<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
QUINTILES TRANSNATIONAL CORP.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
NORTH CAROLINA 8731 56-1714315
(State or other jurisdiction (Primary standard industrial (I.R.S. Employer
of incorporation or classification code no.) Identification No.)
organization)
</TABLE>
4709 CREEKSTONE DRIVE
RIVERBIRCH BUILDING, SUITE 300
DURHAM, NORTH CAROLINA 27703-8411
(919) 941-2000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
DENNIS B. GILLINGS, PH.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
QUINTILES TRANSNATIONAL CORP.
4709 CREEKSTONE DRIVE
RIVERBIRCH BUILDING, SUITE 300
DURHAM, NORTH CAROLINA 27703-8411
(919) 941-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES TO:
<TABLE>
<C> <C>
GERALD F. ROACH, ESQ. PHILLIP M. RENFRO, ESQ.
MICHAEL P. SABER, ESQ. FULBRIGHT & JAWORSKI L.L.P.
SMITH, ANDERSON, BLOUNT, DORSETT, 300 CONVENT STREET, SUITE 2200
MITCHELL & JERNIGAN, L.L.P. SAN ANTONIO, TEXAS 78205
2500 FIRST UNION CAPITOL CENTER (210) 270-7172
RALEIGH, NORTH CAROLINA 27601
(919) 821-1220
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this registration statement becomes effective and upon
consummation of the transaction described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE(1) FEE(1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value.... 350,000(2) N/A $1,969,669 $596.87
=================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee, based
upon the book value of the CVA Capital Stock as of the latest practicable
date in accordance with Rule 457(f)(2) of the Securities Act of 1933, as
amended.
(2) Represents the maximum number of shares of the registrant's common stock to
be issued in the Merger. Does not include additional shares that may be
issued by reason of potential adjustments for recapitalizations. Pursuant to
Rule 416, this Registration Statement covers such additional shares, the
number of which is indeterminable at the date hereof. Because such
additional shares, if issued, will be issued for no additional
consideration, no additional registration fee will be required.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
QUINTILES TRANSNATIONAL CORP.
CROSS-REFERENCE SHEET FOR REGISTRATION STATEMENT ON FORM S-4
<TABLE>
<CAPTION>
ITEM NUMBER IN FORM S-4 PROSPECTUS CAPTION OR LOCATION
----------------------- ------------------------------
<C> <C> <S> <C>
A.
Information About the Transaction
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus............................. Facing Page of Registration Statement;
Outside Front Cover Page of Proxy
Statement/ Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.......................... Available Information; Incorporation of
Certain Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.......... Summary; Risk Factors
4. Terms of the Transaction................. Summary; The Merger; Comparison of the
Rights of Holders of Quintiles Common
Stock and CVA Common Stock
5. Pro Forma Financial Information.......... Not Applicable
6. Material Contracts with the Company Being
Acquired............................... Summary; The Merger
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to Be Underwriters.............. Inapplicable
8. Interests of Named Experts and Counsel... Inapplicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ Inapplicable
B.
Information About the Registrant
10. Information with Respect to S-3
Registrants............................ Incorporation of Certain Documents by
Reference; Summary; The Merger; Certain
Information Concerning Quintiles
11. Incorporation of Certain Information by
Reference.............................. Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3
Registrants............................ Inapplicable
13. Incorporation of Certain Information by
Reference.............................. Inapplicable
14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants...... Inapplicable
C.
Information About the Company Being Acquired
15. Information with Respect to S-3
Companies.............................. Inapplicable
16. Information with Respect to S-3 or S-2
Companies.............................. Inapplicable
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies........ Summary; The Merger; Certain Information
Concerning CVA; Financial Statements of
CVA
D.
Voting and Management Information
18. Information if Proxies, Consents or
Authorizations are to be Solicited..... Incorporation of Certain Documents by
Reference; Summary; Special Meeting of
CVA Stockholders; The Merger; Interests
of Certain Persons in the Merger;
Rights of Dissenting CVA Stockholders
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer................ Inapplicable
</TABLE>
<PAGE> 3
[CVA LETTERHEAD]
, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
CerebroVascular Advances, Inc. ("CVA") on , 1997, at 9:00 a.m.,
local time, at 9901 1H-10 West, Suite 400, San Antonio, Texas 78230 (together
with any adjournment or postponement thereof, the "Special Meeting").
As described in the enclosed Proxy Statement/Prospectus, at the Special
Meeting, the holders of common stock, par value $.001 per share, of CVA ("CVA
Common Stock"), and the holder of Series A Preferred Stock, par value $.001 per
share, of CVA (the "CVA Preferred Stock"), will be asked to approve and adopt
the Merger Agreement (the "Merger Agreement"), including the Plan of Merger (the
"Plan of Merger"), attached as Exhibit A thereof, dated as of May 8, 1997, among
Quintiles Transnational Corp., a North Carolina corporation ("Quintiles"), CVA
Acquisition Corp., a North Carolina corporation which has not engaged in any
material operations since its incorporation and is a wholly-owned subsidiary of
Quintiles ("Acquisition"), CVA, and the stockholders of CVA signatory thereto,
and the transactions contemplated thereunder, including a merger (the "Merger")
pursuant to which CVA would be merged with and into Acquisition, with
Acquisition being the surviving corporation in the Merger. Copies of the Merger
Agreement and Plan of Merger are attached as Appendix A and Appendix B,
respectively, to the Proxy Statement/Prospectus.
In connection with the Merger, (i) each share of CVA Common Stock and CVA
Preferred Stock issued and outstanding as of the Effective Time (as defined in
the Merger Agreement), other than shares as to which dissenters' rights have
been perfected under the Texas Business Corporation Act and shares held in CVA's
treasury, would be converted into the right to receive common stock, par value
$.01 per share, of Quintiles ("Quintiles Common Stock"), based upon an exchange
ratio to be determined subsequent to the date of the Proxy Statement/Prospectus,
but prior to the date of the Special Meeting; and (ii) any option to purchase
shares of CVA Common Stock outstanding prior to the Effective Time would become
an option to purchase shares of Quintiles Common Stock, all subject to and in
accordance with the terms and conditions of the Merger Agreement and Plan of
Merger, and as more fully described in the accompanying Proxy
Statement/Prospectus.
In approving the Merger Agreement and Plan of Merger, CVA's Board of
Directors has unanimously determined that the proposed Merger is in the best
interests of CVA and CVA's stockholders. ACCORDINGLY, THE BOARD OF DIRECTORS
RECOMMENDS THAT THE STOCKHOLDERS OF CVA VOTE IN FAVOR OF THE MERGER AGREEMENT
AND PLAN OF MERGER AND THE TRANSACTIONS CONTEMPLATED THEREUNDER, INCLUDING THE
MERGER.
The close of business on , 1997 has been fixed by the CVA Board
of Directors as the record date (the "CVA Record Date") for the determination of
stockholders entitled to vote at the Special Meeting. The affirmative vote of
the holders of shares representing at least two thirds ( 2/3) of the voting
power of the CVA Common Stock and CVA Preferred Stock (voting together as a
class) and the affirmative vote of the holders of shares representing at least
two-thirds ( 2/3) of the voting power of the CVA Preferred Stock (voting
separately as a class), each as outstanding on the CVA Record Date, is necessary
to approve the Merger Agreement and Plan of Merger and the transactions
contemplated thereunder, including the Merger.
YOU ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS CAREFULLY. IT IS VERY
IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE ENCLOSED PRE-ADDRESSED
AND PRE-PAID ENVELOPE SO THAT IT WILL BE RECEIVED NO LATER THAN ,
1997. If you attend the Special Meeting, you may vote in person if you wish,
even though you have previously returned your proxy.
Sincerely,
DAVID L. EDWARDS
President and Chief Executive Officer
<PAGE> 4
CEREBROVASCULAR ADVANCES, INC.
9901 1H-10 WEST
SUITE 4000
SAN ANTONIO, TEXAS 78230
, 1997
---------------------
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON , 1997
TO THE STOCKHOLDERS OF CEREBROVASCULAR ADVANCES, INC.:
A Special Meeting of Stockholders of CerebroVascular Advances, Inc. ("CVA")
will be held at 9901 1H-10 West, Suite 400, San Antonio, Texas 78230 on
, 1997, at 9:00 a.m., local time (together with any adjournment or
postponement thereof, the "Special Meeting"), for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Merger Agreement (the "Merger Agreement"), including the Plan of Merger
(the "Plan of Merger") attached as Exhibit A thereto, dated as of May 8,
1997, among Quintiles Transnational Corp., a North Carolina corporation
("Quintiles"), CVA Acquisition Corp., a North Carolina corporation which
has not engaged in any material operations since its incorporation and is a
wholly-owned subsidiary of Quintiles ("Acquisition"), CVA, and the
stockholders of CVA signatory thereto, and the transactions contemplated
thereunder, including a merger (the "Merger") pursuant to which CVA would
be merged with and into Acquisition, with Acquisition being the surviving
corporation in the Merger; and
2. To transact such other business as may properly come before the
Special Meeting.
The close of business on , 1997 has been fixed by the CVA Board
of Directors as the record date (the "CVA Record Date") for the determination of
stockholders entitled to vote at the Special Meeting. The affirmative vote of
the holders of shares representing at least two-thirds ( 2/3) of the voting
power of the common stock, par value $.001 per share, of CVA (the "CVA Common
Stock") and the Series A Preferred Stock, par value $.001 per share, of CVA (the
"CVA Preferred Stock") (voting together as a class) and the affirmative vote of
the holders of shares representing at least two-thirds ( 2/3) of the voting
power of CVA Preferred Stock (voting separately as a class), each as outstanding
on the CVA Record Date, is necessary to approve the Merger Agreement and the
Plan of Merger and the transactions contemplated thereunder, including the
Merger. A complete list of stockholders entitled to vote at the Special Meeting
will be available for examination by any CVA Stockholder, for any purpose
germane to the Special Meeting, at the office of the Secretary of CVA, 9901
1H-10 West, Suite 400, San Antonio, Texas 78230, for a period of at least ten
days preceding the Special Meeting.
All shares represented by properly executed proxies will be voted in
accordance with the specifications on the proxy card. If no such specifications
are made, proxies will be voted FOR approval and adoption of the Merger
Agreement and the Plan of Merger and the transactions contemplated thereunder,
including the Merger. Stockholders of CVA who do not vote in favor of or
otherwise consent to approval and adoption of the Merger Agreement, the Plan of
Merger and the Merger and who otherwise comply with the provisions of Sections
5.12 through 5.13 of the Texas Business Corporation Act (the "TBCA"), will have
the right, if the Merger is consummated, to dissent and to demand an appraisal
of the fair value of their shares. A copy of Sections 5.12 through 5.13 of the
TBCA is attached to the Proxy Statement/Prospectus as Appendix D. See "Rights of
Dissenting CVA Stockholders" in the Proxy Statement/Prospectus for a description
of how to properly exercise dissenters' rights.
You are urged to read the Proxy Statement/Prospectus carefully. It is very
important that your shares be represented at the Special Meeting. Whether or not
you plan to attend the Special Meeting, you are requested to complete, date,
sign and return the enclosed proxy card promptly in the enclosed pre-addressed
and pre-paid envelope so that it will be received no later than ,
1997. If you attend the Special Meeting, you may vote in person if you wish,
even though you have previously returned your proxy. Failure to return a
properly executed proxy or to vote at the Special Meeting will have the same
effect as a vote against the Merger Agreement, the Plan of Merger and the
transactions contemplated thereunder, including the Merger. Any action may be
taken on any of the foregoing proposals at the Special Meeting on the date
specified above or on any dates to which by original or later adjournment, the
Special Meeting may be adjourned.
By Order of the CVA Board of Directors,
MICHAEL T. DWYER
Secretary
San Antonio, Texas
, 1997
<PAGE> 5
CEREBROVASCULAR ADVANCES, INC.
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
, 1997
---------------------
QUINTILES TRANSNATIONAL CORP.
PROSPECTUS
FOR 350,000 SHARES OF
COMMON STOCK
This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is being
furnished to the stockholders of CerebroVascular Advances, Inc., a Texas
corporation ("CVA"), in connection with the solicitation of proxies by the Board
of Directors of CVA for use at its Special Meeting of Stockholders to be held on
, 1997 in connection with the approval of the proposed merger of CVA
with and into CVA Acquisition Corp. ("Acquisition"), a North Carolina
corporation and a wholly-owned subsidiary of Quintiles Transnational Corp., a
North Carolina corporation ("Quintiles"). Quintiles has filed a Registration
Statement on Form S-4 with the United States Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, with respect to a maximum of
350,000 shares of Quintiles Common Stock, par value $0.01 per share ("Quintiles
Common Stock"), issuable to the stockholders of CVA in connection with the
merger of CVA with and into Acquisition (the "Merger"). This Proxy
Statement/Prospectus also constitutes the Prospectus of Quintiles filed as part
of the Registration Statement.
The Board of Directors of CVA has unanimously determined that the Merger is
in the best interests of the stockholders of CVA and recommends that they vote
their CVA shares FOR approval of the Merger Agreement.
This Proxy Statement/Prospectus is first being mailed to stockholders of
CVA on or about , 1997.
---------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 8 HEREOF FOR
A DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED BY
STOCKHOLDERS IN CONNECTION WITH THEIR VOTE
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Proxy Statement/Prospectus is , 1997.
<PAGE> 6
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY QUINTILES OR CVA. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE
SHARES OF QUINTILES COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION TO SUCH A PERSON. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY OFFER OR SALE MADE HEREBY SHALL UNDER ANY
CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
Quintiles is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by Quintiles may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
regional offices located at 7 World Trade Center, New York, New York 10048 and
Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials may also be obtained from the web site that
the Commission maintains at http://www.sec.gov. Quotations relating to
Quintiles' Common Stock appear on the Nasdaq National Market and such reports
and other information concerning Quintiles also can be inspected and copied at
the offices of the Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C.
20006-1506.
Quintiles has filed with the Commission a Registration Statement on Form
S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Common Stock offered hereby. This Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which are omitted in accordance with
the rules and regulations of the Commission. Statements contained in this Proxy
Statement/Prospectus as to the contents of any contract or other document
referred to are not necessarily complete and with respect to each such contract
or other document filed as an exhibit to the Registration Statement, reference
is made to such exhibit for a more complete description of the matters involved,
each such statement being qualified in all respects by such reference. For
further information with respect to Quintiles and the Quintiles Common Stock,
reference is made to the Registration Statement. The information so omitted,
including exhibits, may be obtained from the Commission at its principal office
in Washington, D.C. upon payment of the prescribed fees, or may be inspected
without charge at the Public Reference Facilities of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004.
---------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 340-23520)
pursuant to the Exchange Act are incorporated herein by reference:
1. Quintiles' Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
2. Quintiles' Current Reports on Form 8-K dated November 22, 1996 (as
amended by Form 8-K/A on January 16, 1997), February 7, 1997 and March 5,
1997;
3. The description of Quintiles' Common Stock contained in its
Registration Statement on Form 8-A as filed with the Commission on April
11, 1994; and
4. All other documents filed by Quintiles pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the shares of
Quintiles Common Stock.
Quintiles will provide without charge to each person, including any
beneficial owner, to whom a copy of this Proxy Statement/Prospectus is
delivered, upon the written or oral request of such person, a copy of any or all
of the documents which are incorporated by reference herein, other than exhibits
to such information (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to Quintiles, 4709
Creekstone Drive, Riverbirch Building, Suite 300, Durham, North Carolina
27703-8411, Attention Corporate Secretary, telephone (919) 941-2000.
---------------------
Any statement contained in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified shall not be deemed to
constitute a part of this Prospectus except as so modified, and any statement so
superseded shall not be deemed to constitute part of this Prospectus.
(ii)
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY..................................................... 1
The Companies............................................. 1
The Merger................................................ 2
Restrictions Applicable to Certain CVA Stockholders....... 4
Recommendation of CVA's Board of Directors................ 4
Stockholder Approval...................................... 4
The Special Meeting....................................... 4
Appraisal Rights.......................................... 4
Regulatory Approvals...................................... 5
Accounting Treatment...................................... 5
Federal Income Tax Considerations......................... 5
Market Prices and Dividend Policies....................... 5
Selected Historical Financial Data........................ 6
RISK FACTORS................................................ 8
Dependence on Certain Industries and Clients.............. 8
Management of Growth...................................... 8
Acquisition Risks......................................... 8
Risks Relating to Contract Sales Services................. 9
Competition; Industry Consolidation....................... 9
Loss or Delay of Large Contracts; Fixed Price Nature of
Contracts.............................................. 9
Dependence on Personnel................................... 9
Potential Liability....................................... 10
Dependence on Government Regulation....................... 10
Uncertainty in Healthcare Industry and Possible Healthcare
Reform................................................. 10
Exchange Rate Fluctuations................................ 11
Variation in Quarterly Operating Results.................. 11
Volatility of Stock Price................................. 11
Indemnification Obligations of CVA Stockholders Pursuant
to the Merger Agreement................................ 11
No Assurance of Expected Business Benefits of Merger...... 12
Possible Loss of Tax-Free Treatment....................... 12
SPECIAL MEETING OF CVA STOCKHOLDERS......................... 13
Voting Information for CVA Stockholders................... 13
Solicitation of Proxies................................... 13
THE MERGER.................................................. 14
Summary of the Transaction................................ 14
Background of the Merger.................................. 15
Recommendation of CVA Board of Directors.................. 16
Reasons for the Merger.................................... 16
The Merger Agreement...................................... 17
The Escrow Agreement...................................... 23
Accounting Treatment...................................... 26
Federal Income Tax Considerations......................... 26
Restrictions on Resales of Quintiles Common Stock; Pooling
Considerations; Affiliate Agreements................... 27
Regulatory Approvals...................................... 28
INTERESTS OF CERTAIN PERSONS IN THE MERGER.................. 28
Stock Ownership, Stock Options of CVA Directors and
Executive Officers..................................... 28
Employment, Consulting and Noncompetition Agreements...... 29
</TABLE>
(iii)
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RIGHTS OF DISSENTING CVA STOCKHOLDERS....................... 29
CERTAIN INFORMATION CONCERNING QUINTILES.................... 31
Recent Development........................................ 33
CERTAIN INFORMATION CONCERNING CVA.......................... 34
General................................................... 34
CVA's Services............................................ 34
Sales and Marketing....................................... 34
Contractual Arrangements.................................. 34
Competition............................................... 34
Government Regulation..................................... 35
Potential Liability and Insurance......................... 35
Intellectual Property..................................... 36
Facilities and Employees.................................. 36
Legal Proceedings......................................... 36
Management's Discussion and Analysis of Financial
Condition and Results of Operations of CVA............. 37
Beneficial Ownership of Management and Certain
Stockholders........................................... 38
COMPARISON OF THE RIGHTS OF HOLDERS OF QUINTILES COMMON
STOCK AND CVA COMMON STOCK................................ 39
Authorized Capital Stock; Blank Stock Provision........... 39
Size of the Board of Directors............................ 40
Classified Board of Directors............................. 40
Cumulative Voting......................................... 40
Removal of Directors; Filling Vacancies................... 41
Amendment of Charter and Bylaws........................... 41
Power to Call Special Meetings of Stockholders............ 41
Stockholder Action Without Meeting........................ 42
Stockholder Approval of Certain Business Combinations..... 42
Directors' Standard of Care............................... 43
Indemnification and Limitation of Liability............... 43
Dividends and Repurchases of Shares....................... 44
Appraisal Rights.......................................... 44
LEGAL MATTERS............................................... 45
EXPERTS..................................................... 45
FORWARD LOOKING STATEMENTS.................................. 46
INDEX TO FINANCIAL STATEMENTS............................... F-1
Appendix A -- Merger Agreement.............................. A-1
Appendix B -- Form of Plan of Merger........................ B-1
Appendix C -- Form of Escrow Agreement...................... C-1
Appendix D -- Texas Business Corporation Act Articles 5.12
and 5.13.................................................. D-1
</TABLE>
(iv)
<PAGE> 9
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto included or incorporated
by reference in this Proxy Statement/Prospectus. Certain capitalized terms used
in this Summary are defined elsewhere in this Proxy Statement/Prospectus.
Information contained or incorporated by reference in this Proxy
Statement/Prospectus contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995, which can be identified by
the use of forward-looking terminology, such as "may" "will," "expect,"
"anticipate," "estimate," "believe", or "continue" or the negative thereof or
other variations thereon or comparable terminology. See "Forward Looking
Statements." The matters set forth under the caption "Risk Factors" in this
Proxy Statement/Prospectus constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to differ
materially from those in such forward-looking statements.
THE COMPANIES
Quintiles
Quintiles Transnational Corp. ("Quintiles") is a leading provider of
full-service contract research, sales and marketing services to the global
pharmaceutical, biotechnology and medical device industries. Quintiles, through
the use of its extensive information technology capabilities, provides a broad
range of fully-integrated contract services in order to accelerate the time from
discovery to peak market acceptance of a new therapy by offering traditional
contract research services as well as contract sales and marketing services. In
addition, Quintiles provides health economics and healthcare policy consulting
and disease and health information management services to support the growing
information needs of the healthcare industry. Since 1992, Quintiles' annual net
revenue has increased from $96.3 million to $537.6 million in 1996, and during
the same period, its annual net income available for common stockholders
(excluding non-recurring costs) increased from $2.8 million to $32.1 million.
During 1996, Quintiles provided services to 49 of the 50 largest pharmaceutical
companies in the world as ranked by 1995 healthcare revenue and to the 11
largest biotechnology companies in the world as ranked by market capitalization
in December 1996. As of March 31, 1997, Quintiles had over 50 offices located in
21 countries and approximately 8,251 employees.
