
of the same with any Borrower, and that neither Bank nor its representatives
have made any agreements with, or commitments or representations or warranties
to, any Borrower (either in writing or orally) other than as expressly stated in
this Agreement. Nothing contained in this Agreement, or any compliance with the
terms of this Agreement or any of the instruments, agreements or documents
referred to in this Agreement, shall impose any obligation on the part of Bank
to consummate a further restructure of the Obligations.
14. BANK RELIANCE. Borrower expressly understand and further agree that
Bank is relying on all terms, covenants, conditions, warranties and
representations set forth in this Agreement including, without limitation,
Bank's right to terminate the Forbearance Period at any time upon the occurrence
of a Terminating Event, as a material inducement to Bank to enter into this
Agreement.
15. RELEASE. In consideration of the accommodations being made
available by Bank to or for the benefit of Borrower under this Agreement
including, without limitation, the forbearance on the part of Bank, Borrower,
for themselves and their respective heirs, personal representatives,
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<PAGE> 9
agents, employees, successors and assigns, do hereby remise, release and forever
discharge Bank and its agents, employees, representatives, officers, successors
and assigns of and from any and all claims, counterclaims, demands, actions and
causes of action of any nature whatsoever, whether at law or in equity
including, without limitation, any of the foregoing arising out of or relating
to the transactions described in this Agreement, or any proposed financing
arrangements to or for the benefit of any Borrower or any entities owned by or
under the control of any Borrower, which against Bank or its agents, employees,
representatives, officers, successors or assigns, or any of them, any Borrower
now has or hereafter can or may have for or by reason of any cause, matter or
thing whatsoever, from the beginning of the world to the date of this Agreement.
16. INDEMNIFICATION. From and after the date of this Agreement,
Borrower, severally and collectively, shall indemnify, defend and hold harmless
Bank and its agents, employees, representatives, attorneys, successors and
assigns (severally and collectively, the "Indemnified Parties") against and from
any and all liability for, and against and from all losses or damages
Indemnified Parties may suffer as a result of, any claim, demand, cost, expense,
or judgment of any type, kind, character or nature (including attorneys' fees
and court costs), which Indemnified Parties shall incur or suffer as a result of
(i) any act or omission of Borrower or any of their agents or representatives in
connection with the transactions described in this Agreement and any of the
instruments, agreements and documents referred to in this Agreement, (ii) the
inaccuracy of any of the representations or warranties of Borrower, and (iii)
the breach of any of the respective covenants set forth herein of Borrower. This
indemnification shall survive execution and exchange of this Agreement.
17. WAIVERS.
(a) Borrower hereby waives the benefit of any theory or statute
requiring the marshaling of assets or other similar legal doctrine and agree
that Bank may exercise its rights against the Collateral and apply the proceeds
thereof to any of the Obligations, as aforesaid.
(b) Borrower hereby renounces any rights of notification of sale
Borrower may have pursuant to Section 9504(c) of the Uniform Commercial Code as
enacted in the Commonwealth of Pennsylvania; Borrower acknowledge that this
renunciation is intended to be a renunciation after default, as described in
Section 9504(c) of the Uniform Commercial Code.
18. NO COERCION. Borrower hereby represents and warrants that they are
fully aware of the terms set forth in this Agreement and have voluntarily, and
without coercion or duress of any kind, entered into this Agreement intending to
be legally bound by its terms.
19. APPLICABLE LAW. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, without giving effect to principles of conflicts
of laws.
20. JURY TRIAL WAIVER. BORROWER HEREBY IRREVOCABLY WAIVES TRIAL BY JURY
AND ANY RIGHT THERETO, AND CONSENT TO THE JURISDICTION
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<PAGE> 10
OF THE COURTS OF PHILADELPHIA COUNTY, PENNSYLVANIA, AND AGREES NOT TO RAISE ANY
OBJECTION TO SUCH JURISDICTION, OR TO THE LAYING OF THE VENUE IN SUCH
COMMONWEALTH, AND FURTHER AGREES THAT SERVICE OF PROCESS MAY BE DULY EFFECTED
UPON THEM BY SERVICE BY CERTIFIED MAIL OR NATIONALLY RECOGNIZED OVERNIGHT
COURIER SERVICE, CHARGES PREPAID, TO THE ADDRESSES SET FORTH ON THE FIRST PAGE
OF THIS AGREEMENT.
21. EXPENSES. On demand, Borrower will pay all reasonable expenses,
including the reasonable fees and expenses of legal counsel for Bank, incurred
in connection with the administration, amendment, modification or enforcement of
this Agreement and the collection or attempted collection of any of the debts,
liabilities and obligations referred to in this Agreement.
22. INTEGRATION. This Agreement and the instruments, agreements and
documents referred to in this Agreement shall be deemed incorporated into and
made a part of the Loan Agreement, the Note and the other Financing Agreements.
All such instruments, agreements and documents, and this Agreement, shall be
construed as integrated and complementary of each other, and as augmenting and
not restricting Bank's rights, remedies, benefits and security. If, after
applying the foregoing an inconsistency still exists, the provisions of this
Agreement shall constitute and amendment to the Financing Agreements and shall
control.
23. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
24. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
25. NO OBLIGATION. Nothing set forth herein shall obligate Buyer to
enter into the Guaranty or Pledge, and Buyer shall have no liability to Bank
unless and until the execution and delivery by Buyer and Bank of mutually
satisfactory written agreements.
IN WITNESS WHEREOF, the parties hereto have caused this Forbearance
Agreement to be executed the day and year first above written.
CHRYSALIS INTERNATIONAL
CORPORATION, a Pennsylvania corporation
By: /s/ Paul J. Scmittt
---------------------------------
Name: Paul J. Schmitt
Title: Chairman, President and CEO
[SIGNATURES CONTINUED ON THE FOLLOWING PAGE]
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CHRYSALIS INTERNATIONAL PRECLINICAL
SERVICES CORPORATION,
a Pennsylvania corporation
By: /s/ Paul J. Scmittt
---------------------------------
Name: Paul J. Schmitt
Title: Chairman and CEO
CHRYSALIS DNX TRANSGENIC SCIENCES
CORPORATION, an Ohio corporation
By: /s/ Paul J. Scmittt
---------------------------------
Name: Paul J. Schmitt
Title: President and CEO
CHRYSALIS INTERNATIONAL CLINICAL
SERVICES CORPORATION,
a Delaware corporation
By: /s/ Paul J. Scmittt
---------------------------------
Name: Paul J. Schmitt
Title: Chairman
FIRST UNION NATIONAL BANK
By: /s/ Elizabeth B. Styer
---------------------------------
Name: Elizabeth B. Styer
Title: Senior Vice President
PHOENIX INTERNATIONAL LIFE
SCIENCES INC.
By: /s/ Jean-Yves Caloz
---------------------------------
Name: Jean-Yves Caloz
Title: Senior Vice President and Secretary
11