Since its inception in 1982, Quintiles has continued to expand the scope of
its services and geographic presence to support the needs of its clients on a
worldwide basis. Quintiles has implemented a number of strategic initiatives to
broaden its array of services and create new opportunities for growth. In
November 1996, Quintiles completed a business combination with Innovex Limited
("Innovex"), an international contract services organization specializing in
managing the sales and marketing of drugs for pharmaceutical companies. Innovex
enables Quintiles to complement its clinical research focus on obtaining
regulatory approval with services designed to assist clients in achieving market
penetration of new therapies. Also in November 1996, Quintiles acquired BRI
International, Inc. ("BRI"), a leading international contract research firm
specializing in medical device development and regulatory compliance consulting.
In May 1996, Quintiles acquired the operating assets of Lewin-VHI, Inc., a
nationally-recognized healthcare consulting firm, and formed a new subsidiary of
Quintiles, The Lewin Group Inc. In February 1996, Quintiles acquired PMC
Contract Research AB, a contract research organization ("CRO") located in
Uppsala, Sweden, which has extensive clinical trials management expertise.
During 1996, Quintiles added more than 20 new offices through acquisitions and
internal growth and commenced construction of a 171,000 square foot clinical
trial drug formulation, manufacturing, packaging and distribution facility in
Bathgate, Scotland.
Quintiles' principal executive offices are located at 4709 Creekstone
Drive, Riverbirch Building, Suite 300, Durham, North Carolina 27703-8411 and its
telephone number is (919) 941-2000. Unless the context otherwise requires, the
term "Quintiles" refers to Quintiles Transnational Corp. and its subsidiaries.
Acquisition
CVA Acquisition Corp. ("Acquisition"), a North Carolina Corporation, is a
wholly-owned subsidiary of Quintiles formed for the purpose of consummating the
Merger. The principal executive office and telephone number of Acquisition are
the same as Quintiles.
1
<PAGE> 10
CVA
CerebroVascular Advances, Inc. ("CVA"), a Texas corporation, is a provider
of CRO services for the pharmaceutical and biotechnology industries. CVA
provides clinical development services to client companies that complement their
research and development functions. CVA was founded in February 1993 and began
operations in January 1994. CVA has extensive medical expertise in neurology and
believes that it is one of the leading providers of CRO services for companies
developing drugs to treat stroke.
CVA currently has 28 full-time employees, and its single office location is
at 9901 IH 10 West, Suite 400, San Antonio, Texas 78230 and its telephone number
is (210) 697-2200.
THE MERGER
If the Merger is effected, CVA will be merged with and into Acquisition, a
wholly-owned subsidiary of Quintiles. After the Merger, Acquisition, as the
surviving corporation in the Merger, will own and operate the assets and
business CVA currently owns and operates.
Upon consummation of the Merger, holders of CVA Common Stock and CVA
Preferred Stock will cease to have any direct equity interest in CVA. The
Quintiles Common Stock to be received by holders of CVA Common Stock and CVA
Preferred Stock upon consummation of the Merger will provide those holders with
an opportunity to have a continuing equity interest in the combined operations
of Quintiles and CVA.
Quintiles will issue at the Effective Time up to a maximum of 350,000
shares of Quintiles Common Stock to the holders (a "CVA Stockholder") of shares
of CVA Common Stock and CVA Preferred Stock outstanding at the Effective Time,
the exact number of shares to be issued being subject to the average closing
price per share of Quintiles Common Stock on the Nasdaq National Market for the
ten trading day period ending three days before the Closing Date ("Average Share
Price"). If the Average Share Price is more than $99.60, then Quintiles will
issue at the Effective Time an aggregate of such number of shares of Quintiles
Common Stock determined by dividing $25,000,000 by the Average Share Price.
Conversely, if the Average Share Price is less than $55.78, then Quintiles will
issue at the Effective Time an aggregate of such number of shares of Quintiles
Common Stock determined by dividing $14,000,000 by the Average Share Price, not
to exceed 350,000 shares. If the Average Share Price is between $55.78 and
$99.60 (inclusive) then Quintiles will issue at the Effective Time a total of
251,000 shares of Quintiles Common Stock to the CVA Stockholders. In each such
case, the Quintiles Common Stock will be issued to each CVA Stockholder on a
basis equivalent to such holder's pro rata equity ownership of CVA. The number
of shares of Quintiles Common Stock issuable at the Effective Time will not
include such number of shares of Quintiles Common Stock issuable upon the
exercise of options to acquire shares of Quintiles Common Stock substituted at
the Effective Time for options to acquire shares of CVA Common Stock. See "The
Merger -- The Merger Agreement -- Conversion of CVA Capital Stock."
It is the intention of the parties to consummate the Merger and the other
transactions contemplated by the Merger Agreement and the Plan of Merger as soon
as possible following adoption and approval of the Merger Agreement and the Plan
of Merger by the CVA Stockholders and satisfaction of all covenants and
conditions to the parties' respective obligations to consummate the Merger (or,
to the extent permitted, waiver thereof) or at such other time as designated in
writing by Quintiles and CVA. The Merger will become effective at the time
specified in the articles of merger which will be filed with the Secretary of
State of the State of North Carolina and the Secretary of State of the State of
Texas contemporaneously with the closing of the transactions contemplated by the
Merger Agreement.
In the Merger, each share of CVA Common Stock and CVA Preferred Stock
(collectively, "CVA Capital Stock") issued and outstanding immediately prior to
the Effective Time will cease to be outstanding and (other than shares of CVA
Common Stock held by a CVA Stockholder who exercises dissenter's rights under
Texas law and shares of CVA Common Stock held in CVA's treasury) will be
converted into the right to receive shares of Quintiles Common Stock at an
exchange ratio to be determined following the date of this Proxy
Statement/Prospectus based on the Average Share Price of Quintiles Common Stock.
No fractional shares of Quintiles Common Stock will be issued by Quintiles upon
the conversion of CVA Capital Stock in the Merger, and all such fractional
shares will be eliminated. Each share of Acquisition common stock issued and
outstanding immediately prior to the Effective Time will be converted into one
share of common stock of the Surviving Corporation. The rights of Quintiles
stockholders, including the former CVA Stockholders who will become holders of
2
<PAGE> 11
Quintiles Common Stock, are governed by the Articles of Incorporation and Bylaws
of Quintiles and the laws of the State of North Carolina. See "Comparison of the
Rights of Holders of Quintiles Common Stock and CVA Capital Stock" and "The
Merger -- The Merger Agreement -- Conversion of CVA Capital Stock."
Pursuant to the Merger Agreement and the Plan of Merger, at the Effective
Time, each option to acquire one share of CVA Common Stock will be substituted
for an option to acquire such number of shares of Quintiles Common Stock that
the option holder would have received had such holder exercised its option
immediately prior to the Effective Time. The per share exercise price for any
Quintiles option so received will equal the per share exercise price of the CVA
options substituted for such Quintiles options divided by the ratio used to
exchange Quintiles Common Stock for CVA Capital Stock. Each Quintiles option
will otherwise be subject to the same terms and conditions as apply to the
related CVA option, except that all such Quintiles options will be fully vested
and immediately exercisable as of the Effective Time, as provided in the related
CVA option.
In issuing shares of Quintiles Common Stock to the CVA Stockholders in
accordance with the Merger Agreement and Plan of Merger, Quintiles will withhold
from each CVA Stockholder and deliver to the Escrow Agent 10% of the shares of
Quintiles Common Stock issuable to each CVA Stockholder under the Merger
Agreement and the Plan of Merger (the "Escrow Fund"), to be issued in the name
of, held and transferred by an escrow agent to be determined by Quintiles, as
Escrow Agent, pursuant to the terms of the Merger Agreement and the Escrow
Agreement, the form of which is attached hereto as Appendix C (the "Escrow
Agreement"). None of the Quintiles options nor any of the shares of Quintiles
Common Stock issuable upon the exercise of Quintiles options shall be
contributed to the Escrow Fund. Furthermore, the Merger Agreement provides that,
by virtue of the Merger and the resolutions to be adopted by the CVA
Stockholders at the Special Meeting, J.E. Campion, a director of CVA, shall be
irrevocably appointed attorney-in-fact, and authorized and empowered to act, for
and on behalf of any or all of the CVA Stockholders in connection with the
indemnity provisions of the Merger Agreement as they relate to the CVA
Stockholders generally, the Escrow Agreement, and such other matters reasonably
necessary for consummation of the transactions contemplated by the Merger
Agreement. If the indemnification provisions of the Merger Agreement are
triggered, CVA Stockholders may lose some or all of the Quintiles Common Stock
deposited into escrow which constitutes a portion of the consideration received
by the CVA Stockholders in exchange for their CVA Common Stock in the Merger.
See "The Merger -- The Merger Agreement -- Stockholder's Representative," "The
Merger -- The Escrow Agreement" and "Risk Factors -- Indemnification Obligations
of CVA Stockholders Pursuant to the Merger Agreement."
Pursuant to the Merger Agreement, from and after Closing, Quintiles,
Acquisition, CVA and their respective affiliates and all of their respective
officers, directors, employees (other than certain former CVA employees), agents
and stockholders (other than the CVA Stockholders) shall be defended,
indemnified and held harmless from and against any and all losses arising in
connection with misrepresentations made in the Merger Agreement. See "The
Merger -- The Merger Agreement -- Indemnification."
The Merger Agreement may be terminated by the parties at any time by mutual
consent in writing. Quintiles, Acquisition or CVA may terminate the Merger
Agreement if the transactions contemplated thereby, including, but not limited
to, the Merger, are not consummated before July 31, 1997 or if any court or
government instrumentality of competent jurisdiction takes any action to prevent
such transactions. Quintiles may terminate the Merger Agreement upon the
material breach of any of the representations, warranties or covenants provided
by CVA under the Merger Agreement. CVA may terminate the Merger Agreement upon
the material breach of any of the representations, warranties or covenants
provided by Quintiles or Acquisition thereunder. See "The Merger -- The Merger
Agreement -- Amendment, Waiver and Termination."
Consummation of the Merger is subject to the satisfaction of certain
conditions. See "The Merger -- The Merger Agreement -- Conditions to
Consummation." In addition, the parties have agreed to certain covenants in
connection with the Merger Agreement, including, without limitation, a provision
that may require CVA to pay an overbid fee of $1 million to Quintiles in the
event that CVA enters into a transaction with a third party pursuant to an
Acquisition Proposal within 12 months from the date of the Merger Agreement or
if the CVA Stockholders fail to approve the Merger. See "The Merger -- The
Merger Agreement -- Certain Covenants."
3
<PAGE> 12
RESTRICTIONS APPLICABLE TO CERTAIN CVA STOCKHOLDERS
Affiliates of CVA who exchange their shares of CVA Capital Stock in the
Merger will be subject to certain restrictions on resale of the Quintiles Common
Stock received in the Merger. See "The Merger -- Restrictions on Resales of
Quintiles Common Stock; Pooling Considerations; Affiliate Agreements."
RECOMMENDATION OF CVA'S BOARD OF DIRECTORS
The Board of Directors of CVA has unanimously determined that the Merger is
in the best interests of the Stockholders of CVA and has approved the Merger
Agreement and the Plan of Merger, and recommends that the CVA Stockholders vote
"FOR" approval of the Merger Agreement and Plan of Merger.
STOCKHOLDER APPROVAL
A special meeting (the "Special Meeting") of the CVA Stockholders will be
held on , 1997 at which the CVA Stockholders will consider and vote
on a proposal to approve the Merger pursuant to the terms of the Merger
Agreement and Plan of Merger.
THE SPECIAL MEETING
The close of business on , 1997 has been fixed by the CVA Board
of Directors as the record date (the "CVA Record Date") for the determination of
CVA Stockholders entitled to vote at the Special Meeting. As of the CVA Record
Date, there were 1,723,875 issued and outstanding shares of CVA Common Stock and
523,810 issued and outstanding shares of CVA Preferred Stock. The affirmative
vote of the holders of shares representing at least two-thirds ( 2/3) of the
voting power of the CVA Common Stock and the CVA Preferred Stock (voting
together as a class) and the affirmative vote of the holders of shares
representing at least two-thirds ( 2/3) of the voting power of the CVA Preferred
Stock (voting separately as a class), each as outstanding on the CVA Record
Date, is necessary to approve the Merger Agreement, the Plan of Merger and the
transactions contemplated thereunder, including the Merger. Any other matter
properly considered and acted upon at the Special Meeting must be approved by
the affirmative vote of the holders of shares representing a majority of the
shares constituting the voting power of CVA Capital Stock entitled to vote on
such matter and represented at the Special Meeting (whether in person or by
proxy), except for such matters which by law, the Articles of Incorporation of
CVA, as amended, or the Bylaws of CVA, as amended (the "CVA Bylaws"), require
otherwise.
Each holder of CVA Common Stock is entitled to one vote for each share on
all matters submitted to a vote of the CVA Stockholders. Each holder of CVA
Preferred Stock is entitled to one vote for each share of CVA Common Stock into
which the CVA Preferred Stock is convertible. The holders of CVA Common Stock
and CVA Preferred Stock vote together as a class. Additionally, the holders of
CVA Preferred Stock vote as a separate class in certain circumstances, as
provided in CVA's Articles of Incorporation or Bylaws. The presence at the
Special Meeting, in person or by proxy, of the holders of issued and outstanding
shares representing a majority of the shares constituting the voting power of
CVA Capital Stock entitled to vote at such meeting will constitute a quorum for
the transaction of business. Abstentions will be treated as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. Because the proposals to be voted on at the Special Meeting require the
affirmative vote of a percentage of the outstanding shares, abstentions will be
equivalent to votes cast against the Merger Agreement, the Plan of Merger and
the transactions contemplated thereunder, including the Merger.
APPRAISAL RIGHTS
Any CVA Stockholder of record who objects to the Merger and who follows the
procedures prescribed by Articles 5.12 and 5.13 of the Texas Business
Corporation Act (the "TBCA") may be entitled, in lieu of receiving the shares of
Quintiles Common Stock in the Merger, to receive cash equal to the fair value of
such shares, which value will be determined by agreement or appraisal. See
"Rights of Dissenting CVA Stockholders" and Appendix D to this Proxy
Statement/Prospectus, which contains the applicable provisions of the TBCA in
their entirety.
4
<PAGE> 13
REGULATORY APPROVALS
Quintiles and CVA are not aware of any governmental or regulatory approvals
required for consummation of the Merger, except for compliance with applicable
state securities laws and the filing of articles of merger with the Secretary of
State of the State of North Carolina and the Secretary of State of the State of
Texas.
ACCOUNTING TREATMENT
It is intended that the Merger will be treated as a pooling of interests
for financial accounting purposes in accordance with generally accepted
accounting principles. As a condition to the obligations of Quintiles and
Acquisition pursuant to the Merger Agreement, they must receive, on the Closing
Date, the opinion of Ernst & Young LLP, regarding the ability of the Merger to
be accounted for as a pooling of interests, as contemplated by the Merger
Agreement. See "The Merger -- Accounting Treatment."
FEDERAL INCOME TAX CONSIDERATIONS
As a condition to the obligations of Quintiles, Acquisition and CVA to
consummate the Merger, each party is to receive the opinion of Ernst & Young
LLP, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986 and that no gain
or loss will be recognized by the CVA Stockholders upon their receipt of
Quintiles Common Stock in the Merger. See "The Merger -- Federal Income Tax
Considerations" and "Risk Factors -- Possible Loss of Tax-Free Treatment."
MARKET PRICES AND DIVIDEND POLICIES
Quintiles Common Stock has traded publicly on the Nasdaq National Market
under the trading symbol "QTRN" since April 20, 1994, the date on which the
Quintiles Common Stock was first offered to the public. The table below sets
forth the high and low sale prices for Quintiles Common Stock for the periods
indicated as reported by the Nasdaq Stock Market. Such prices are adjusted to
reflect the two-for-one stock split effected as a 100% stock dividend on
November 27, 1995.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Year ended December 31, 1995
First quarter............................................. $19.438 $14.500
Second quarter............................................ 24.125 17.250
Third quarter............................................. 32.125 22.000
Fourth quarter............................................ 46.000 26.250
Year ended December 31, 1996
First quarter............................................. 69.250 37.000
Second quarter............................................ 82.000 56.500
Third quarter............................................. 83.250 52.500
Fourth quarter............................................ 83.250 58.250
Year ended December 31, 1997
First quarter............................................. 78.000 53.250
Second quarter (through May 7, 1997)...................... 59.250 43.000
</TABLE>
On May 7, 1997, the last full trading day prior to the date of this Proxy
Statement/Prospectus, the reported closing sales price per share of Quintiles
Common Stock on the Nasdaq National Market was $55.75. On December 31, 1996,
Quintiles had 33,149,962 shares of Common Stock outstanding (not including
2,404,332 shares issuable upon the exercise of stock options outstanding as of
December 31, 1996), and there were approximately 8,950 beneficial owners of the
Common Stock.
There is no public market for the CVA Common Stock.
Quintiles has never declared or paid any cash dividends on the Quintiles
Common Stock, and one of its existing domestic credit facilities prohibits the
payment of dividends without the prior consent of the lender. Quintiles does not
anticipate paying any cash dividends in the foreseeable future and intends to
retain future earnings for the development and expansion of its business.
CVA has never paid any cash dividends on CVA Common Stock. CVA does not
anticipate paying any cash dividends in the foreseeable future and intends to
retain future earnings for the development and expansion of its business.
5
<PAGE> 14
SELECTED HISTORICAL FINANCIAL DATA
Selected Consolidated Financial Data of Quintiles
The Selected Consolidated Statement of Operations Data set forth below for
each of the years in the five-year period ended December 31, 1996 and the
Consolidated Balance Sheet Data set forth below as of December 31, 1992, 1993,
1994, 1995 and 1996 are derived from the audited consolidated financial
statements of Quintiles and notes thereto which have been audited by Ernst &
Young LLP and are incorporated by reference into this Proxy
Statement/Prospectus. The selected consolidated financial data presented below
should be read in conjunction with Quintiles' audited consolidated financial
statements and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1992(1) 1993(1) 1994(1) 1995(1) 1996(1)
------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenue............................................ $96,336 $141,923 $195,900 $323,692 $537,608
Costs and expenses:
Direct costs......................................... 45,957 70,258 97,293 165,313 272,590
General and administrative expense................... 37,833 53,335 73,432 113,247 187,589
Depreciation and amortization........................ 4,607 7,823 10,352 16,903 24,780
Non-recurring costs:
Restructuring costs................................ -- -- -- 2,373 13,102
Special pension contribution....................... -- -- -- 2,329 2,329
------- -------- -------- -------- --------
Total costs and expenses...................... 88,397 131,416 181,077 300,165 500,390
------- -------- -------- -------- --------
Income from operations................................. 7,939 10,507 14,823 23,527 37,218
Non-recurring transaction costs........................ -- -- -- -- (17,118)
Other income (expense)................................. (2,635) (2,890) (1,191) (1,445) (2,975)
------- -------- -------- -------- --------
Total other income (expense).................. (2,635) (2,890) (1,191) (1,445) (20,093)
------- -------- -------- -------- --------
Income before income taxes............................. 5,304 7,617 13,632 22,082 17,125
Income taxes........................................... 2,467 3,272 4,585 8,181 11,914
------- -------- -------- -------- --------
Income before cumulative effect of accounting change... 2,837 4,345 9,047 13,901 5,211
Cumulative effect of accounting change................. -- (158) -- -- --
------- -------- -------- -------- --------
Net income............................................. 2,837 4,187 9,047 13,901 5,211
Non-equity dividend.................................... -- -- -- -- (846)
------- -------- -------- -------- --------
Net income available for common stockholders........... $ 2,837 $ 4,187 $ 9,047 $ 13,901 $ 4,365
======= ======== ======== ======== ========
Net income per share................................... $ 0.14 $ 0.17 $ 0.32 $ 0.45 $ 0.13
======= ======== ======== ======== ========
Weighted average shares outstanding(2)................. 20,888 23,972 28,044 31,233 33,714
======= ======== ======== ======== ========
</TABLE>
- ---------------
(1) Prior to Quintiles' November 29, 1996 share exchange with Innovex, Innovex
had a fiscal year end of March 31, and Quintiles had (and continues to have)
a fiscal year end of December 31. As a result, the pooled data presented
above for 1992 through 1995 include Innovex's March 31 fiscal year data in
combination with Quintiles' December 31 fiscal year data. In connection with
the share exchange, Innovex changed its fiscal year end to December 31.
Accordingly, the pooled data presented above for 1996 include both Innovex's
and Quintiles' data on a December 31 year end basis. Because of the
difference between Innovex's fiscal year end in 1995 compared with 1996,
Innovex's quarter ended March 31, 1996 data are included in Quintiles'
pooled data for both 1995 and 1996.
(2) Restated to reflect a two-for-one stock split of Quintiles' Common Stock
effected as a 100% stock dividend on November 27, 1995.
6
<PAGE> 15
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1992 1993 1994 1995 1996
------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT EMPLOYEES)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 4,333 $ 14,539 $ 45,625 $ 80,061 $ 62,032
Working capital........................................ 2,773 16,896 46,384 70,020 96,008
Total assets........................................... 70,993 125,366 193,568 334,642 518,005
Long-term debt and obligations, including current
portion.............................................. 12,931 21,373 21,874 51,831 182,293
Stockholders' equity................................... $23,585 $ 40,097 $ 87,092 $161,805 $144,348
Employees.............................................. 1,376 1,908 2,592 4,372 7,394
</TABLE>
Comparative Per Share Data
The following table sets forth certain unaudited historical per share data
of Quintiles and CVA and combined per share data on an unaudited pro forma basis
after giving effect to the Merger on a pooling of interests basis assuming an
exchange ratio of 0.10163 shares of Quintiles Common Stock in exchange for each
share of CVA Capital Stock. The unaudited pro forma combined financial data are
not necessarily indicative of the operating results that would have been
achieved had the transaction been in effect as of the beginning of each of the
periods presented and should not be construed as representative of future
operations. The CVA equivalent pro forma per share amounts are computed by
multiplying the Quintiles pro forma per share amounts by an assumed common stock
exchange ratio of 0.10163:1.
<TABLE>
<CAPTION>
QUINTILES CVA
HISTORICAL PER AND CVA EQUIVALENT
SHARE DATA PRO FORMA PRO FORMA
----------------- PER SHARE PER SHARE
QUINTILES CVA DATA DATA
--------- ----- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Net income............................................ $0.13 $0.53 $0.17 $0.02
Book value............................................ $4.35 $1.00 $4.38 $0.44
Year ended December 31, 1995
Net income............................................ $0.45 $0.16 $0.45 $0.05
Year ended December 31, 1994
Net income............................................ $0.32 $0.12 $0.33 $0.03
</TABLE>
7
<PAGE> 16
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Proxy Statement/Prospectus, Stockholders of CVA should consider the
following factors carefully in evaluating the Merger. To the extent that these
factors apply to the CRO industry in general, such risk factors apply to CVA's
business as well. See also "Forward Looking Statements."
DEPENDENCE ON CERTAIN INDUSTRIES AND CLIENTS
Quintiles' revenues are highly dependent upon the research and development
and sales and marketing expenditures of the pharmaceutical and biotechnology
industries. Quintiles has benefited to date from the growing tendency of
pharmaceutical and biotechnology companies to engage independent outside
organizations to conduct large clinical research and sales and marketing
projects. Quintiles' operations could be materially and adversely affected by a
general economic decline in these industries or by any reduction in the
outsourcing of development or sales and marketing expenditures. Quintiles has in
the past derived, and may in the future derive, a significant portion of its net
revenue from a relatively limited number of major projects or clients. In 1996,
ten clients accounted for approximately 48% of Quintiles' consolidated net
revenue. As pharmaceutical companies continue to outsource large projects and
studies to fewer full-service global providers, the concentration of business
could increase. Quintiles is likely to experience such concentration in 1997 and
in future years. The loss of any such client could materially and adversely
affect Quintiles.
MANAGEMENT OF GROWTH
Quintiles has experienced rapid growth over the past 10 years. Quintiles
believes that its sustained growth places a strain on operational, human and
financial resources. In order to manage its growth, Quintiles must continue to
improve its operating and administrative systems and to attract and retain
qualified management, professional, scientific and technical personnel. Foreign
operations may involve the additional risks of assimilating differences in
foreign business practices, hiring and retaining qualified personnel, and
overcoming language barriers. Quintiles has a transnational organizational
structure, comprised of three operating divisions performing complementary
functions with a holding company performing management functions. While this
transnational structure has successfully supported Quintiles' growth to date,
Quintiles recently has completed a number of acquisitions, and there can be no
assurance that this structure will continue to be effective. Failure to manage
growth effectively could have a material adverse effect on Quintiles.
ACQUISITION RISKS
Acquisitions involve numerous risks, including difficulties and expenses
incurred in connection with the acquisition and the assimilation of the
operations and services of the acquired companies, the diversion of management's
attention from other business concerns and the potential loss of key employees
of the acquired companies. Acquisitions of foreign companies also may involve
the additional risks of assimilating differences in foreign business practices
and overcoming language barriers. Since February 1996, Quintiles has completed
five acquisitions, both within the United States and internationally. There can
be no assurance that Quintiles' past and any future acquisitions will be
successfully integrated into its operations. Quintiles reviews many acquisition
candidates in the ordinary course of business, and Quintiles continually is
evaluating new acquisition opportunities. Given the CRO industry consolidation
which is occurring, Quintiles expects to continue to evaluate and compete for
suitable acquisition candidates. There can be no assurance that Quintiles will
successfully complete future acquisitions nor that acquisitions, if completed,
will contribute favorably to Quintiles' operations and future financial
condition. Although Quintiles performs due diligence investigations on each
company or business it seeks to acquire, there may be liabilities which
Quintiles fails or is unable to discover for which Quintiles, as a successor
owner, may be liable. Quintiles generally seeks to minimize its exposure to such
liabilities by obtaining indemnification from each seller, which may be
supported by deferring payment of a portion of the purchase price. However,
there is no assurance that such indemnifications, even if obtainable,
enforceable and collectible (as to which there also is no assurance), will be
sufficient in amount, scope or duration to fully offset the potential
liabilities arising from the acquisitions.
8
<PAGE> 17
RISKS RELATING TO CONTRACT SALES SERVICES
Outsourced contract sales services is a relatively new industry outside the
U.K. Quintiles believes that the contract sales industry emerged in the 1980s,
primarily in the U.K., because of regulatory cost containment pressure on
pharmaceutical companies. As a result, large pharmaceutical companies began to
outsource their sales and marketing activities incident to product launch. There
is a relatively low level of market penetration for outsourced sales and
marketing services in most other countries, including the United States. As
such, companies in this industry are subject to all of the risks inherent in a
new or emerging industry, including an inability to attract and retain clients,
changes in the regulatory regime, an absence of an established earnings history,
the availability of adequately trained sales representatives and additional and
unforeseen costs and expenses. There can be no assurance that Quintiles will be
able to market successfully its contract sales and marketing services outside
the U.K.
COMPETITION; INDUSTRY CONSOLIDATION
The market for Quintiles' contract research services is highly competitive,
and Quintiles competes against traditional CROs, the in-house research and
development departments of pharmaceutical companies, as well as universities and
teaching hospitals. In sales and marketing services, Quintiles competes against
the in-house sales and marketing departments of pharmaceutical companies and
small local contract sales organizations in each country in which it operates.
Quintiles also competes against consulting firms offering healthcare consulting
services, including boutique firms specializing in the healthcare industry and
the healthcare departments of large firms. Expansion by these competitors into
other areas in which Quintiles operates could affect Quintiles' competitive
position. Increased competition may lead to price and other forms of competition
that may affect Quintiles' margins. Consolidation within the pharmaceutical
industry, as well as a trend by pharmaceutical companies to limit outsourcing to
fewer organizations, has heightened the competition for contract research
services. As a result, consolidation also has occurred among the providers of
contract research services, and several large, full-service providers have
emerged, including Quintiles. If these consolidation trends continue, they may
result in greater competition among the larger contract research providers for
clients and acquisition candidates.
LOSS OR DELAY OF LARGE CONTRACTS; FIXED PRICE NATURE OF CONTRACTS
Most of Quintiles' contracts are terminable upon 15-90 days' notice by the
client. Although the contracts typically provide for payment of certain fees for
winding down the study and, in some cases, a termination fee, the loss or delay
of a large contract or the loss or delay of multiple contracts could adversely
affect Quintiles' future net revenue and profitability. Contracts may be
terminated for a variety of reasons, including the failure of a product to
satisfy safety requirements, unexpected or undesired results of the product, the
client's decision to forego a particular study or insufficient patient
enrollment or investigator recruitment. Quintiles contracts with investigators
who undertake to recruit large numbers of patients in many of its studies. There
can be no assurance that Quintiles will always be able to satisfy recruitment
targets, particularly in large studies for which there is little precedent. In
addition, most of Quintiles' contracts for the provision of its services are
fixed price or fee-for-service subject to a cap. Since Quintiles' contracts are
predominantly structured in this manner, Quintiles bears the risk of cost
overruns. Underpricing of contracts or significant cost overruns could have a
material adverse effect on Quintiles.
DEPENDENCE ON PERSONNEL
Quintiles relies on a number of key executives, including Dennis B.
Gillings, Ph.D., its Chairman of the Board of Directors and Chief Executive
Officer. Quintiles maintains key man life insurance on Dr. Gillings in the
amount of $3 million. The loss of the services of any key executive could have a
material adverse effect on Quintiles. In addition, Quintiles' performance
depends on its ability to attract and retain qualified management and
professional, scientific and technical operating staff, as well as its ability
to recruit qualified representatives for its contract sales services. There can
be no assurance that Quintiles will be able to continue to attract and retain
qualified personnel.
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POTENTIAL LIABILITY
In connection with its provision of contract research services, Quintiles
contracts with physicians to serve as investigators in conducting clinical
trials to test new drugs on human volunteers. Such testing creates a risk of
liability for personal injury to or death of volunteers, particularly to
volunteers with life-threatening illnesses, resulting from adverse reactions to
the drugs administered. Although Quintiles does not believe it is legally
accountable for the medical care rendered by third party investigators, it is
possible that Quintiles could be held liable for the claims and expenses arising
from any professional malpractice of the investigators with whom it contracts or
in the event of personal injury to or death of persons participating in clinical
trials. Quintiles also could be held liable for errors or omissions in
connection with the services it performs. In addition, as a result of its Phase
I clinical trials facilities, Quintiles could be liable for the general risks
associated with a Phase I facility including, but not limited to, adverse events
resulting from the administration of drugs to clinical trial participants or the
professional malpractice of Phase I medical care providers. Quintiles believes
that its risks are reduced by contractual indemnification provisions with
clients and investigators, insurance maintained by clients and investigators and
by Quintiles, various regulatory requirements, including the use of
institutional review boards and the procurement of each volunteer's informed
consent to participate in the study. The contractual indemnifications generally
do not protect Quintiles against certain of its own actions such as negligence.
The contractual arrangements are subject to negotiation with clients and the
terms and scope of such indemnification vary from client to client and from
trial to trial. The financial performance of these indemnities is not secured.
Therefore, Quintiles bears the risk that the indemnifying party may not have the
financial ability to fulfill its indemnification obligations. Quintiles
maintains professional liability insurance that covers worldwide territories in
which Quintiles currently does business and includes drug safety issues as well
as data processing errors and omissions. There can be no assurance that
Quintiles will be able to maintain such insurance coverage on terms acceptable
to Quintiles. Quintiles could be materially and adversely affected if it were
required to pay damages or bear the costs of defending any claim outside the
scope of or in excess of a contractual indemnification provision or beyond the
level of insurance coverage or in the event that an indemnifying party does not
fulfill its indemnification obligations.
DEPENDENCE ON GOVERNMENT REGULATION
Quintiles' contract research business has benefited from the extensive
governmental regulation of the drug development process, particularly in the
United States. In Europe, the general trend has been towards establishing common
standards for clinical testing of new drugs, leading to changes in the various
requirements currently imposed by each country. Quintiles believes that the
level of regulation is generally less burdensome outside the United States. From
time to time legislation is introduced in the U.S. Congress to substantially
modify regulations administered by the Food and Drug Administration ("FDA")
governing the drug approval process. Changes in regulation in the United States
or elsewhere, including mandatory substitution of generic drugs for patented
drugs, relaxation in the scope of regulatory requirements or the introduction of
simplified drug approval procedures, could decrease the business opportunities
available to Quintiles. In addition, the failure on the part of Quintiles to
comply with applicable regulations could result in the termination of ongoing
clinical research or sales and marketing projects or the disqualification of
data for submission to regulatory authorities, either of which could have a
material adverse effect on Quintiles.
UNCERTAINTY IN HEALTHCARE INDUSTRY AND POSSIBLE HEALTHCARE REFORM
The healthcare industry is subject to changing political, economic and
regulatory influences that may affect the pharmaceutical, biotechnology and
medical device industries. Numerous governments have undertaken efforts to
control growing healthcare costs through legislation, regulation and voluntary
agreements with medical care providers and pharmaceutical companies.
Implementation of government healthcare reform may adversely affect research and
development expenditures by pharmaceutical, biotechnology and medical device
companies which could decrease the business opportunities available to
Quintiles. Management is unable to predict the likelihood of healthcare reform
legislation being enacted or the effects such legislation would have on
Quintiles.
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EXCHANGE RATE FLUCTUATIONS
Approximately 56.5%, 59.2% and 57.0% of Quintiles' net revenue for the
years ended December 31, 1996, 1995, and 1994, respectively, were derived from
Quintiles' operations outside the United States. Quintiles' operations and
financial results could be significantly affected by factors associated with
international operations such as changes in foreign currency exchange rates and
uncertainties relative to regional economic circumstances, as well as by other
risks sometimes associated with international operations. Since the revenue and
expenses of Quintiles' foreign operations are generally denominated in local
currencies, exchange rate fluctuations between such local currencies and the
U.S. dollar will subject Quintiles to currency translation risk with respect to
the reported results of its foreign operations. Also, Quintiles may be subject
to foreign currency transaction risks when Quintiles' service contracts are
denominated in a currency other than the currency in which Quintiles incurs
expenses related to such contracts. Quintiles limits its foreign currency
transaction risks through exchange rate collars stated in its contracts with
clients or Quintiles hedges the transaction risk with foreign exchange contracts
or options. There can be no assurance that Quintiles will not experience
fluctuations in financial results from Quintiles' operations outside the United
States, and there can be no assurance Quintiles will be able to contractually or
otherwise favorably reduce its currency transaction risk associated with its
service contracts.
VARIATION IN QUARTERLY OPERATING RESULTS
Quintiles' results of operations have been and can be expected to be
subject to quarterly fluctuations. Quarterly results can fluctuate as a result
of a number of factors, including the timing of start-up expenses for new
offices, acquisitions, the completion or commencement of significant contracts,
changes in the mix of services offered and foreign exchange fluctuations.
Quintiles believes that quarterly comparisons of its financial results should
not be relied upon as an indication of future performance.
VOLATILITY OF STOCK PRICE
The market price of Quintiles' Common Stock has been and may continue to be
subject to wide fluctuations in response to variations in operating results from
quarter to quarter, changes in earnings estimates by analysts, market conditions
in the industry and general economic conditions.
INDEMNIFICATION OBLIGATIONS OF CVA STOCKHOLDERS PURSUANT TO THE MERGER AGREEMENT
Under the Merger Agreement, from and after closing Quintiles, Acquisition
and their affiliates and all of their respective officers, directors, employees
(other than former CVA employees), agents and stockholders (other than the CVA
Stockholders) (each an "Indemnitee") will be defended, indemnified and held
harmless pursuant to the Merger Agreement and the Escrow Agreement from and
against any and all losses, claims, actions, damages, liabilities, costs and
expenses arising in connection with any misrepresentation made by CVA in the
Merger Agreement or any of the documents related to the Merger Agreement or
otherwise required to consummate the Merger. The Merger Agreement calls for the
establishment of the Escrow Fund into which 10% of the Quintiles shares issued
in the Merger will be deposited. Subject to the limitations set forth in the
Merger Agreement, each Indemnitee will be advanced or reimbursed out of the
Escrow Fund on demand and prior to a final determination pursuant to the Merger
Agreement and the Escrow Agreement for any and all expenses reasonably incurred
by such Indemnitee in investigating, preparing for, defending or taking any
other action in respect of any loss described above or any proceeding related
thereto, whether or not such Indemnitee is a party to such proceeding. To the
extent such losses arise during the period ending on the later of 90 days after
the date of the Merger Agreement or the expiration of the waiting period
described in the Affiliate Agreement executed by all affiliates of CVA as a
condition to the Merger Agreement (see "The Merger -- Restrictions on Resales of
Quintiles Common Stock; Pooling Considerations; Affiliate Agreements"), the
aggregate recourse available to Indemnitees is limited to 25% of the aggregate
value of the Quintiles Common Stock issued to the CVA Stockholders on the
Closing Date, calculated based on the closing price of the Quintiles Common
Stock on the Closing Date. Thereafter, the maximum aggregate recourse available
to the Indemnitees will be limited to the Escrow Fund. Additionally, the
Indemnitees will not be entitled to indemnification unless and until the
aggregate of all amounts to which the Indemnitees would be entitled exceeds
$150,000.
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Partial recourse for any indemnification of Quintiles and the other
Indemnitees pursuant to the Merger Agreement shall be from, out of, and to the
extent of the Escrow Fund. If such indemnification provisions of the Merger
Agreement are triggered, CVA Stockholders may lose some or all of the Quintiles
Common Stock deposited into escrow which constitutes a portion of the
consideration received by the CVA Stockholders in exchange for their CVA Capital
Stock in the Merger. There can be no assurance that the indemnification
provisions of the Merger Agreement will not require disbursement of shares out
of the Escrow Fund or that the amount of such disbursements will not deplete the
Escrow Fund in its entirety. Subject to the resolution of timely asserted
claims, the Escrow Fund shall terminate and be released to the CVA Stockholders
shortly after the date which is 365 days after the Closing Date.
The Merger Agreement provides that, by virtue of the Merger and the
resolutions to be adopted at the Special Meeting, J.E. Campion, a director of
CVA (the "Stockholder's Representative"), shall be irrevocably appointed
attorney-in-fact, and authorized and empowered to act, for and on behalf of any
or all of the CVA Stockholders in connection with the indemnity provisions of
the Merger Agreement as they relate to the CVA Stockholders generally, the
Escrow Agreement and such other matters reasonably necessary to consummate the
transactions contemplated by the Merger Agreement, including to act as the
representative of the CVA Stockholders to review and authorize all claims
authorized or directed by the Escrow Agreement and dispute or question the
accuracy thereof, to compromise on their behalf with Quintiles any claims
asserted thereunder and to authorize payments to be made with respect thereto
and to take such further actions as authorized in the Merger Agreement.
Consequently, CVA Stockholders will not be able to contest, question or
negotiate any claims for indemnification in their own right and will be bound by
the decisions of the Stockholder's Representative. There can be no assurance
that the indemnification provisions will not be triggered, or, if triggered,
that the amount of indemnity paid will not deplete the Escrow Fund.
NO ASSURANCE OF EXPECTED BUSINESS BENEFITS OF MERGER
The Merger involves the combination of two companies that have previously
operated independently. Among the factors considered by the Boards of Directors
of Quintiles and CVA in connection with their approval of the Merger Agreement
were the potential synergies and increased attractiveness of the combined
company to clients due to its increased capacity, experience and international
presence. There can be no assurance that such benefits will be obtained.
POSSIBLE LOSS OF TAX-FREE TREATMENT
Although the Merger has been structured to qualify as a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Internal Revenue Service (the "IRS") has not provided
a ruling on the matter, and the opinion of Ernst & Young LLP to be delivered on
the Closing Date will neither bind the IRS nor prevent the IRS from adopting a
contrary position. Moreover, the tax-free treatment is premised on the CVA
Stockholders' satisfying a "continuity of interest" requirement, which requires
them to refrain from disposing such number of CVA shares (or Quintiles shares
after the Merger) pursuant to a plan or intent formed before the Merger that
they would no longer hold in the aggregate a substantial portion of the entire
consideration received by them in the Merger. While certain CVA Stockholders
have expressed their present intention not to transfer their shares, a
subsequent decision by these or other CVA Stockholders to sell a sufficient
number of shares could result in a loss of tax-free treatment. If this occurs,
then each CVA Stockholder would recognize gain or loss on each CVA share
surrendered in the amount of the difference between the stockholder's basis in
such share and the fair market value of the Quintiles shares received in
exchange therefor at the time of the Merger. See "The Merger -- Federal Income
Tax Considerations."
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SPECIAL MEETING OF CVA STOCKHOLDERS
This Proxy Statement/Prospectus is being furnished by CVA to its
stockholders in connection with the solicitation of proxies by the Board of
Directors of CVA for use at a special meeting of CVA Stockholders to be held at
9901 1H-10 West, Suite 400, San Antonio, Texas 78230 on , 1997, at
9:00 a.m. local (together with any adjournment or postponement thereof the
"Special Meeting"). At the Special Meeting, the holders of CVA Common Stock will
be asked to approve and adopt the Merger Agreement, the Plan of Merger and the
transactions contemplated thereunder, including the Merger.
VOTING INFORMATION FOR CVA STOCKHOLDERS
The close of business on , 1997, has been fixed by the CVA
Board of Directors as the CVA Record Date. As of the CVA Record Date, there were
issued and outstanding 1,723,875 shares of CVA Common Stock and 523,810 shares
of CVA Preferred Stock. The affirmative vote of the holders of shares
representing at least two-thirds ( 2/3) of the voting power of the CVA Common
Stock and CVA Preferred Stock (voting together as a class) and the affirmative
vote of the holders of shares representing at least two-thirds ( 2/3) of the
voting power of the CVA Preferred Stock (voting separately as a class), each as
outstanding on the CVA Record Date, is necessary to approve the Merger Agreement
and the Plan of Merger and the transactions contemplated thereunder, including
the Merger. Any other matter properly considered and acted upon at the Special
Meeting must be approved by the affirmative vote of the holders of the shares
representing a majority of the shares constituting the voting power of CVA
Capital Stock outstanding on the CVA Record Date, entitled to vote on such
matter and present at the Special Meeting (whether in person or by proxy),
except for such matters which by law, the CVA Articles of Incorporation or the
CVA Bylaws require otherwise.
Each holder of CVA Common Stock is entitled to one vote for each share on
all matters submitted to a vote of stockholders and each holder of CVA Preferred
Stock is entitled to one vote for each share of CVA Common Stock into which the
CVA Preferred Stock is convertible. The holders of CVA Common Stock and CVA
Preferred Stock vote together as a class. Additionally, the holders of CVA
Preferred Stock vote as a separate class in certain circumstances, as provided
in CVA's Articles of Incorporation or Bylaws. The presence at the Special
Meeting, in person or by proxy, of the holders of the issued and outstanding
shares representing a majority of the shares constituting the voting power of
CVA Capital Stock entitled to vote at such meeting will constitute a quorum for
the transaction of business. Abstentions will be treated as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. Because the proposals to be voted on at the Special Meeting require the
affirmative vote of a percentage of the outstanding shares, abstentions will be
equivalent to votes cast against the Merger Agreement and the Plan of Merger and
the transactions contemplated thereunder, including the Merger.
Any CVA Stockholder of record who objects to the Merger and who follows the
procedures prescribed by Articles 5.12 and 5.13 of the TBCA may be entitled, in
lieu of receiving the shares of Quintiles Common Stock in the Merger, to receive
cash equal to the fair value of such shares, which value will be determined by
agreement or appraisal. A copy of Articles 5.12 and 5.13 of the TBCA is attached
to this Proxy Statement/Prospectus as Appendix D. See "Rights of Dissenting CVA
Stockholders."
SOLICITATION OF PROXIES
The accompanying proxy sent to CVA Stockholders is being solicited by the
CVA Board of Directors. All proxies in the enclosed form of proxy that are
properly executed and returned to CVA prior to commencement of voting at the
Special Meeting will be voted at the Special Meeting in accordance with the
instructions thereon. All executed but unmarked CVA proxies will be voted FOR
approval and adoption of the Merger Agreement, the Plan of Merger and the
transactions contemplated thereunder, including the Merger. A stockholder may
revoke a proxy at any time before it is voted by filing with the Secretary of
CVA either an instrument revoking the proxy or a duly executed proxy bearing a
later date, or by attending the Special Meeting and voting in person. Such
filing should be sent to the Corporate Secretary of CVA, at CerebroVascular
Advances, Inc., 9901 1H-10 West, Suite 400, San Antonio, Texas 78230. Attendance
at the Special Meeting will not by itself revoke the proxy. At the Special
Meeting, stockholder votes will be tabulated by persons appointed by the CVA
Board of Directors to act as inspectors of election. Quintiles will pay all
expenses incurred in connection with this solicitation,
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including postage, printing, handling and the actual expenses incurred by
custodians, nominees and fiduciaries in forwarding proxy material to beneficial
owners.
CVA STOCKHOLDERS SHOULD NOT SEND THEIR STOCK CERTIFICATES WITH THEIR PROXY CARDS
The management of CVA does not know of any other matters other than those
set forth herein which may come before the Special Meeting. If any other matters
are properly presented to the Special Meeting for action, it is intended that
the persons named in the applicable form of proxy will vote on such matters as
determined by the majority of the CVA Board of Directors.
In addition to the use of the mails, proxies may be solicited by officers
and directors and regular employees of CVA, without additional remuneration, by
personal interviews, telephone, telegraph or otherwise.
IN UNANIMOUSLY APPROVING THE MERGER AGREEMENT, THE PLAN OF MERGER AND THE
TRANSACTIONS CONTEMPLATED THEREUNDER, INCLUDING THE MERGER, THE CVA BOARD OF
DIRECTORS HAS DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF CVA AND ALL
OF CVA'S STOCKHOLDERS AND RECOMMENDS THAT THE STOCKHOLDERS OF CVA VOTE IN FAVOR
OF THE MERGER AGREEMENT, THE PLAN OF MERGER AND THE TRANSACTIONS CONTEMPLATED
THEREUNDER, INCLUDING THE MERGER.
THE MERGER
The following information with respect to the Merger, insofar as it relates
to matters contained in the Merger Agreement, the Plan of Merger and the Escrow
Agreement, is qualified in its entirety by reference to the Merger Agreement,
the form of the Plan of Merger and the form of the Escrow Agreement, copies of
which are attached hereto as Appendix A, Appendix B and Appendix C,
respectively, and are incorporated herein by reference.
SUMMARY OF THE TRANSACTION
If the Merger is effected, CVA will be merged with and into Acquisition,
which will become a wholly-owned subsidiary of Quintiles. After the Merger,
Acquisition, as the surviving corporation in the Merger, will continue to own
and operate the assets and business CVA currently owns and operates.
Upon consummation of the Merger, holders of CVA Capital Stock will cease to
have any direct equity interest in CVA. The Quintiles Common Stock to be
received by holders of CVA Capital Stock upon consummation of the Merger will
provide those holders with an opportunity to have a continuing equity interest
in the combined operations of Quintiles and CVA.
Quintiles will issue at the Effective Time up to a maximum of 350,000
shares of Quintiles Common Stock to the CVA Stockholders, the exact number of
shares to be issued being subject to the average closing price per share of
Quintiles Common Stock on the Nasdaq National Market for the ten trading day
period ending three days before the Closing Date ("Average Share Price"). If the
Average Share Price is more than $99.60, then Quintiles will issue at the
Effective Time an aggregate of such number of shares of Quintiles Common Stock
determined by dividing $25,000,000 by the Average Share Price. Conversely, if
the Average Share Price is less than $55.78, then Quintiles will issue at the
Effective Time an aggregate of such number of shares of Quintiles Common Stock
determined by dividing $14,000,000 by the Average Share Price, not to exceed
350,000 shares. If the Average Share Price is between $55.78 and $99.60
(inclusive) then Quintiles will issue at the Effective Time a total of 251,000
shares of Quintiles Common Stock to the CVA Stockholders. In each such case, the
Quintiles Common Stock will be issued to each CVA Stockholder on a basis
equivalent to such holder's pro rata equity ownership of CVA. The number of
shares of Quintiles Common Stock issuable at the Effective Time will not include
such number of shares of Quintiles Common Stock issuable upon the exercise of
Quintiles options substituted at the Effective Time for CVA options. See "-- The
Merger Agreement -- Conversion of CVA Capital Stock."
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BACKGROUND OF THE MERGER
During 1995, CVA identified a need to grow in size and increase its
monitoring capabilities, data management expertise and geographic presence to
remain competitive in the CRO industry, as large pharmaceutical and
biotechnology companies increasingly sought to outsource large, multi-national
projects. To respond to these developments, CVA decided to form one or more
strategic alliances with either European-based CROs or multi-national CROs.
During 1995 CVA conducted presentations and meetings with three European based
CROs, and two U.S.-based multi-national CROs.
During 1995 and into 1996, CRO industry consolidation was continuing and
competition was intensifying among the large, global CROs. Large CROs were
expanding their international operations and increasing their service offerings.
In addition, several CROs sought financing from the public markets to pursue
these activities. Based on these developments in the industry, and CVA's
existing financial resources, CVA's management concluded that it needed to take
further action to remain competitive with the large, multi-national CROs capable
of assisting large pharmaceutical and biotechnology companies with research and
development on a world-wide basis.
The April 1996 Board Meeting
At a meeting on April 22, 1996, CVA's Board of Directors (the "CVA Board")
focused on CVA's long range plans and the various alternatives for remaining
competitive. At this meeting, the CVA Board reviewed the strategic options
available to CVA.
The CVA Board and management identified and evaluated three possible
alternatives for the company. First, CVA could focus solely on internal growth.
Second, CVA could pursue a strategy of expanding its service lines with
strategic alliances. Third, CVA could merge with a strategic partner,
particularly a company of greater size, to establish a significantly expanded
company and improve its services and geographical presence as a CRO with
therapeutic expertise in neurological diseases.
The CVA Board and management generally concluded that the internal growth
alternative would take significant time and effort and that, given the pace at
which competitors were growing, CVA would not catch up to any of the large CROs.
In reviewing the other possible alternatives, the CVA Board considered a number
of factors, including increased liquidity for stockholders, the need for
additional capital and facilitation of future financings, and the effect on
CVA's employees and outside consultants (which represent not only the majority
of CVA's stockholders, but also, in management's view, CVA's principal assets).
The CVA Board also discussed possible strategic partners. The CVA Board
concluded that management should pursue an acquisition of CVA by a U.S.-based
multi-national CRO.
The CVA Board requested the Chairman of the CVA Board, John D. Platt, to
serve as CVA's representative to initiate and conduct discussions regarding a
business combination for CVA.
Consideration of Combination Alternatives
Subsequent to the April 22, 1996 Board meeting, the Chairman of the CVA
Board and CVA's management reviewed the corporate history, recent developments
and financial performance of several CROs most of whose stock is publicly traded
on the Nasdaq National Market. This review process concluded with the decision
to pursue an acquisition of CVA by Quintiles.
The Proposed Merger with Quintiles
In May and June, 1996, CVA's Chairman of the Board and CVA's management
held preliminary discussions with Quintiles' representatives concerning a
possible combination of the two companies. These discussions continued on July
16, 1996 when CVA's Chairman, President, Senior Vice President and Chief
Scientific Officer met with Quintiles' senior management group in Chapel Hill,
North Carolina. The parties held a general discussion of their respective
companies' capabilities, culture and vision and determined that further
discussions should be held. In determining to pursue such discussions, CVA's
management concluded that the two companies had similar cultures and visions.
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Periodic discussions between CVA and Quintiles continued, and, in
September, 1996, Quintiles expressed an interest in an exchange of its common
stock for all of CVA's capital stock in a merger transaction.
Final Consideration of Options; Decision to Combine with Quintiles
At a meeting on September 25, 1996, CVA's Board reviewed the status of
discussions with Quintiles. Based on the Chairman's and management's
recommendations and its own consideration of other alternatives, the CVA Board
decided to pursue the business combination with Quintiles. See "-- Reasons for
the Merger" for a discussion of various factors considered by the CVA Board in
reaching this decision. The CVA Board directed the Chairman and CVA management
to continue discussions with Quintiles and to seek certain changes in the terms
and conditions offered by Quintiles, including an increase in the price offered
by Quintiles and the receipt of registered stock for CVA stockholders, both of
which were subsequently obtained.
After further negotiations, Quintiles and CVA entered into a non-binding
letter of intent with respect to the Merger on November 22, 1996.
On April 10, 1997, the CVA Board held a meeting, with certain members of
management and outside counsel present, to discuss the definitive Merger
Agreement and the transactions contemplated in connection with the Merger. The
CVA Board considered the financial and business implications of the transaction
and reviewed its fiduciary duties under Texas law with outside counsel.
Following extensive discussion, the CVA Board concluded (for the reasons
discussed below under the caption "-- Reasons for the Merger") that the Merger
is in the best interests of CVA and its stockholders. All board members present
at the meeting unanimously adopted resolutions, among other things, authorizing
the officers of CVA to enter into and perform the Merger Agreement, subject to
approval by stockholders, and recommending to the CVA Stockholders that they
vote in favor of approval of the Merger Agreement.
RECOMMENDATION OF CVA BOARD OF DIRECTORS
The Board of Directors of CVA has unanimously approved the Merger Agreement
and Plan of Merger and unanimously recommends a vote "FOR" the approval of the
Proposal to approve and adopt the Merger Agreement and the Plan of Merger and
the transactions contemplated thereunder. CVA's Board of Directors believes that
the Merger is fair to and in the best interests of the CVA Stockholders.
REASONS FOR THE MERGER
In approving the Merger Agreement and Plan of Merger and the transactions
contemplated thereby, and in recommending that CVA's Stockholders approve the
same, CVA's Board of Directors consulted with management, as well as its legal
advisors, and considered a number of factors, including the following:
(i) CVA's long term goal of growing in size and increasing its
capabilities, expertise and geographic presence to remain competitive in a
consolidating industry in which the large pharmaceutical and biotechnology
companies are increasingly looking for CROs that can handle large,
multi-national projects;
(ii) CVA's assessment that growth involved either (1) the raising of
significant additional equity capital to finance the growth of CVA in a
manner that would maximize stockholder value, the acquiring of several
companies, and the need to offer target companies cash or liquidity in the
form of publicly traded stock, or (2) a transaction with another CRO as its
strategic partner that would complement CVA's strengths;
(iii) Management's assessment that the internal growth option through
an initial public offering ("IPO") and acquisitions involved significant
risks for CVA, including risks relating to the volatility of the IPO
market, risks inherent in acquisitions, the time required to complete an
IPO, the time and difficulties involved in integrating other companies, and
similar factors;
(iv) Management's assessment of Quintiles' business, market presence,
current business strategy and competitive position in the CRO industry, the
opportunities for joint business development between CVA and Quintiles in
both the combined company's existing geographic markets and in potential
new markets,
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the receptivity of Quintiles management to the mission and values of CVA
and its employees and the continued ability to satisfy the needs of the
clients which CVA serves;
(v) The structure, form and amount of consideration to be paid in the
Merger;
(vi) The opportunity, through the Merger, for CVA's Stockholders to
have increased liquidity in their investment as holders of publicly traded
stock with a substantial trading volume;
(vii) The terms of the Merger Agreement and Plan of Merger;
(viii) The financial resources which would be made available to the
consolidated company after the Merger to deal with uncertainties and
changes which may result from the ongoing consolidation and maturation of
the CRO industry; and
(ix) The ability, through the Merger, to recognize value from the
strategic assets which CVA has developed, including its methods of
operations, reputation, market presence and capabilities.
In unanimously approving the Merger Agreement and Plan of Merger, the CVA
Board of Directors has determined that the Merger is in the best interests of
CVA and CVA's stockholders and recommends that the Stockholders of CVA vote in
favor of the Merger Agreement and Plan of Merger and the transactions
contemplated thereunder, including the Merger. The names of the members of the
CVA Board of Directors and the holdings of such persons and certain information
regarding their interests in the Merger are set forth elsewhere in this Proxy
Statement/Prospectus. See "Interests of Certain Persons in the Merger" and
"Certain Information Concerning CVA -- Beneficial Ownership of CVA Common
Stock."
The Quintiles Board of Directors believes that the Merger is in the best
interests of Quintiles and its stockholders. In reaching such determination, the
Quintiles Board of Directors considered a number of factors including, but not
limited to, (i) information pertaining to Quintiles' and CVA's respective
businesses, prospects, historical and projected financial performances,
financial condition and operations; (ii) analyses of the respective projected
contributions to net revenue, operating profit and net income of each company;
(iii) reports from management on Quintiles' due diligence investigation of CVA;
and (iv) the business reputation and capabilities of the management of CVA, as
well as the compatibility of the managements and corporate cultures of Quintiles
and CVA. In its deliberations concerning the Merger, the Board of Directors of
Quintiles also considered various additional considerations and risk factors,
including, but not limited to (i) the historical financial performance of CVA;
(ii) the percentage of ownership reduction to Quintiles stockholders resulting
from the issuance of Quintiles Common Stock to the CVA Stockholders; (iii) the
risk that the public market price of Quintiles Common Stock might be adversely
affected by the announcement of the Merger; (iv) the risk that the combined
company might not achieve revenue equal to the sum of the separate companies'
anticipated revenue; (v) the risk that other benefits sought to be obtained by
the Merger will not be obtained; (vi) the cost of integration of the operations
of Quintiles and CVA and its impact on the combined results of the combined
company after the Merger; and (vii) other risks described under "Risk Factors."
THE MERGER AGREEMENT
The statements and descriptions contained in this Proxy
Statement/Prospectus with respect to the terms and conditions of the Merger
Agreement are intended only as a general discussion of the Merger Agreement and
are qualified in their entirety by reference to the detailed provisions set
forth in the Merger Agreement attached hereto as Appendix A and the form of the
Plan of Merger attached hereto as Appendix B, each of which is incorporated
herein by reference. Each CVA Stockholder is advised to read the Merger
Agreement and Plan of Merger carefully.
General. The Merger Agreement and the Plan of Merger provide that,
following the performance and fulfillment of all covenants, conditions and
obligations to the Merger (other than those waived in accordance with the terms
of the Merger Agreement), CVA will merge with and into Acquisition in accordance
with the Plan of Merger, attached hereto as Appendix B, the separate corporate
existence of CVA shall cease, and Acquisition will be the surviving corporation
(sometimes referred to as the "Surviving Corporation") and a wholly-owned
subsidiary of Quintiles and shall continue its existence as a North Carolina
corporation. The name of the
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<PAGE> 26
Surviving Corporation will be "Quintiles CVA, Inc." The Merger will be effected
by filing articles of merger with the Secretary of State of the State of North
Carolina and the Secretary of State of the State of Texas, respectively. The
articles of merger will be filed contemporaneously with the closing of the
Merger which will occur as soon as practicable after the satisfaction (or waiver
if permissible) of the conditions set forth in the Merger Agreement or at such
other date designated by Quintiles and CVA in writing (such specified or other
date, the "Closing Date").
Effective Time of the Merger. It is the intention of the parties to
consummate the Merger and the other transactions contemplated by the Merger
Agreement and the Plan of Merger (the "Closing") as soon as practicable
following adoption and approval of the Merger Agreement by the CVA Stockholders
and satisfaction of all covenants and conditions to the parties' respective
obligations to consummate the Merger (or, to the extent permitted, waiver
thereof) or at such other time as designated in writing by Quintiles and CVA.
The Merger will become effective upon the later to occur of the filing of the
articles of merger with the Secretary of State of North Carolina or the
Secretary of State of the State of Texas (the "Effective Time").
Conversion of CVA Capital Stock. In the Merger, each share of CVA Capital
Stock issued and outstanding immediately prior to the Effective Time will cease
to be outstanding and, except for shares of CVA Common Stock held by a CVA
Stockholder who exercises dissenter's rights under the TBCA and shares of CVA
Common Stock held in CVA's treasury, will be converted, without any action by
the holder thereof, into the right to receive a fraction of a share of Quintiles
Common Stock determined by utilizing a formula (rounded to five decimal places)
based on the average closing sale price (the "Average Sale Price") of the
Quintiles Common Stock on the Nasdaq National Market for the 10 trading days
ending three trading days prior to the Closing Date.
Assuming that CVA does not issue any shares of CVA Capital Stock through
the Closing Date, such formula can be illustrated as follows:
(a) if the Average Sale Price is between $55.78 and $99.60 per share
(inclusive), then each share of CVA Capital Stock will be converted into
the right to receive .10163 shares of Quintiles Common Stock;
(b) if the Average Sale Price is below $55.78, each share of CVA
Capital Stock will be converted into the right to receive such number of
shares of Quintiles Common Stock (not to exceed 350,000) determined by
dividing the quotient obtained by dividing $14,000,000 by the Average Sale
Price by the number of outstanding shares of CVA Capital Stock; or
(c) if the Average Sale Price is above $99.60, each share of CVA
Capital Stock will be converted into the right to receive a fraction of a
share of Quintiles Common Stock determined by dividing the quotient
obtained by dividing $25,000,000 by the Average Sale Price by the number of
outstanding shares of CVA Capital Stock.
For purposes of the formula, all shares of CVA Common Stock subject to CVA
options are treated as outstanding and all shares of CVA Preferred Stock are
treated as if they have been converted into shares of CVA Common Stock at the
preferential rate set forth in CVA's Articles of Incorporation. The actual
fraction of a share of Quintiles Common Stock to be exchanged for each share of
CVA Capital Stock in connection with the Merger will be determined at the close
of business on the third trading day prior to the Closing Date.
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<PAGE> 27
By way of example, the chart below demonstrates the fraction of a share of
Quintiles Common Stock a CVA Stockholder would receive for each share of CVA
Capital Stock based upon the applicable sample Quintiles Average Sale Prices set
forth:
<TABLE>
<CAPTION>
FRACTION OF A
SHARE OF QUINTILES
COMMON STOCK ISSUABLE
IN EXCHANGE FOR
QUINTILES AVERAGE EACH SHARE OF
SALE PRICE CVA CAPITAL STOCK
- ------------------------------------------------------------ ---------------------
<S> <C>
$ 45.00................................................ 0.12597
$ 50.00................................................ 0.11337
$ 55.78................................................ 0.10163
$ 75.00................................................ 0.10163
$ 99.60................................................ 0.10163
$105.00................................................ 0.09640
$110.00................................................ 0.09202
</TABLE>
If the total number of shares of Quintiles Common Stock to be issued at the
Effective Time in the Merger exceeds 350,000, then each of Quintiles and CVA, at
its sole option, will have the right not to consummate the Merger. See "The
Merger -- Conditions to Consummation of the Merger."
No certificate representing fractional shares of Quintiles Common Stock
shall be issued upon the surrender for exchange of a certificate of CVA Capital
Stock, and all such fractional share interests will be eliminated. Each share of
Acquisition Common Stock issued and outstanding immediately prior to the
Effective Time will be converted into one share of common stock of the Surviving
Corporation.
Treatment of Outstanding CVA Stock Options. Pursuant to the Merger
Agreement and Plan of Merger, Quintiles has agreed to substitute options to
acquire shares of CVA Common Stock ("CVA Options") for options to acquire shares
of Quintiles Common Stock ("Quintiles Options"). At the Effective Time, each CVA
Option to acquire one share of CVA Common Stock will be converted into the right
to receive a Quintiles Option to acquire such number of shares of Quintiles
Common Stock that the CVA Option holder would have received had such holder
exercised its CVA Option immediately prior to the Effective Time. The per share
exercise price for any Quintiles Option so received will equal the per share
exercise price of the CVA Options exchanged for such Quintiles Options divided
by the ratio used to exchange Quintiles Common Stock for CVA Common Stock. Each
Quintiles Option so substituted in the Merger will otherwise be subject to the
same terms and conditions as apply to related CVA Options, except that all such
Quintiles Options will be fully vested and immediately exercisable as of the
Effective Time, as provided in the related CVA Options.
Payments Into Escrow. In issuing shares of Quintiles Common Stock to the
CVA Stockholders in accordance with the Merger Agreement and Plan of Merger,
Quintiles will withhold from each CVA Stockholder and deliver to the Escrow
Agent 10% of the shares of Quintiles Common Stock issuable pursuant to the
Merger Agreement and the Plan of Merger. Such shares will be issued in the name
of, held and distributed by an escrow agent to be determined by Quintiles, as
Escrow Agent, in accordance with the terms of the Merger Agreement and the
Escrow Agreement, the form of which is attached hereto as Appendix C (the
"Escrow Agreement") (such escrow sometimes referred to as the "Escrow Fund").
The Escrow Agent will hold such shares for the accounts of the CVA Stockholders
in accordance with each stockholder's respective interest in the shares so held
in escrow, and shall vote such shares in accordance with the written
instructions of the CVA Stockholder for whose account such shares are held. Any
cash or other taxable dividends paid with respect to such shares shall be paid
to the CVA Stockholders in accordance with each CVA Stockholder's respective
proportionate interest in the shares being held in escrow. None of the Quintiles
Options substituted for CVA Options nor any of the shares of Quintiles Common
Stock issuable upon the exercise of such Quintiles Options shall be contributed
to the Escrow Fund. See "-- The Escrow Agreement."
Appointment of Stockholder's Representative. The Merger Agreement provides
that, by virtue of the Merger and the resolutions to be adopted by the CVA
Stockholders at the Special Meeting, J.E. Campion, a director of CVA, shall be
irrevocably appointed attorney-in-fact and authorized and empowered to act, for
and on
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<PAGE> 28
behalf of any and all CVA Stockholders in connection with the indemnity
provisions of the Merger Agreement as they relate to the CVA Stockholders
generally, the Escrow Agreement and such other matters as are reasonably
necessary to consummate the transactions contemplated by the Merger Agreement,
including, without limitation, to act as the representative of the CVA
Stockholders to review and authorize all claims authorized or directed by the
Escrow Agreement and dispute or question the accuracy thereof, to compromise on
their behalf with Quintiles any claims asserted thereunder and to authorize
payments to be made with respect thereto and to take such further actions as are
authorized in the Merger Agreement (the above named representative, as well as
any subsequent representative of the CVA Stockholders appointed by him or after
his death or incapacity elected by vote of holders of a majority of CVA Common
Stock outstanding immediately prior to the Effective Time referred to as the
"Stockholder's Representative"). Each CVA Stockholder who votes in favor of the
Merger pursuant to the terms of the Merger Agreement, by such vote, without
further action, and each CVA Stockholder who receives shares of Quintiles Common
Stock in connection with the Merger, by acceptance thereof, confirms such
appointment and authority of the Stockholder's Representative and acknowledges
and agrees that such appointment is irrevocable and coupled with an interest.
Representations and Warranties of CVA and the CVA Stockholders. The Merger
Agreement requires CVA and those CVA Stockholders who hold approximately 99% of
the outstanding shares of CVA Capital Stock to make certain representations and
warranties with respect to the business of CVA. The rights of Quintiles,
Acquisition and their affiliates to indemnification under the Merger Agreement
depend, in part, upon the absence of any misrepresentation or any
non-fulfillment of CVA's representations, warranties, covenants, obligations and
agreements made in or pursuant to the Merger Agreement or in certain other
documents or agreements delivered to Quintiles in connection with the Merger.
Such representations and warranties of CVA include, but are not limited to: (i)
the validity of CVA's financial statements; (ii) the absence of liabilities,
obligations or indebtedness of or claims against CVA arising from, or in
connection with, or based upon acts, omissions, events, things, facts,
conditions, matters or occurrences existing, occurring or taking place on or
before the Closing Date; (iii) the absence of certain changes in the financial
condition of CVA other than in the ordinary course of business; and (iv) the
absence of any untrue statement of material fact or omission of any statement of
a material fact necessary in order to make the statements made in CVA's
disclosures to Quintiles pursuant to the Merger Agreement not misleading.
In addition, the Merger Agreement requires CVA to make certain
representations and warranties with respect to the CVA Stockholders.
Specifically, CVA represents and warrants that (i) as of the Closing Date, the
CVA Stockholders are the lawful owners of the CVA Capital Stock to be
transferred, free and clear of all liens and encumbrances, restrictions and
claims of every kind, and such shares owned by the CVA Stockholders shall
represent not less than 100% of all issued and outstanding CVA Capital Stock as
of such time; (ii) each CVA Stockholder has the full legal right, power and
authority to enter and deliver any documents necessary to effect the transaction
to which such CVA Stockholder is a party, perform such CVA Stockholder's
obligations thereunder and consummate the transactions contemplated thereby; and
(iii) any documents to which any CVA Stockholder is a party constitute the valid
and legally binding obligations of such CVA Stockholder, enforceable against
such CVA Stockholder in accordance with their respective terms.
THE PRECEDING PARAGRAPHS REPRESENT A SUMMARY OF CERTAIN REPRESENTATIONS AND
WARRANTIES MADE BY CVA IN THE MERGER AGREEMENT. THE CVA STOCKHOLDERS SHOULD
CAREFULLY REVIEW THE MERGER AGREEMENT SINCE THE REPRESENTATIONS AND WARRANTIES
CONTAINED THEREIN FORM THE BASIS FOR THE INDEMNIFICATION PROVISIONS OF THE
MERGER AGREEMENT WHICH ARE TO BE SECURED BY SHARES OF QUINTILES COMMON STOCK
ISSUABLE TO THE CVA STOCKHOLDERS AND DEPOSITED INTO ESCROW PURSUANT TO THE
ESCROW AGREEMENT. COPIES OF THE MERGER AGREEMENT AND THE FORM OF THE ESCROW
AGREEMENT ARE ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS APPENDIX A AND
APPENDIX C, RESPECTIVELY.
Conditions to Consummation of the Merger. The obligations of Quintiles and
Acquisition to consummate the Merger are subject to the satisfaction or waiver
by Quintiles of a number of conditions, including the following: (i) receipt of
a favorable opinion of CVA's legal counsel; (ii) the accuracy at Closing of the
representations and warranties made by CVA and the CVA Stockholders; (iii) the
absence of any adverse change in the assets or liabilities or condition,
financial or otherwise, or results of operations, or prospects of CVA, that
would be reasonably likely to diminish the value of CVA by more than $200,000;
(iv) the accuracy of the
20
<PAGE> 29
representations and warranties made by CVA in the Merger Agreement; (v) the
performance of all agreements of CVA pursuant to the Merger Agreement prior to
the Closing Date; (vi) the substantial consistency of the actual financial
performance of CVA with its financial projections; (vii) the absence of any
action, proceeding or claim that seeks to restrain or prohibit any of the
transactions contemplated by the Merger Agreement; (viii) the delivery by Ernst
& Young LLP of an opinion related to the appropriateness of pooling of interests
accounting for the Merger; (ix) the receipt of all governmental and other
consents and approvals necessary for consummation of the transactions
contemplated by the Merger Agreement; (x) the execution of the Escrow Agreement
and certain employment and consulting agreements by all parties thereto; (xi)
the receipt of resignations of officers and directors of CVA; (xii) the
repayment of any intra-company debt among CVA, its officers, directors and
employees; (xiii) the absence of any indication that certain employees intend to
leave the employment of CVA; (xiv) the absence of any exercise of dissenters'
rights pursuant to the Texas Business Corporation Act by CVA Stockholders; (xv)
the approval and adoption of the Merger Agreement and Plan of Merger by the CVA
Stockholders; (xvi) the absence of any issued or pending stop-order with respect
to the Registration Statement of which this Proxy Statement/Prospectus is a
part; and (xvii) the issuance by Quintiles at the Effective Time of not more
than 350,000 shares of Quintiles Common Stock in the Merger.
The obligations of CVA and the CVA Stockholders to consummate the Merger
are subject to the satisfaction or waiver by CVA of a number of conditions,
including the following: (i) the delivery of a favorable opinion of Quintiles'
legal counsel; (ii) the accuracy at Closing of the representations and
warranties made by Quintiles and Acquisition; (iii) the receipt of all
governmental and other consents and approvals necessary to consummate the
transactions contemplated by the Merger Agreement; (iv) the execution of certain
employment and consulting agreements by Quintiles; (v) the compliance by
Quintiles and Acquisition with all agreements required to be performed by them
prior to the Closing Date; (vi) the absence of any issued or pending stop-order
with respect to the Registration Statement of which this Proxy
Statement/Prospectus is a part; (vii) the receipt of evidence that the Quintiles
Common Stock to be issued in the Merger shall be quoted on the Nasdaq National
Market; (viii) the absence of any action, proceeding or claim that seeks to
restrain or prohibit the transactions contemplated by the Merger Agreement; (ix)
the receipt of a written opinion from Ernst & Young LLP to the effect that the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code and that no gain or loss will be recognized by the CVA Stockholders
upon their receipt of Quintiles Common Stock in the Merger; and (x) the issuance
by Quintiles at the Effective Time of not more than 350,000 shares of Quintiles
Common Stock in the Merger.
No assurances can be provided as to when or if all of the conditions to the
Merger can or will be satisfied (or waived by the party permitted to do so). In
the event the Merger is not consummated on or before July 31, 1997, the Merger
Agreement may be terminated by Quintiles or CVA. See "-- Amendment, Waiver and
Termination."
Certain Covenants. The Merger Agreement requires CVA to conduct its
operations only in the ordinary course of business and to preserve intact its
business organization, keep available the services of its officers and
employees, maintain satisfactory relationships with third parties and perform
all of its existing obligations. Neither Quintiles, Acquisition, CVA nor any of
their respective officers, directors or stockholders may take any actions that
would disqualify the transactions contemplated by the Merger Agreement from
pooling of interests accounting treatment or treatment as a tax-free
reorganization of CVA within the meaning of Section 368(a) of the Code.
Quintiles has agreed to include the shares of Quintiles Common Stock
issuable with respect to the Quintiles Options substituted at the Effective Time
for CVA Options in an existing Quintiles stock option plan in which the shares
issuable under the plan have been registered with the Commission on a
Registration Statement on Form S-8.
Acquisition Proposals. The Merger Agreement also requires CVA, its
officers, directors and affiliates to refrain from taking any action directly or
indirectly to encourage, initiate or engage in discussions with or provide
information to any third party concerning any Acquisition Proposal. "Acquisition
Proposal" means any proposal for a merger, consolidation, sale of assets, tender
offer, sale of shares or similar transaction.
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<PAGE> 30
CVA has agreed to notify Quintiles immediately of any Acquisition Proposal,
or if any request for confidential information regarding CVA in connection with
any Acquisition Proposal is received, and will provide Quintiles with any
information regarding such Acquisition Proposal or request as Quintiles shall
request.
If the CVA Stockholders fail to approve the Merger or the CVA Stockholders
or CVA close any transaction pursuant to any Acquisition Proposal within 12
months of the date of the Merger Agreement, other than the transactions
contemplated by the Merger Agreement, or at any time within 12 months of the
date of the Merger Agreement, any person other than the CVA Stockholders holds
20% or more of the then outstanding CVA Capital Stock and (i) the CVA
Stockholders do not reject the Acquisition Proposal, (ii) the Merger Agreement
is terminated as a result of the failure of the CVA Stockholders to gain
approval of the Merger, (iii) the Merger Agreement is terminated as a result of
the dissent of more than 10% of the CVA Stockholders, or (iv) the Merger
Agreement is terminated as a result of (A) the material breach by CVA or the CVA
Stockholders of any binding agreement contained in Articles I, IV, VII or VIII
of the Merger Agreement or (B) the knowing breach by CVA or the CVA Stockholders
of any representation, warranty or covenant contained in the Merger Agreement,
then CVA shall pay to Quintiles, immediately upon consummation of such
transaction, an overbid fee of $1 million. CVA will not be liable under this
provision where such triggering event occurs following a termination of the
Merger Agreement (i) by CVA due to the failure of certain conditions to the
parties' respective obligations under the Merger Agreement or (ii) by Quintiles
or CVA due to the failure to receive any necessary regulatory approval.
Amendment, Waiver and Termination. The Merger Agreement may be waived,
amended, supplemented or modified only by a written agreement executed by each
of the parties thereto.
The Merger Agreement may be terminated by the parties at any time by mutual
written consent. Any party may terminate the Merger Agreement by written notice
prior to the Closing Date if any court or other government instrumentality of
competent jurisdiction takes any action to restrain, enjoin or otherwise
prohibit the transactions contemplated by the Merger Agreement.
Quintiles may terminate the Merger Agreement by written notice to CVA at
any time prior to the Closing Date if CVA breaches in any material respect any
representation, covenant or warranty provided by CVA under the Merger Agreement
or if the consummation of the transactions contemplated thereby have not
occurred on or before July 31, 1997.
CVA may terminate the Merger Agreement upon written notice to Quintiles and
Acquisition on or prior to the Closing Date if Quintiles or Acquisition breach
in any material respect any representation, warranty or covenant contained in
the Merger Agreement or if the consummation of the transactions contemplated
thereby have not occurred on or before July 31, 1997.
Indemnification. From and after Closing, Quintiles, Acquisition and their
affiliates and all of their respective officers, directors, employees (other
than certain former key employees of CVA), agents and stockholders (other than
the CVA Stockholders) (each, an "Indemnitee") will be defended, indemnified and
held harmless by CVA and the CVA Stockholders pursuant to the Merger Agreement
and the Escrow Agreement from and against any and all losses, claims, actions,
damages, liabilities, costs and expenses (collectively "Losses") in connection
with (i) any misrepresentation, or failure to satisfy any representation,
warranty, covenant, obligation or agreement made by CVA or any CVA Stockholder
in or pursuant to the Merger Agreement or any of the documents related to the
Merger Agreement or otherwise required to consummate the Merger, (ii) any
litigation, action, claim, proceeding or investigation by any third party
relating to or arising out of the business or operations of CVA (or any
affiliate controlled by CVA) prior to the Closing Date or the actions of any CVA
Stockholder or (iii) Quintiles' enforcement of its indemnification rights under
the Merger Agreement. Each Indemnitee will be advanced or reimbursed on demand
for expenses reasonably incurred in connection with preparing for, defending or
taking any other action with respect to any such Loss or any related proceeding.
The maximum aggregate recourse of the Indemnitees is limited to 25% of the
Merger consideration to the extent Losses subject to indemnification arise in
the period ending at the later of 90 days from the date of the Merger Agreement
or upon expiration of the waiting period described in the Affiliate Agreement
executed by affiliates of CVA as a condition to closing under the Merger
Agreement (See "-- Restrictions on Resales of Quintiles Common Stock; Pooling
Considerations; Affiliate Agreements"). Thereafter, recourse for such Losses is
limited to the extent of the
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<PAGE> 31
Escrow Fund. In addition, the Indemnitees will not be entitled to
indemnification for any amount unless and until the aggregate of all amounts for
which Indemnitees would be entitled to be indemnified exceeds $150,000.
CVA shall be liable for any Losses arising from the events described in the
preceding paragraph prior to the Closing Date and from and after any termination
of the Merger Agreement. Following the Closing Date, CVA shall have no liability
for indemnification and CVA Stockholders will be prohibited from seeking
contribution from CVA with respect to any amounts payable in accordance with the
indemnification provisions of the Merger Agreement.
The representations and warranties of CVA and the CVA Stockholders in the
Merger Agreement will remain in full force and effect until the date 365 days
after the Closing Date (such period referred to as the "Representations
Period"). The Indemnitees may not make any claim for indemnification after the
expiration of the Representations Period, other than claims made in good faith
in writing prior to such expiration, whether or not any action or proceeding is
instituted with respect to such claims prior to the expiration of the
Representations Period. Any and all Losses arising after expiration of the
Representations Period will be recoverable upon notice properly given prior to
the expiration of the Representations Period.
Quintiles and Acquisition have agreed to defend, indemnify and hold
harmless CVA and its officers, directors and stockholders from and after the
Closing Date from and against any Losses relating to and arising from or in
connection with (i) Quintiles' breach of any misrepresentation, or failure to
satisfy any representation, warranty, covenant, obligation or agreement made by
Quintiles and Acquisition in or pursuant to the Merger Agreement or any of the
documents related to the Merger Agreement or otherwise required to consummate
the Merger or (ii) the enforcement by CVA and the CVA Stockholders of their
rights to indemnification. To the extent that any such Losses arise out of, or
are based upon, any untrue statement or omission or any alleged untrue statement
or omission based upon information furnished to Quintiles by CVA or its
officers, directors, employees, agents or representatives for inclusion in the
Registration Statement of which this Proxy Statement/Prospectus is a part,
Quintiles will not be liable for such Losses. Furthermore, Quintiles' aggregate
liability for any Losses that may be incurred by CVA or the CVA Stockholders
under any theory of recovery will not exceed 10% of the aggregate value
(calculated with reference to the closing price on the Closing Date) of the
Quintiles Common Stock to be issued in connection with the Merger.
Expenses. The Merger Agreement provides that each party will pay all of
its own expenses relating to the transactions contemplated by the Merger
Agreement, except that the CVA Stockholders will pay certain expenses of CVA in
excess of $150,000.
THE ESCROW AGREEMENT
The statements and descriptions contained in this Proxy
Statement/Prospectus with respect to the terms and conditions of the Escrow
Agreement are intended as a general discussion of the Escrow Agreement and are
qualified in their entirety by reference to the detailed provisions set forth in
the form of the Escrow Agreement attached hereto as Appendix C and incorporated
herein by reference. Each CVA Stockholder is advised to read the Escrow
Agreement carefully.
Treatment of Accumulation of Escrow Shares. Pursuant to the Escrow
Agreement, an escrow agent to be determined by Quintiles (anticipated to be a
national bank with its headquarters in North Carolina) (the "Escrow Agent"),
will hold the shares of Quintiles Common Stock deposited into escrow pursuant to
Section 1.4 of the Merger Agreement (the "Escrow Shares") in safe keeping and
dispose thereof only in accordance with the terms of the Escrow Agreement. At
any time after the date of the Escrow Agreement and prior to the distribution of
the Escrow Shares in accordance with the Escrow Agreement, if any of the CVA
Stockholders become entitled to receive or actually receive in connection with
the Escrow Shares any (i) non-taxable distribution of securities of Quintiles or
of any other entity; (ii) any non-taxable distribution of stock options,
warrants or rights; or (iii) non-taxable stock dividend or other non-taxable
distribution payable in securities or property of any description, all of the
shares of capital stock, or other property resulting from any such distribution,
stock option, warrant, right or stock dividend will be deemed to be Escrow
Shares and will be subject to the terms of the Escrow Agreement to the same
extent as the original Escrow Shares. Any cash dividends and any taxable stock
dividends paid with respect to the Escrow Shares will be paid to the CVA
Stockholders in accordance with their respective interests in
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<PAGE> 32
the Escrow Shares. The Escrow Agent may treat the Stockholder's Representative
as the duly authorized agent and representative of the CVA Stockholders with
respect to any additional property related to the Escrow Shares. The Escrow
Agent will vote the Escrow Shares in accordance with the written instructions of
each CVA Stockholder for whose account such Escrow Shares are held.
Distribution of Escrow Shares Upon Termination. Quintiles will not be
entitled to assert any claim against the Escrow Shares after the expiration of
the Representations Period (the "Claims Deadline"); provided, however, that any
claim made in good faith in writing on or prior to the Claims Deadline setting
forth in reasonable detail the basis for such claim (whether or not any action,
demand or proceeding is instituted with respect to such claim prior to the
Claims Deadline) will continue, subject to final resolution as provided in the
Escrow Agreement. The Escrow Agreement will terminate upon complete distribution
of the Escrow Shares. Within five business days after the Claims Deadline, the
Escrow Agent will deliver to the CVA Stockholders that portion of the Escrow
Shares not previously distributed or otherwise subject to claims pursuant to
Article IV of the Escrow Agreement, in proportion to the initial deposits of
shares made on their behalf by Quintiles. Thereafter, the balance of the Escrow
Shares will continue to be held by the Escrow Agent pursuant to the Escrow
Agreement until all claims asserted against the Escrow Shares are finally
resolved in accordance with Article IV thereof, at which time the balance of the
Escrow Shares will be distributed to the CVA Stockholders.
Claims Against Escrow Shares. If Quintiles (on its own behalf or on behalf
of any other Indemnitee) at any time on or prior to the Claims Deadline asserts
a claim for indemnification pursuant to Article VIII of the Merger Agreement,
Quintiles must submit to the Escrow Agent and the Stockholder's Representative a
written claim stating the details specified in Section 4.1 of the Escrow
Agreement, including the facts alleged as the basis for the claim, the amount of
Losses (as defined in the Escrow Agreement) incurred or reasonably expected to
be incurred and, if the Losses have been incurred, the number of Escrow Shares
to which the Indemnitee is entitled with respect to such Losses, calculated by
dividing the amount of such Losses by the closing price per share of Quintiles
Common Stock on the Nasdaq National Market on the Closing Date. If the claim is
for Losses which the Indemnitee reasonably believes it may incur, Quintiles'
written claim shall state a reasonable estimate of such Losses, but no payment
or distribution shall be made by the Escrow Agent until such Losses have
actually been incurred and Quintiles submits a notice to the Escrow Agent and
the Stockholder's Representative pursuant to Section 4.1(ii) of the Escrow
Agreement, whether or not the Losses are incurred prior to the Claims Deadline.
Resolution of Asserted Claims Against the Escrow Shares. If, within 25
days after Quintiles provides the appropriate notice of an asserted claim, the
Stockholder's Representative fails to notify the Escrow Agent and Quintiles in
writing that he reasonably disputes in good faith the asserted claim, then, at
the end of such period, the Escrow Agent will distribute to Quintiles the number
of Escrow Shares having an aggregate value equal to the amount of the claim.
Resolution of Disputed Claims Against Escrow Shares. If within the 25 day
period, the Stockholder's Representative notifies the Escrow Agent and Quintiles
in writing that he disputes or denies in good faith the asserted claim made by
Quintiles against the Escrow Shares, then the Stockholder's Representative and
Quintiles will use their reasonable best efforts to effect a settlement and
compromise of such asserted claim. Any liability, loss, damage or expense
established by reason of any such settlement and compromise will be certified in
writing to the Escrow Agent by the Stockholder's Representative and Quintiles,
and the Escrow Agent will pay to Quintiles any resulting amount due out of the
Escrow Shares by transfer to Quintiles of a number of Escrow Shares set forth in
such certification. If there is no amount that is due and owing to Quintiles
under the asserted claim, then the Escrow Agent will treat the asserted claim as
rejected by mutual agreement of the parties, and the Escrow Agent will totally
disregard it as the subject of assertion against the Escrow Shares.
Unresolved Claims Against Escrow Shares. If Quintiles and the
Stockholder's Representative are unable to settle and compromise any disputed
claim asserted against the Escrow Shares, the Escrow Agent may not make any
payment or distribution out of the Escrow Shares with respect to such claim
unless and until the Escrow Agent has received either: (a) a certificate of
Quintiles and the Stockholder's Representative certifying the amount of the
asserted claim in dispute and directing payment thereof; (b) a certified copy of
an award of an arbitrator, as referred to in Article VII of the Escrow
Agreement, determining the amount of the asserted claim in dispute; or (c) a
certified copy of a final unappealable judgment of a court of competent
jurisdiction determining
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the amount of the asserted claim in dispute, certified by the party providing
such copy as being binding and nonappealable. Upon receipt of any such
certification, the claim will be treated as a resolved asserted claim, and the
Escrow Agent will pay and distribute Escrow Shares in the manner described in
Section 4.2 of the Escrow Agreement.
Certain Rights of the Escrow Agent. From and at all times after the date
of the Escrow Agreement, Quintiles and the CVA Stockholders (collectively, the
"Indemnifying Parties") shall, to the fullest extent permitted by law, jointly
and severally indemnify and hold harmless the Escrow Agent and each director,
officer, employee, attorney, agent and affiliate of the Escrow Agent
(collectively, the "Indemnified Parties") against any and all actions, claims,
losses, damages, liabilities, costs and expenses of any kind or nature
whatsoever incurred by or asserted against any of the Indemnified Parties from
and after the date of the Escrow Agreement, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
claim, demand, suit, action or proceeding (including any inquiry or
investigation) by any person, whether threatened or initiated, asserting a claim
for any legal or equitable remedy under any statute or regulation arising from
or in connection with the negotiation, preparation, execution, performance or
failure of performance of the Escrow Agreement or any transactions contemplated
therein, whether or not any such Indemnifying Party is a party to any such
action, proceeding, suit or the target of any such inquiry or investigation;
provided, however, that no Indemnified Party shall have the right to be
indemnified pursuant to the Escrow Agreement for any liability resulting from
the gross negligence or willful misconduct of such Indemnified Party. The CVA
Stockholders (in accordance with their pro rata interest in the Escrow Shares)
and Quintiles will be jointly and severally liable for these obligations;
provided, however, that as between Quintiles and the CVA Stockholders, 50% of
the indemnified amount will be paid by the CVA Stockholders (in accordance with
their pro rata interests in the Escrow Shares) and 50% will be paid by
Quintiles. Quintiles shall have the option at any time to pay any amount due to
the Escrow Agent in satisfaction of the CVA Stockholders' obligations under the
Escrow Agreement, and upon any such payment, Quintiles may treat the amount of
such payment as an immediate liquidated claim against the Escrow Shares pursuant
to Section 4.2 of the Escrow Agreement.
If, at any time, there exists any dispute with respect to any obligations
of the Escrow Agent under the Escrow Agreement, or if at any time the Escrow
Agent is unable to determine, to the Escrow Agent's sole satisfaction, the
proper disposition of any portion of the Escrow Shares or the Escrow Agent's
proper actions with respect to its obligations thereunder, or if Quintiles and
the Stockholder's Representative have not within 30 days of the furnishing by
the Escrow Agent of a notice of resignation pursuant to Section 5.4 thereof,
appointed a successor escrow agent, then the Escrow Agent may take either or
both of the following actions upon written notice to Quintiles and the
Stockholder's Representative: (i) hold and decline to make further disbursements
of the Escrow Shares that the Escrow Agent would otherwise be obligated to make
under the Escrow Agreement until such dispute or uncertainty shall be resolved
to the sole satisfaction of the Escrow Agent or until a successor escrow agent
is appointed (as the case may be) and/or (ii) petition the Superior Court for
Wake County, North Carolina, or if such Court should be without subject matter
jurisdiction or should decline to exercise jurisdiction, any other state or
federal court of competent jurisdiction in North Carolina, for instructions with
respect to such dispute or uncertainty, and pay into such court all Escrow
Shares for holding and disposition in accordance with the instructions of such
court. The Escrow Agent will have no liability to Quintiles, the CVA
Stockholders or any other person with respect to any such actions described
above.
The Escrow Agent will receive a fee of $1000 per year for its services
under the Escrow Agreement. In addition, the Escrow Agent will be entitled to
reimbursement for all reasonable expenses, disbursements and advances (including
reasonable attorneys' fees) incurred or made by the Escrow Agent in accordance
with any of the provisions of the Escrow Agreement, excluding any expense,
disbursement or advance that may arise from its own negligence or willful
misconduct. Quintiles will be severally liable for 50% of such compensation and
reimbursement, and the CVA Stockholders will be liable (in accordance with their
pro rata interest in the Escrow Shares) for the other 50% of such compensation
and reimbursement.
The Escrow Agent or any successor may at any time resign by giving notice
in writing to the Stockholder's Representative and Quintiles. In the event of
any such resignation, a successor Escrow Agent will be appointed by written
consent of the Stockholder's Representative and Quintiles.
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The Stockholder's Representative. The Stockholder's Representative may be
removed and a new Stockholder's Representative(s) may be appointed at any time
by the written agreement of a majority of the CVA Stockholders, effective upon
receipt by the Escrow Agent and Quintiles of a duly executed copy of the written
instrument appointing the new Stockholder's Representative. The CVA Stockholders
will immediately select a successor should the Stockholder's Representative
resign. The Stockholder's Representative will have no liability to the CVA
Stockholders with respect to any action taken by him or her under the Escrow
Agreement, except with respect to his or her negligence or willful misconduct.
The Stockholder's Representative may act in reliance upon the advice of counsel
in reference to any matter in connection with the Escrow Agreement and will not
incur any liability to the CVA Stockholders, or any one of them, for any action
taken in good faith in accordance with such advice. All CVA Stockholders will
jointly and severally indemnify the Stockholder's Representative, ratably
according to their respective interests in the Escrow Shares, from and against
any and all Losses incurred in connection with the Stockholder Representative's
actions under the Escrow Agreement or by virtue of acting in his capacity as the
Stockholder's Representative, except to the extent resulting from his negligence
or willful misconduct. The Stockholder's Representative is entitled to
reimbursement from the CVA Stockholders, in accordance with their pro rata
interest in the Escrow Shares, for all reasonable expenses, disbursements and
advances (including reasonable attorneys' fees) incurred or made by the
Stockholder's Representative in connection with his actions under the Escrow
Agreement or by virtue of acting in his capacity as the Stockholder's
Representative, except to the extent resulting from his negligence or willful
misconduct. See "Risk Factors -- Indemnification Obligations of CVA Stockholders
Pursuant to the Merger Agreement."
ACCOUNTING TREATMENT
It is intended that the Merger will be treated as a pooling of interests
for financial accounting purposes in accordance with generally accepted
accounting principles. As a condition to the obligations of Quintiles and
Acquisition pursuant to the Merger Agreement, they must receive, on the Closing
Date, the opinion of Ernst & Young LLP regarding the ability of these entities
to enter into a transaction to be accounted for as a pooling of interests as
contemplated by the Merger Agreement.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain federal income tax consequences
of the Merger to holders of CVA Capital Stock. The discussion does not address
all aspects of federal income taxation that may be relevant to particular
stockholders and may not be applicable to stockholders who are not citizens or
residents of the United States, or who will acquire the Quintiles Common Stock
pursuant to the exercise or termination of employee stock options or otherwise
as compensation, nor does the discussion address the effect of any applicable
foreign, state, local or other tax laws. This discussion assumes that CVA
Stockholders hold their CVA Capital Stock as capital assets within the meaning
of Section 1221 of the Code. EACH STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE MERGER,
INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL AND OTHER TAX
LAWS.
The following discussion is based on the Code, applicable United States
Treasury regulations, judicial authority, and administrative rulings and
practice, all as of the date hereof. The Internal Revenue Service (the "IRS") is
not precluded from adopting a contrary position. In addition, there can be no
assurance that future legislative, judicial or administrative changes or
interpretations will not adversely affect the accuracy of the statements and
conclusions set forth herein. Any such changes or interpretations could be
applied retroactively and could affect the tax consequences of the Merger to
Quintiles, CVA and their respective stockholders.
It is a condition to consummation of the Merger that Ernst & Young LLP
deliver at Closing a written opinion to the effect that the Merger will, under
then current law, constitute a tax-free reorganization under Section 368(a) of
the Code. In rendering such opinion, Ernst & Young LLP will rely upon written
representations and covenants of Quintiles and CVA.
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As a tax-free reorganization, the Merger will have the following federal
income tax consequences for Stockholders, CVA, Acquisition and Quintiles:
1. No gain or loss will be recognized by holders of CVA Capital Stock
upon their receipt in the Merger of Quintiles Common Stock solely in
exchange for CVA Capital Stock.
2. The tax basis of the shares of Quintiles Common Stock received by
each stockholder of CVA will equal the tax basis of such Stockholder's
shares of CVA Capital Stock exchanged in the Merger.
3. The holding period for the shares of Quintiles Common Stock
received by each stockholder of CVA will include the holding period for the
shares of CVA Capital Stock of such stockholder exchanged in the Merger.
4. Neither Quintiles, Acquisition, nor CVA will recognize gain or loss
as a result of the Merger.
The parties are not requesting a ruling from the IRS in connection with the
Merger. The opinion of Ernst & Young LLP referred to herein will neither bind
the IRS nor preclude the IRS from adopting a contrary position, and will be
subject to certain assumptions and qualifications and the accuracy of certain
representations made by Quintiles and CVA and including representations to be
delivered to Ernst & Young LLP by the respective managements of Quintiles and
CVA. In providing their opinion, Ernst & Young LLP will rely on certain
assumptions and representations relating to the "continuity of interest"
requirement from Quintiles and CVA.
To satisfy the continuity of interest requirement, CVA Stockholders must
not, pursuant to a plan or intent existing at or prior to the Merger, dispose of
or transfer so much of either (i) their CVA Capital Stock in anticipation of the
Merger or (ii) the Quintiles Common Stock to be received in the Merger
(collectively, "Planned Dispositions"), such that the CVA Stockholders, as a
group, would no longer have a significant equity interest in the CVA business
conducted after the Merger. Planned Dispositions include, among other things,
dispositions of shares pursuant to the exercise of dissenters' rights. CVA
Stockholders will generally be regarded as having retained a significant equity
interest as long as the Quintiles Common Stock received in the Merger (after
taking into account Planned Dispositions), in the aggregate, represents a
substantial portion of the entire consideration received by the CVA Stockholders
in the Merger. If the continuity of interest requirement were not satisfied, the
Merger would not be treated as a "reorganization."
A successful IRS challenge to the "reorganization" status of the Merger (as
a result of the failure of the "continuity of interest" requirement or
otherwise) would result in each CVA Stockholder recognizing gain or loss with
respect to each share of CVA Capital Stock surrendered equal to the difference
between the stockholder's basis in such share and the fair market value, as of
the Effective Time, of the Quintiles Common Stock received in exchange therefor.
In such event, a stockholder's aggregate basis in the Quintiles Common Stock so
received would equal its fair market value and his holding period for such stock
would begin the day after the Merger.
Even if the Merger qualifies as a "reorganization," a recipient of shares
of Quintiles Common Stock may recognize income or gain to the extent that such
shares were considered to be received in exchange for services or property
(other than solely CVA Capital Stock). All or a portion of such income or gain
may be taxable as ordinary income. In addition, gain or loss would be recognized
to the extent that a CVA Stockholder was treated as receiving (directly or
indirectly) consideration other than Quintiles Common Stock in exchange for the
stockholder's CVA Capital Stock.
RESTRICTIONS ON RESALES OF QUINTILES COMMON STOCK; POOLING CONSIDERATIONS;
AFFILIATE AGREEMENTS
All shares of Quintiles Common Stock to be issued at the Effective Time
pursuant to the Merger Agreement will be freely transferable under the
Securities Act, except for shares issued to any person who is an "affiliate" of
CVA prior to the Merger. Affiliates are persons who control, are controlled by
or under common control with CVA at the time the CVA Stockholders vote on the
Merger, none of whom will be affiliates of Quintiles at or shortly after the
Effective Time, and generally include CVA's directors, executive officers and
major stockholders with representatives on CVA's Board of Directors. Such
affiliates may not sell their shares of Quintiles Common Stock acquired in the
Merger without (i) the further registration of such shares under the Securities
Act, (ii) compliance with Rule 145 promulgated under the Securities Act, which
permits resales under certain
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conditions, as discussed in more detail below, or (iii) the availability of
another exemption from such further registration. Under Rule 145, a person who
was an affiliate of CVA, but who is not an affiliate of Quintiles after the
Merger, may publicly sell shares acquired in the Merger where the person (1)(a)
sells during any period the number of shares permitted under Rule 144(e)
promulgated under the Securities Act; (b) sells in a "broker's transaction", (c)
does not solicit orders to buy in connection with the transaction and does not
make any payment in connection with such sale to anyone other than the selling
broker, and (d) sells at a time when there is adequate current public
information about Quintiles; or (2)(a) holds such shares for at least one year
and (b) sells at a time when there is adequate public information about
Quintiles; or (3) holds the shares for at least two years. As a condition to the
Merger, each person who has been identified by CVA as an affiliate of CVA is
required to have entered into an agreement with Quintiles acknowledging the
restrictions set forth above (each, an "Affiliate Agreement").
Pooling of interests accounting treatment requires that affiliates of CVA
who receive shares of Quintiles Common Stock in the Merger and affiliates of
Quintiles must not sell or otherwise reduce their risk relative to their shares
of Quintiles Common Stock until Quintiles has published consolidated financial
statements including the combined operations of Quintiles and the Surviving
Corporation for a period of at least 30 days following the Effective Time. As a
condition to the Merger, Quintiles must receive an Affiliate Agreement signed by
all persons who were, at the CVA Record Date, affiliates of CVA evidencing their
agreement not to sell their shares of Quintiles Common Stock until such period
has expired.
In order to help ensure that the Merger will qualify as a reorganization
under Section 368(a) of the Tax Code, the Affiliate Agreements to be executed by
each affiliate of CVA contain a representation that such affiliate (i) has no
plan or intention to sell any of the shares of Quintiles Common Stock received
by such affiliate in the Merger, and (ii) is not aware of, or participating in,
any plan or intent on the part of CVA Stockholders to engage in sales of
Quintiles Common Stock received in the Merger, such that the aggregate fair
market value, as of the Effective Time, of the shares of Quintiles Common Stock
subject to such sales would exceed 50% of the aggregate fair market value of all
outstanding CVA Common Stock immediately prior to the Merger.
REGULATORY APPROVALS
Quintiles and CVA are aware of no material governmental or regulatory
requirements that remain to be compiled with in connection with the Merger,
other than applicable securities and "blue sky" laws of the various states and
the filing of articles of merger, setting forth the principal terms of the
Merger Agreement and Plan of Merger, with the Secretary of State of North
Carolina and the Secretary of State of the State of Texas.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
STOCK OWNERSHIP, STOCK OPTIONS OF CVA DIRECTORS AND EXECUTIVE OFFICERS
As of the CVA Record Date, the directors and executive officers of CVA as a
group beneficially owned an aggregate of 1,439,136 shares of CVA Common Stock,
including options exercisable within 60 days of April 18, 1997 and CVA Preferred
Stock convertible at the election of the holder, and held options to purchase
118,000 shares of CVA Common Stock, all of which vest upon consummation of the
Merger. Certain members of CVA's Board of Directors are affiliated with Woodside
Fund III, which is the sole holder of shares of CVA Preferred Stock. See
"Certain Information Concerning CVA -- Beneficial Ownership of Management and
Certain Stockholders." All of those shares will be treated in the Merger in the
same manner as the shares of CVA Common Stock held by other stockholders of CVA,
and all of those options will be treated in the Merger in the same manner (other
than for restrictions nor transfer due to pooling restrictions -- see "The
Merger -- Restrictions on Resales of Quintiles Common Stock; Pooling
Considerations; Affiliate Agreements") as options to purchase CVA Common Stock
held by other employees of CVA. To the best of CVA's knowledge, each of the CVA
directors and executive officers who owns shares of CVA Common Stock intends to
vote those shares in favor of the Merger. Each director and executive officer of
CVA will enter into an agreement restricting his or her sale of Quintiles shares
for a period following the effectiveness of the Merger. See "The Merger -- The
Merger
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Agreement -- Restrictions on Resales of Quintiles Common Stock; Pooling
Considerations; Affiliate Agreements."
EMPLOYMENT, CONSULTING AND NONCOMPETITION AGREEMENTS
On the Closing Date, Acquisition will enter into employment agreements with
two employees, David L. Edwards and Michael T. Dwyer, each of whom is also a CVA
Stockholder. The employment agreement with Mr. Edwards provides for a three year
original term and an annual base salary of $180,000, and Mr. Dwyer's agreement
provides for a three year original term and an annual base salary of $150,000.
The employment agreements permit participation in the Quintiles Executive
Compensation Plan and all employee benefit plans or programs made available to
other employees of Acquisition at similar levels. The employment agreements also
contain certain non-compete and confidentiality provisions, including the
requirement that neither Mr. Edwards nor Mr. Dwyer compete with Quintiles,
Acquisition or their respective affiliates for the longer of three years from
execution of the employment agreement and the one year period following the
later of the termination of employment and receipt of the final post-termination
payment, if any.
Also on the Closing Date, Acquisition will enter into independent
consulting agreements with Stroke Consultants, Inc., the principal stockholder
of which is Dr. Justin A. Zivin, and Dr. David G. Sherman, each of whom is also
a CVA Stockholder. The independent consulting agreements provide for an original
term of three years and payment of a consulting fee of $10,000 per month in the
case of Stroke Consultants and approximately $5,000 per month in the case of Dr.
Sherman. The independent consulting agreements contain certain non-compete and
confidentiality provisions, including the requirement that neither consultant
compete with Quintiles, Acquisition or their respective affiliates for the
longer of three years from execution of the independent consulting agreement and
one year period following the termination.
RIGHTS OF DISSENTING CVA STOCKHOLDERS
Articles 5.12 through 5.13 of the TBCA entitle any CVA Stockholder as of
the CVA Record Date who objects to the Merger and who follows the procedures
prescribed by such Articles, in lieu of receiving the Quintiles Common Stock, to
receive cash equal to the "fair value" of such stockholder's shares as
determined by agreement or appraisal. Set forth below is a summary of the
procedures relating to the exercise of the right to dissent as provided in the
TBCA. The summary does not purport to be complete and is qualified in its
entirety by reference to Articles 5.12 and 5.13 of the TBCA, which have been
reproduced and attached hereto as Appendix D. FAILURE TO COMPLY WITH ANY OF THE
REQUIRED STEPS MAY RESULT IN TERMINATION OF ANY SUCH RIGHT TO DISSENT THE
STOCKHOLDER MAY HAVE UNDER THE TBCA.
CVA Stockholders who follow the procedures set forth in Articles 5.12 and
5.13 of the TBCA may receive a cash payment equal to the fair value of their
shares of CVA Common Stock and CVA Preferred Stock, determined as of the day
preceding the Special Meeting, exclusive of any change in value arising from or
in anticipation of the Merger. Unless all of the procedures set forth in
Articles 5.12 and 5.13 of the TBCA are followed by a CVA Stockholder who wishes
to exercise dissenters' rights, such stockholder will be bound by the terms of
the Merger. To be entitled to a cash payment upon exercise of dissenters'
rights, a stockholder must (i) file with CVA, prior to the Special Meeting, a
written objection to the Merger, setting out that the stockholder's right to
dissent will be exercised if the Merger is effected and giving the stockholder's
address to which notice thereof shall be delivered or mailed in the event the
Merger is consummated, (ii) not vote his shares in favor of the adoption and
approval of the Merger and Merger Agreement and (iii) demand such cash payment
in writing within ten days after the delivery or mailing by Quintiles of a
notice that the Merger has become effective. The demand must state the number of
shares of the CVA Common Stock and CVA Preferred Stock owned by the stockholder
and the fair value of such shares as estimated by the stockholder. ANY
STOCKHOLDER FAILING TO MAKE DEMAND WITHIN THE TEN-DAY PERIOD SHALL BE BOUND BY
THE MERGER AGREEMENT AND THE MERGER. Within 20 days after demanding payment for
his shares, each holder of certificates formerly representing shares of CVA
Common Stock and CVA Preferred Stock so demanding payment shall submit such
certificates to Quintiles for notation thereon that such demand has been made.
The failure of holders of such certificates to do so shall, at the option of
Quintiles,
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terminate such stockholders' rights to dissent unless a court of competent
jurisdiction for good and sufficient cause shall otherwise direct.
Within 20 days after receipt by Quintiles of a demand for payment made by a
dissenting stockholder, Quintiles shall deliver or mail to the dissenting
stockholder a written notice that either shall set out that Quintiles accepts
the amount claimed in the demand and agrees to pay that amount within 90 days
after the Effective Time, upon the surrender of the share certificates duly
endorsed, or shall contain an estimate by Quintiles of the fair value of the
shares of CVA Common Stock and CVA Preferred Stock, together with an offer to
pay the amount of that estimate within 90 days after the Effective Time, upon
receipt of notice within 60 days after the effective time of the Merger, from
the stockholder that the stockholder agrees to accept that amount upon the
surrender of the certificates duly endorsed.
If within 60 days after the Effective Date Quintiles and the dissenting
stockholder agree upon the value of the shares of CVA Common Stock and CVA
Preferred Stock, payment for the shares shall be made by Quintiles within 90
days of the Effective Date. Upon payment of the agreed value the dissenting
stockholder shall cease to have any interest in the shares of Quintiles.
If, within the period of 60 days after the Effective Time, the stockholder
and Quintiles do not so agree, the stockholder or Quintiles may, within 60 days
after the expiration of such 60-day period, file a petition in any court of
competent jurisdiction in Bexar County, Texas asking for a finding and
determination of the fair value of the stockholder's shares of CVA Common Stock
and CVA Preferred Stock. The clerk of the court shall give notice of the time
and place fixed for the hearing of the petition by registered mail to Quintiles
and to the stockholders who have demanded payment for their shares and with whom
agreements as to the value of their shares have not been reached by Quintiles.
Quintiles and all of its dissenting stockholders so notified shall be bound by
the final judgment of such court.
After hearing the petition, the court shall determine the stockholders who
have complied with the provisions of Articles 5.12 and 5.13 of the TBCA and have
become entitled to the valuation of and payment of their shares, and shall
appoint one or more qualified appraisers to determine that value. In addition to
having the power to examine the books and records of CVA, the appraisers shall
afford a reasonable opportunity to the parties interested to submit to them
pertinent evidence as to the value of the shares of CVA Common Stock and CVA
Preferred Stock.
The appraisers shall determine the fair value of the shares of the
stockholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the stockholders entitled to
payment for their shares and shall direct the payment of that value by
Quintiles, together with interest thereon, to the date of such judgment, to the
stockholder entitled to payment The judgment shall be payable to the holders of
shares only upon, and simultaneously with, the surrender to Quintiles of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting stockholders shall cease to have any interest in those shares or in
Quintiles. The court shall allow the appraisers a reasonable fee as court costs,
and all costs shall be allocated between the parties in the manner that the
court determines to be fair and equitable.
Any stockholder who has demanded payment for his shares in accordance with
the TBCA shall not thereafter be entitled to vote or exercise any other rights
of a stockholder of Quintiles except the right to receive payment for his shares
of CVA Common Stock and CVA Preferred Stock, in accordance with the TBCA and the
right to maintain an appropriate action to obtain relief on the ground that the
Merger would be or was fraudulent, and the respective shares of CVA Common Stock
and CVA Preferred Stock for which payment has been demanded shall not thereafter
be considered outstanding for the purposes of any subsequent vote of
stockholders.
Any stockholder who has demanded payment for his shares of CVA Common Stock
and CVA Preferred Stock in accordance with the TBCA may withdraw such demand at
any time before payment for his shares or before any petition has been filed
pursuant to the TBCA asking for a finding and determination of the fair value of
such shares, but no such demand may be withdrawn after such payment has been
made, or, unless Quintiles shall
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consent thereto, after any such petition has been filed. If, however (i) such
demand shall be withdrawn as hereinbefore provided, (ii) pursuant to the TBCA
Quintiles shall terminate the stockholder's rights under the TBCA, (iii) no
petition asking for a finding and determination of fair value of such shares of
CVA Common Stock and CVA Preferred Stock, by a court shall have been filed
within the time provided in the TBCA, or (iv) after the hearing of a petition
filed pursuant to the TBCA, the court shall determine that such stockholder is
not entitled to the relief provided by the TBCA, then, in any such case, such
stockholder and all persons claiming under him shall be conclusively presumed to
have approved and ratified the Merger and shall be bound thereby, the right of
such stockholder to be paid the fair value of his shares shall cease, and his
status as a stockholder shall be restored without prejudice to any corporate
proceedings that may have been taken during the interim, and such stockholder
shall be entitled to receive any dividends or other distributions made to
stockholders in the interim.
A vote against approval and adoption of the Merger and the Merger Agreement
will not satisfy the requirement for a written objection to approval and
adoption of the Merger and the Merger Agreement or a written demand for payment
of the "fair value" of the shares owned by a dissenting stockholder. Failure to
vote against approval and adoption of the Merger and the Merger Agreement (for
example, an abstention from voting) will not constitute a waiver of a
stockholder's dissenters' rights.
Exercise of the right to dissent under the TBCA may result in a judicial
determination that the "fair value" of a dissenting stockholder's shares of CVA
Common Stock and CVA Preferred Stock, is higher or lower than the shares of
Quintiles Common Stock to be issued pursuant to the Merger.
The TBCA provides that, in the absence of fraud in the transaction, the
right to an appraisal as set forth above to a stockholder objecting to the
Merger is the exclusive remedy for the recovery of the value of his shares or
for money damages to such stockholder with respect to the Merger. If CVA
complies with the requirements of the TBCA, any stockholder who fails to comply
with the requirements of the TBCA shall not be entitled to bring suit for the
recovery of the value of his shares or for money damages to the stockholder with
respect to the Merger.
THE FOREGOING DISCUSSION IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE
TBCA. CVA STOCKHOLDERS ARE STRONGLY ENCOURAGED TO REVIEW CAREFULLY THE FULL TEXT
OF THE TBCA AS IT RELATES TO DISSENTERS' RIGHTS, WHICH IS INCLUDED AS APPENDIX D
TO THIS PROXY STATEMENT/PROSPECTUS. THE PROVISIONS ARE DETAILED AND COMPLEX, AND
A CVA STOCKHOLDER FAILING TO COMPLY STRICTLY WITH THEM MAY FORFEIT HIS
DISSENTING STOCKHOLDER'S RIGHTS. ANY CVA STOCKHOLDER WHO INTENDS TO DISSENT FROM
THE MERGER SHOULD REVIEW THE TEXT OF THOSE PROVISIONS CAREFULLY AND ALSO IS
URGED TO CONSULT WITH HIS LEGAL ADVISER. NO FURTHER NOTICE OF THE EVENTS GIVING
RISE TO DISSENTERS' RIGHTS OR ANY STEPS ASSOCIATED THEREWITH WILL BE FURNISHED
TO CVA STOCKHOLDERS, EXCEPT AS INDICATED ABOVE OR OTHERWISE REQUIRED BY LAW.
Any dissenting stockholder who perfects his right to be paid the fair value
of his shares will recognize gain or loss, if any, for federal income tax
purposes upon the receipt of cash for his shares. The amount of gain or loss and
its character as ordinary or capital gain or loss will be determined in
accordance with applicable provisions of the Code. See "The Merger -- Federal
Income Tax Considerations."
The stockholders of Quintiles are not required by law or otherwise to
approve the Merger Agreement, and accordingly will not have dissenters' rights
in connection with the Merger.
CERTAIN INFORMATION CONCERNING QUINTILES
Quintiles is a leading provider of full-service contract research, sales
and marketing services to the global pharmaceutical, biotechnology and medical
device industries. Quintiles, through the use of its extensive information
technology capabilities, provides a broad range of fully-integrated contract
services in order to accelerate the time from discovery to peak market
acceptance of a new therapy by offering traditional contract research services
as well as contract sales and marketing services. In addition, Quintiles
provides health economics and healthcare policy consulting and disease and
health information management services to support
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<PAGE> 40
the growing information needs of the healthcare industry. Since 1992, Quintiles'
annual net revenue has increased from $96.3 million to $537.6 million in 1996,
and during the same period, its annual net income available for common
stockholders (excluding non-recurring costs) increased from $2.8 million to
$32.1 million. During 1996, Quintiles provided services to 49 of the 50 largest
pharmaceutical companies in the world as ranked by 1995 healthcare revenue and
to the 11 largest biotechnology companies in the world as ranked by market
capitalization in December 1996. As of March 31, 1997 Quintiles had over 50
offices located in 21 countries and approximately 8,251 employees.
Since its inception in 1982, Quintiles has continued to expand the scope of
its services and geographic presence to support the needs of its clients on a
worldwide basis. Quintiles has implemented a number of strategic initiatives to
broaden its array of services and create new opportunities for growth. In
November 1996, Quintiles completed a business combination with Innovex, an
international contract services organization specializing in managing the sales
and marketing of drugs for pharmaceutical companies. Innovex enables Quintiles
to complement its clinical research focus on obtaining regulatory approval with
services designed to assist clients in achieving market penetration of new
therapies. Also in November 1996, Quintiles acquired BRI, a leading
international contract research firm specializing in medical device development
and regulatory compliance consulting. In May 1996, Quintiles acquired the
operating assets of Lewin-VHI, Inc., a nationally-recognized healthcare
consulting firm, and formed a new subsidiary of Quintiles, The Lewin Group Inc.
In February 1996, Quintiles acquired PMC Contract Research AB, a CRO located in
Uppsala, Sweden, which has extensive clinical trials management expertise.
During 1996, Quintiles added more than 20 new offices through acquisitions and
internal growth and commenced construction of a 171,000 square foot clinical
trial drug formulation, manufacturing, packaging and distribution facility in
Bathgate, Scotland.
Quintiles has created an organizational structure that enables it to fully
integrate its broad range of contract services and cross-sell them more
comprehensively. Quintiles' contract research services include clinical trial
studies in Phases I through IIIa of drug development, clinical data management
and biostatistical analysis, laboratory services, formulation and packaging of
clinical trial drugs, pre-clinical services, regulatory affairs and medical
device consulting. Quintiles' services for the perimarketing period, which
Quintiles defines as the period from two years before to two years after
regulatory approval, include clinical trial studies in Phases IIIb and IV, as
well as pharmaceutical sales and marketing services. Quintiles' healthcare
consulting services include health economics and healthcare policy consulting
and disease and health information management services.
Quintiles' focused strategy is to: (i) provide a broad array of
fully-integrated contract services; (ii) offer specialized services in key
therapeutic areas in order to facilitate an expedited drug development process;
(iii) expand its geographic presence to support the worldwide needs of the
pharmaceutical, biotechnology and medical device industries; (iv) increase its
penetration of contract sales and marketing services, particularly in the United
States and Europe, by leveraging Quintiles' strong contract research presence in
these markets; (v) extend its leadership position in information technology; and
(vi) capitalize on the growing importance of health economics and disease
information management services in the healthcare industry.
Quintiles competes in the CRO industry which typically provides independent
product development services for the pharmaceutical, biotechnology and medical
device industries. Companies in these industries are increasingly outsourcing
product development services to CROs in order to manage the drug and medical
device development process more efficiently and cost-effectively and to maximize
the benefits in time and profit of patent-protected products. CROs manage
clinical trials for drugs, provide scientific evaluations and analyze the
results as required by the applicable regulatory authorities and provide similar
services for the medical device industry. Quintiles also competes in the
emerging contract sales industry which provides sales and marketing services on
a contract basis to the pharmaceutical industry. The contract sales industry
emerged in the 1980s, most notably in the United Kingdom where, Quintiles
believes, regulatory cost containment pressures on pharmaceutical companies led
such companies to outsource sales and marketing activities relating to product
launch. Contract sales organizations assemble and train a contract sales force
to help launch a pharmaceutical company's newly approved products. Quintiles
believes that it is the leading company to couple contract research services
with contract sales and marketing services.
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<PAGE> 41
Quintiles' principal executive offices are located at 4709 Creekstone
Drive, Riverbirch Building, Suite 300, Durham, North Carolina 27703-8411 and its
telephone number is (919) 941-2000.
Information about the business of Quintiles, its directors and executive
officers, their business history, stock ownership, compensation and direct or
indirect interests in certain transactions with Quintiles, information about the
principal holders of Quintiles Common Stock and additional financial information
not contained in this Proxy Statement/Prospectus is incorporated herein by
reference from reports Quintiles files with the Commission. See "Incorporation
of Certain Documents by Reference."
RECENT DEVELOPMENT
On March 12, 1997, Quintiles completed a public offering of 5,520,000
shares of Quintiles Common Stock at a price per share of $62.875. Of the
5,520,000 shares sold, a total of 1,415,000 shares were sold by Quintiles.
Proceeds to Quintiles, net of underwriting discounts and offering expenses, were
approximately $84.6 million.
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<PAGE> 42
CERTAIN INFORMATION CONCERNING CVA
GENERAL
CVA is a provider of CRO services for the pharmaceutical and biotechnology
industries. CVA provides regulatory consulting and clinical testing services
which complement the research and development departments of client companies,
emphasize a high quality product and reduce product development time and cost.
CVA believes it is a leader in providing clinical trials services related to
stroke.
CVA was founded as a provider of neurological clinical services to
pharmaceutical and biotechnology companies. CVA's net revenue has grown from
approximately $1.2 million in fiscal 1994 to $4.5 million in fiscal 1996. CVA
has a limited client base with one client providing more than 62% of annual net
revenue for fiscal 1996. CVA provides services internationally from one office
in the U.S.
CVA'S SERVICES
CVA assists clients with the design, implementation and management of drug
or biologic clinical research studies by providing clients with high quality
information to support regulatory submissions or post-marketing activities. CVA
can manage a study or program through the entire process from initial
application to final submission, or through any particular segment of that
process. CVA's staff consists of project managers, clinical research associates,
medical monitors, and data managers who work with each other and with clients to
design study plans and monitor studies on a continuing basis. CVA's services
include: protocol design and review; case report form design and printing;
investigator identification and meetings; qualification and coordination;
project management of clinical trials; clinical trial supplies management and
distribution; patient recruitment; database design and construction; data entry
and review/verification; data management; medical monitoring and serious adverse
event management; statistical design and programming; and medical writing.
SALES AND MARKETING
CVA markets and sells its services primarily through in-house sales.
Historically, much of CVA's business has been initiated by telephone inquiries
from potential clients. These contacts have typically been generated from CVA
consultants with prior knowledge of CVA and from responses to presentations.
Senior sales staff are assigned to handle these inquiries and try to generate
business opportunities from them.
CONTRACTUAL ARRANGEMENTS
CVA generally is awarded contracts based, among other things, upon its
response to requests for proposal received from pharmaceutical and biotechnology
companies. The contract may require CVA to design a protocol, conduct trials,
analyze the results of one or more trials, or perform any combination or all of
these services. Most contracts are fee for service (a majority of contracts) or
fixed price. They are fixed task, multi-year contracts that require a portion of
the contract amount to be paid at or near the time the trial is initiated. CVA
generally bills its clients monthly. Frequently, CVA obtains additional revenue
as a result of change orders to existing contracts. Project managers initiate
change orders, subject to client approval, as additional tasks or requirements
are determined over the course of the contract. CVA's contracts generally may be
terminated with or without cause upon a specified notice period (usually 30
days) by the client. In the event of termination, CVA is typically entitled to
all sums owed for work performed through the notice of termination and all costs
associated with termination of the study. Loss of a large contract could
adversely affect CVA's future revenue and profitability. Termination or delay in
the performance of a contract occurs for various reasons, including, but not
limited to, unexpected or undesired results, inadequate patient enrollment or
investigator recruitment, production problems resulting in shortages of the
drug, adverse patient reactions to the drug, or the client's decision to
de-emphasize a particular trial.
COMPETITION
CVA competes primarily with the pharmaceutical companies' in-house research
departments, other CROs and teaching hospitals, many of which have substantially
greater financial and other resources than CVA. The
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<PAGE> 43
CRO industry is highly fragmented, with approximately 20 full-service CROs and
hundreds of small, limited-service providers. In recent years, however,
competitive pressures have resulted in an increasing consolidation of the CRO
industry, which is likely to produce heightened competition among the larger
CROs for clients. Several large, full-service competitors have emerged, all of
which have substantially greater capital and other resources, are better known
and have more experienced personnel than CVA. CVA's competitors include
Quintiles, Covance Inc., Pharmaceutical Product Development Inc., Chrysalis
International Corp., ClinTrials Research, Inc., PAREXEL International Corp.,
IBAH, Inc., and PPD Pharmaco.
The CRO industry is not capital intensive and the financial costs of entry
into this industry as a small limited service provider are relatively low.
However, the resources and expertise required to become a full-service CRO with
global capabilities are significant and include highly trained personnel,
offices in many countries, sophisticated information systems and expertise in
managing complex clinical trials in multiple countries. CVA believes that
clients choose a CRO based on several factors, the most important of which is
the historical quality of the work performed for existing and former clients.
Other factors include references from existing clients, ability to provide the
services required for projects in specific therapeutic areas, and the price for
the services performed. While the contract price is an important consideration,
CVA believes the more important considerations are experience, reputation,
availability of resources and timely completion.
GOVERNMENT REGULATION
The clinical investigation of new pharmaceutical and biotechnology is
highly regulated by governmental agencies. The purpose of U.S. federal
regulations is to ensure that only those products which have been proven to be
safe and effective are made available to the public. The FDA has set forth
regulations and guidelines that pertain to applications to initiate trials of
products, approval and conduct of studies, report and record retention, informed
consent, applications for the approval of new conduct of studies, report and
record retention, informed consent, applications for the approval of new
products, and post-marketing requirements. Pursuant to FDA regulations, CROs
that assume obligations of a drug sponsor are required to comply with applicable
FDA regulations are subject to regulatory action for failure to comply with such
regulations. CVA believes that many pharmaceutical and biotechnology companies
do not have the staff and/or the available expertise to comply with all of the
regulations and standards, and this has contributed and will continue to
contribute to the growth of the CRO industry.
The services provided by CVA are ultimately subject to FDA regulation in
the U.S. and comparable agencies in other countries. CVA is obligated to comply
with FDA regulations governing such activities as selecting qualified
investigators, obtaining required forms from investigators, verifying that
patient informed consent is obtained, monitoring the validity and accuracy of
data, verifying drug/device accountability, and instructing investigators to
maintain records and reports. CVA must also maintain records for each study for
specified periods for inspection by the study sponsor and the FDA during audits.
If FDA audits document a failure by a CRO to adequately comply with federal
regulations and guidelines, significant sanctions could follow. In addition,
failure to comply with applicable regulations could result in termination of
ongoing research or the disqualification of data.
The industry standard for conducting pre-clinical research and development
is embodied in the Good Clinical Practices ("GCP") guidelines, which set
standards ensuring the quality and integrity of the clinical development and
testing process and protect the rights and safety of clinical subjects. The GCP
guidelines have not been formally adopted as regulations by the FDA or its
counterpart regulatory agencies outside the U.S. However, such authorities may
from time to time require that clinical development studies be conducted in
compliance with GCP, and both the FDA and foreign authorities have incorporated
certain provisions of GCP in their regulations.
POTENTIAL LIABILITY AND INSURANCE
CVA monitors the testing of new drugs on human volunteers pursuant to study
protocols in Phase 2, 3 and 4 trials. Clinical research involves a risk of
liability for personal injury or death to subjects from adverse reactions to the
study drug, many of whom are seriously ill and are at great risk of further
illness or death as a result of
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<PAGE> 44
factors other than their participation in a trial. Additionally, although CVA's
employees do not have direct contact with the participants in a clinical trial,
CVA, on behalf of its clients, contracts with physicians who render professional
services, including administration of the substance being tested, to such
persons. Although CVA does not believe it is legally accountable for the medical
care rendered by such third party physicians, it is possible that CVA could be
held liable for bodily injury, death, pain and suffering, loss of consortium,
other personal injury claims and medical expenses arising from any professional
malpractice of such physicians. CVA maintains insurance to cover malpractice
liability of physicians who are consultants of CVA.
CVA believes that the risk of liability to subjects in clinical trials is
mitigated by various regulatory requirements, including the role of
institutional review boards ("IRBs") and the need to obtain each patient's
informed consent. The FDA requires each human clinical trial to be reviewed and
approved by the IRB at each study site. An IRB is an independent committee that
includes both medical and non-medical personnel and is obligated to protect the
interests of subjects enrolled in the trial. After the trial begins, the IRB
monitors the protocol and the measures designed to protect subjects, such as the
requirement to obtain informed consent.
To reduce its potential liability, CVA obtains indemnity provisions in its
contracts with clients and, in some cases, with investigators contracted by CVA
on behalf of its clients. These indemnities generally do not, however, protect
CVA against certain of its own actions such as those involving negligence or
misconduct. Moreover, these indemnities are contractual arrangements that are
subject to negotiation with individual clients, and the terms and scope of such
indemnities vary from client to client and from trial to trial. CVA also, in
some circumstances, indemnifies and holds harmless its clients and investigators
against liabilities incurred by such parties due to the actions or inaction of
CVA. Finally, since the financial performance of these indemnities is not
secured, CVA bears the risk that an indemnifying party may not have the
financial ability to fulfill its indemnification obligations. CVA could be
materially and adversely affected if it were required to pay damages or incur
defense costs in connection with a claim that is outside the scope of an
indemnity or where the indemnity, although applicable, is not performed in
accordance with its terms.
CVA currently maintains an errors and omissions professional liabilities
insurance policy in amounts it believes to be sufficient. There can be no
assurance that this insurance coverage will be adequate, or that insurance
coverage will continue to be available on terms acceptable to CVA.
INTELLECTUAL PROPERTY
CVA believes that factors such as its ability to attract and retain
high-skilled professional and technical employees and its project management
skills and experience are significantly more important to its performance than
are any intellectual property rights developed by it. CVA has developed, and
continually develops and updates, certain computer software related
methodologies. CVA seeks to maintain its rights in the software it develops
through a combination of contract, copyright and trade secret protection.
FACILITIES AND EMPLOYEES
At March 31, 1997, CVA had approximately 28 full-time employees in the U.S.
CVA believes that its relations with its employees are good.
CVA's performance depends on its ability to attract and retain a qualified
management, professional, scientific and technical staff. Competition from both
CVA's clients and competitors for skilled personnel is high. While CVA has not
experienced any significant problems in attracting or retaining qualified staff
to date, there can be no assurance CVA will be able to avoid these problems in
the future.
CVA owns no real estate. CVA leases approximately 14,000 square feet in San
Antonio, Texas for its headquarters operations. CVA believes its current
facilities are adequate for its existing operations.
LEGAL PROCEEDINGS
From time to time CVA is involved in legal proceedings in the ordinary
course of its business which are not anticipated to have a materially adverse
effect on CVA's financial condition or results of operations. There are no
current pending material legal proceedings in which CVA is involved.
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<PAGE> 45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF CVA
RESULTS OF OPERATIONS
Year 1996 Compared to Year 1995
Net revenue for the year ended December 31, 1996 was $4.5 million as
compared with $2.2 million for the year ended December 31, 1995. This represents
a 111.4% increase and was due to continued expansion of certain CVA lines of
service, new clients added and acquisition of new contracts.
Direct costs increased 137.7% from $540,000 in 1995 to $1.3 million in
1996. This increase was in excess of CVA's growth in net revenue due to higher
training costs and the cost of hiring new personnel. Direct costs as a
percentage of net revenue increased from 25.1% in 1995 to 28.2% in 1996.
General and administrative expenses increased 20.0% from $1.0 million in
1995 to $1.2 million in 1996. As a percentage of net revenue, general and
administrative expenses decreased from 48.3% in 1995 to 27.3% in 1996. This
decrease reflects CVA's efforts to control indirect costs in order to achieve
economies of scale on an increasing revenue base.
Operating income for the year ended December 31, 1996 was $1.9 million as
compared with $517,000 for the previous year. This represents a 273.1% increase
and was attributable primarily to the growth in net revenue and a $400,000
non-recurring contract performance bonus received in 1996.
The Company's effective tax rate was 37.0% for 1996 as compared with 34.6%
in 1995. The higher effective tax rate in 1996 was due to higher incremental
state and federal income tax rates.
The Company's net income increased by 264.6% to $1.3 million in 1996 from
$348,000 in 1995. The increase is attributable principally to the increase in
revenue and the decrease in general and administrative as a percentage of
revenue. Net income as a percentage of net revenue increased from 16.2% in 1995
to 27.9% in 1996.
Liquidity and Capital Resources
CVA has financed its operations primarily through cash flow from
operations. Cash flow from operations was approximately $65,000 for the year
ended December 31, 1996, arising primarily from net income and non-cash charges
against income for depreciation and amortization. Net cash flow from operations
was approximately $615,000 in 1995.
CVA had working capital of approximately $1.5 million at December 31,1996,
as compared with $332,000 at December 31, 1995. CVA made capital expenditures
totaling approximately $259,000 during the year ended December 31, 1996,
principally to upgrade its computer technology. CVA has commitments and plans
for approximately $450,000 in capital expenditures as of December 31, 1996. This
amount will be funded from existing cash of CVA.
CVA will depend on cash flow from operations to meet its future working
capital requirements. CVA believes its cash flow from operations will be
adequate to cover its short-term cash requirements. To the extent that CVA
pursues acquisitions or geographic expansion, it may require additional cash
beyond that provided by operations. CVA has no established lines of credit for
bank borrowings.
Inflation
CVA does not believe that inflation has had a material effect on its
results of operations during the past two years.
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<PAGE> 46
BENEFICIAL OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS
Ownership of Directors and Executive Officers
The following table sets forth as of April 18, 1997 the number of shares of
CVA Common Stock beneficially owned by each director and executive officer of
CVA.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF TOTAL
COMMON SHARES COMMON SHARES
BENEFICIAL OWNERS BENEFICIALLY OWNED(1) OUTSTANDING
- ----------------- --------------------- -------------
<S> <C> <C>
J.E. Campion(2)............................................ 572,136 24.9%
Michael T. Dwyer(3)........................................ 137,000 7.9%
David L. Edwards, Ph.D.(4)................................. 530,000 30.7%
Robert Larson(2)........................................... 572,136 24.9%
John D. Platt.............................................. 200,000 11.6%
All Directors and Executive Officers as a Group (5
Persons)(5).............................................. 1,439,136 62.4%
</TABLE>
- ---------------
(1) Based on 1,723,875 shares of CVA Common Stock outstanding on April 18, 1997.
Pursuant to the rules of the Securities and Exchange Commission, certain
shares of CVA Common Stock which a person has the right to acquire within 60
days pursuant to the exercise of stock options or conversion privileges are
deemed to be outstanding for the purpose of computing the percentage
ownership of such person but are not deemed outstanding for the purpose of
computing the percentage ownership of any other person. The address of each
of the persons named in the table is c/o CerebroVascular Advances, Inc.,
9901 1H-10 West, Suite 400, San Antonio, Texas 78230.
(2) Represents shares of CVA Common Stock into which 523,810 shares of CVA
Preferred Stock could be converted at the preferential rate set forth in
CVA's Articles of Incorporation upon consummation of the Merger. Such shares
are held by Woodside Fund III, an entity with which Messrs. Campion and
Larson are affiliated.
(3) Includes 10,000 shares of CVA Common Stock which may be acquired upon the
exercise of options granted under the CVA Option Plan, all of which will
vest on May 1, 1997. Does not include 48,000 shares of CVA Common Stock
which may be acquired upon the exercise of options granted under the CVA
Option Plan, all of which will vest upon consummation of the Merger.
(4) Does not include 60,000 shares of CVA Common Stock which may be acquired
upon the exercise of options granted under CVA's 1994 Stock Option Plan (the
"CVA Option Plan"), all of which will vest upon consummation of the Merger.
(5) Includes 10,000 shares of CVA Common Stock which may be acquired upon the
exercise of options granted under the CVA Option Plan, all of which will
vest on May 1, 1997. Does not include 108,000 shares of CVA Common Stock
which may be acquired upon the exercise of options granted under the CVA
Option Plan, all of which will vest upon consummation of the Merger. Also
includes 572,136 shares of CVA Common into which the shares of CVA Preferred
Stock held by Woodside Fund III, are convertible.
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<PAGE> 47
Ownership of Certain Other Beneficial Owners
The following chart names all beneficial owners (other than directors and
executive officers) of CVA's voting securities known to CVA to own more than 5%
of CVA's voting securities as of April 18, 1997:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF PERCENTAGE PERCENTAGE
PREFERRED COMMON OF OF
SHARES SHARES COMMON PREFERRED
BENEFICIALLY BENEFICIALLY SHARES SHARES
NAME AND ADDRESS OF BENEFICIAL OWNERS OWNED OWNED(1) OUTSTANDING OUTSTANDING
- ------------------------------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Woodside Fund III............................... 523,810 572,136(2) 24.9% 100%
850 Woodside Drive
Woodside, CA 94062
Justin A. Zivin, M.D., Ph.D..................... 0 500,000 29.0% --
1022 Santa Florencia
Solana Beach, CA 92075
David G. Sherman, M.D.(3)....................... 0 150,000 8.9% --
119 Warbler Way
San Antonio, TX 78231
</TABLE>
- ---------------
(1) Based on 1,723,875 shares of CVA Common Stock outstanding on April 18, 1997.
Pursuant to the rules of the Securities and Exchange Commission, certain
shares of CVA Common Stock which a person has the right to acquire within 60
days pursuant to the exercise of stock options or conversion privileges are
deemed to be outstanding for the purpose of computing the percentage
ownership of such person but are not deemed outstanding for the purpose of
computing the percentage ownership of any other person.
(2) Represents shares of CVA Common Stock into which shares of CVA Preferred
Stock could be converted at the preferential rate set forth in CVA's
Articles of Incorporation upon consummation of the Merger.
(3) Includes 20,000 shares held as custodian and by certain members of Mr.
Sherman's family.
COMPARISON OF THE RIGHTS OF HOLDERS OF QUINTILES COMMON STOCK AND CVA COMMON
STOCK
If the Merger is consummated, stockholders of CVA, a Texas corporation,
will become stockholders of Quintiles, a North Carolina corporation, and the
rights of such stockholders will be governed by North Carolina law, including
the North Carolina Business Corporation Act (the "NCBCA"), and by the Amended
and Restated Articles of Incorporation and Bylaws of Quintiles, and will no
longer be governed by Texas law, including the Texas Business Corporation Act
(the "TBCA"), or by the Articles of Incorporation or Bylaws of CVA. Although it
is not practical to compare all the differences between North Carolina law and
applicable Texas law and between the governing documents of Quintiles and CVA,
the following provides a summary of certain of those differences that may
significantly affect the rights of the CVA Stockholders. This summary is
qualified in its entirety by reference to the TBCA and the NCBCA and by the
governing corporate instruments of Quintiles and CVA, to which stockholders of
CVA are referred.
AUTHORIZED CAPITAL STOCK; BLANK STOCK PROVISION
Quintiles' charter authorizes 200,000,000 shares of Quintiles Common Stock,
which are of the same class. The charter also authorizes 25,000,000 shares of
preferred stock, $.01 par value, and grants broad authority to the Quintiles
Board of Directors to determine the voting powers, designations, preferences and
rights of classes or series of such preferred stock without stockholder
approval. Quintiles has no preferred stock outstanding at the date of this Proxy
Statement/Prospectus. Subject to the rights of any preferred stock issued in the
future, as determined by the Board of Directors or otherwise provided under
North Carolina law, the holders of Quintiles Common Stock have one vote per
share on all matters on which holders of Quintiles Common Stock are entitled to
vote.
CVA's Articles of Incorporation authorize 10,000,000 shares of CVA Common
Stock, $.001 par value, which are all of the same class. The Articles also
authorize 5,000,000 shares of Preferred Stock, $.001 par value,
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<PAGE> 48
and grant broad authority to CVA's Board of Directors to determine the
designations, preferences, limitations and relative rights, including voting
rights, of each series of Preferred Stock without stockholder approval. Seven
hundred thousand shares of Preferred Stock have been designated Series A
Preferred Stock, of which 523,810 shares are issued and outstanding. The Series
A Preferred Stock has certain dividend, liquidation, conversion and redemption
rights. In addition, in the event the number of directors is increased beyond
three directors, the holders of the Series A Preferred Stock have the right to
elect a majority of the Board of Directors, and approval from the holders of
shares representing at least two-thirds of the voting power of the Series A
Preferred Stock (voting separately as a class) is required for CVA to effect any
merger, amend its Articles of Incorporation or Bylaws, authorize, create or
issue any additional shares of capital stock, declare dividends, redeem or
purchase its capital stock or voluntarily dissolve or liquidate the company. The
holders of the Series A Preferred Stock have the right to vote, in the same
manner and with the same effect as the holders of CVA Common Stock, voting
together with the holders of CVA Common Stock as one class, on all matters as to
which the holders of CVA Common Stock are entitled to vote. On such matters
which require a shareholder vote, each share of Series A Preferred Stock is
entitled to the number of votes as shall equal the number of shares of CVA
Common Stock into which each share of Series A Preferred Stock is then
convertible. Subject to the rights of any other Preferred Stock issued in the
future, as determined by the Board of Directors or otherwise provided under
Texas law, the holders of CVA Common Stock have one vote per share on all
matters on which the holders of CVA Common Stock are entitled to vote.
SIZE OF THE BOARD OF DIRECTORS
Under North Carolina law, although changes in the number of directors in
general must be approved by a majority of the outstanding shares, the board of
directors may: (i) increase or decrease the number of directors by not more than
30% during any 12-month period or (ii) fix the exact number of directors within
a stated range set forth in the articles of incorporation or bylaws. Quintiles'
Articles of Incorporation set a range for Board size from nine to 15 members,
and the Bylaws permit a majority of the Directors to approve changes in Board
size within the range.
Under the TBCA, the number of directors shall be fixed by the articles of
incorporation or the bylaws, except as to the number of initial directors, which
shall be fixed by the articles of incorporation.
The TBCA further provides that the number of directors may be increased or
decreased from time to time by amendment to, or in the manner provided in, the
articles of incorporation or the bylaws, but no decrease shall have the effect
of shortening the term of any incumbent director. At the first annual meeting of
the stockholders and at each annual meeting thereafter, the holders of shares
entitled to vote in the election of directors shall elect directors to hold
office until the next succeeding annual meeting.
CVA's Articles of Incorporation and Bylaws provide that the number of
directors constituting the Board of Directors may be fixed by the Directors;
provided, however, CVA shall not increase the maximum number of Directors
constituting the Board of Directors to a number in excess of three without the
written consent of the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock and CVA Common Stock, consenting or voting
together as a class.
CLASSIFIED BOARD OF DIRECTORS
A classified board is one to which a certain number, but not all, of the
directors are elected on a rotating basis each year. A North Carolina
corporation may classify its board into two, three or four classes. A classified
board makes changes in the board of directors, and thus potential changes in
control of a corporation, a lengthier and more difficult process. The Quintiles
Board of Directors currently is divided into three classes, each serving three
year terms.
Under the TBCA, a corporation's bylaws may provide for staggering the terms
of directors by dividing the total number of directors into two or three groups.
The terms of the members of the CVA Board of Directors are not staggered.
40
<PAGE> 49
CUMULATIVE VOTING
Cumulative voting permits a stockholder to cumulate his total stockholder
votes for a single candidate in an election of directors. Under North Carolina
law, the right to cumulative voting depends upon the date of incorporation and a
corporation's status as a public or private company. Quintiles' stockholders are
not entitled to cumulate their votes.
The TBCA gives stockholders of a Texas corporation the right to cumulate
their votes in the election of directors unless expressly prohibited in the
corporation's articles of incorporation. The CVA Articles of Incorporation
expressly deny cumulative voting rights to stockholders.
REMOVAL OF DIRECTORS; FILLING VACANCIES
Pursuant to the Quintiles charter, the stockholders can remove a director
only with the approval of two-thirds of the voting power of all shares entitled
to vote in the election of directors, except that where a director was elected
by the holders of one class or series of stock, or a group of such class or
series, only the members of that voting group may participate to remove him. The
Quintiles charter further specifies that only the Board of Directors may fill
vacancies on the Board.
The TBCA requires that the directors be removed in accordance with the
provisions of the bylaws or the articles of incorporation. Otherwise, each
director shall hold office for the elected term and until the successor shall
have been elected and qualified. The bylaws or the articles of incorporation may
provide that at any meeting of stockholders called expressly for the purpose of
director removal, any director or the entire board may be removed, with or
without cause, by a vote of the holders of a specified portion, not less than a
majority, of the shares entitled to vote at an election of directors, subject to
any further restrictions on removal that may be contained in the bylaws. CVA's
Bylaws contain such a provision.
AMENDMENT OF CHARTER AND BYLAWS
Quintiles' charter contains a provision that requires the approval of at
least two-thirds of the stockholders who are entitled to vote in an election of
directors in order to adopt an amendment to the charter. If, however, the
proposed amendment is approved by a majority of the disinterested members of
Quintiles' Board of Directors, then the amendment will only require the majority
approval of the stockholders, or such greater percentage as required under North
Carolina law. A disinterested director is defined as a member of the Board (1)
who is not affiliated with a control person, was not nominated by a control
person and was already on the Board when a control person acquired its
controlling interest or (2) a successor to a disinterested director who is not
affiliated with a control person, is not nominated by a control person and who
is recommended by a majority of disinterested directors on the Board.
Quintiles' Bylaws may be amended or repealed by two-thirds of the shares
entitled to vote on such matter. The Bylaws also permit the Board of Directors
to amend or repeal the bylaws, except that (1) a bylaw adopted, amended or
repealed by the stockholders may not be readopted, amended or repealed by the
Board of Directors unless they are authorized to do so by the charter or a bylaw
adopted by the stockholders, (2) a bylaw that fixes higher quorum or voting
requirements for the Board may not be adopted by less than the majority of the
directors in office and may not later be amended by a vote or quorum less than
required by that bylaw, (3) if a bylaw fixing higher voting or quorum
requirements was originally adopted by the stockholders, only the stockholders
may amend it unless the Bylaws otherwise permit its amendment or repeal by the
Board of Directors.
Under CVA's Articles, an amendment to the Articles of Incorporation or
voluntary dissolution of CVA requires the approval of the holders of shares
representing at least two-thirds of the voting power of the Series A Preferred
Stock then outstanding, voting separately as a class, such approval to be in
addition to the approval of the holders of two-thirds of the outstanding shares
of CVA Common Stock as required by the TCBA. CVA's Bylaws may be altered,
amended or repealed, or new Bylaws may be adopted, by a majority of the whole
Board of Directors, subject to the approval of the holders of shares of Series A
Preferred Stock representing at least two-thirds of the voting power of the
Series A Preferred Stock, acting separately as a class.
41
<PAGE> 50
POWER TO CALL SPECIAL MEETINGS OF STOCKHOLDERS
Quintiles' Bylaws provide that special meetings of the stockholders may be
called only by the Board of Directors, the Chairman of the Board, the President
or the holders of 25% or more of the voting power of the outstanding shares of
Quintiles stock.
Under the TBCA, a special meeting of stockholders of a Texas corporation
may be called by the president, the board of directors, such other persons
authorized in the articles of incorporation or bylaws or by the holders of at
least 10% of all the shares entitled to vote at the special meeting, unless the
articles of incorporation provide for a greater or lesser percentage, not
greater than 50%. CVA's Bylaws provide that the holders of at least 10% of all
the votes entitled to be cast are eligible to call a special meeting.
STOCKHOLDER ACTION WITHOUT MEETING
Under both the NCBCA and the TBCA, stockholders may act without a meeting
if a consent in writing to such action is signed by all stockholders entitled to
vote. In addition, both North Carolina and Texas law permit the articles of
incorporation of a North Carolina or Texas corporation to provide that the
stockholders may take action without a meeting if a consent in writing to such
action is signed by the stockholders having the minimum number of votes that
would be necessary to take such action at a meeting. Neither Quintiles' nor
CVA's Articles contain such a provision.
STOCKHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS
North Carolina has two primary anti-takeover statutes, the Shareholder
Protection Act and the Control Share Acquisition Act, which govern the
stockholder approval required for certain business combinations. As permitted by
North Carolina law, Quintiles has opted-out of both these provisions. Quintiles'
Articles of Incorporation provide that, in the absence of more restrictive
requirements under applicable law, any "Business Combination" (as defined below)
must be approved by either: (i) a majority of the Board of Directors, consisting
of two-thirds of the full Board, or (ii) a supermajority of the shares,
consisting of at least two-thirds of the shares entitled to vote thereon, and a
majority of a quorum of the Board of Directors (but less than two-thirds of the
full Board). This supermajority voting requirement is complemented by a "fair
price" provision. Under the fair price provision in Quintiles' Articles of
Incorporation, where a business combination is approved by a supermajority of
the stockholders and a majority, but less than two-thirds, of the Board of
Directors, stockholders who do not vote to approve the transaction can elect to
sell their shares to the company for cash at a "fair price," as determined by a
specified formula. "Business Combinations" that trigger the supermajority voting
requirements generally include mergers, dispositions of all or substantially all
of the corporation's assets, and transactions involving control persons,
including combinations with control persons, other combination transactions
entered at the behest of control persons or other transactions which would have
the result of increasing a person's control of the corporation. A control person
includes any person or entity which, together with its affiliates, owns or
controls at least 10% of any class of Quintiles' equity (or securities
convertible into equity), excluding those persons who obtained that level of
control prior to January 1, 1994.
Under the TBCA, stockholders have the right, subject to certain exceptions,
to vote on all mergers to which the corporation is a party. In certain
circumstances, different classes of securities may be entitled to vote
separately as classes with respect to such mergers. In addition to the
affirmative vote of the holders of at least two-thirds of the outstanding shares
entitled to vote, under CVA's Articles, the affirmative vote of the holders of
at least two-thirds of the voting power of the Series A Preferred Stock then
outstanding, acting separately as a class, is required to approve a merger.
The approval of the stockholders of the surviving corporation in a merger
is not required under Texas law if (i) the corporation is the sole surviving
corporation in the merger, (ii) there is no amendment to the surviving
corporation's articles of incorporation, (iii) each stockholder holds the same
number of shares in the surviving corporation immediately after the merger as
prior thereto, and such shares have identical designations, preferences,
limitations and relative rights, (iv) the voting power of the shares in the
surviving corporation immediately after the merger, plus the voting power of the
shares issued in the merger, does not exceed the voting power of the shares
outstanding immediately prior to the merger by more than 20%, (v) the number of
shares in
42
<PAGE> 51
the surviving corporation outstanding immediately after the merger, plus the
shares issued in the merger, does not exceed the number of shares outstanding
immediately prior to the merger by more than 20% and (vi) the board of directors
of the surviving corporation adopts a resolution approving the plan of merger.
DIRECTORS' STANDARD OF CARE
The NCBCA requires that a director of a North Carolina corporation
discharge his duties as a director (a) in good faith, (b) with the care that an
ordinarily prudent person in a like position would exercise under similar
circumstances, and (c) in a manner he reasonably believes to be the best
interests of the corporation.
Except in cases of directors authorizing distributions prohibited by the
TBCA or commencing business prior to the receipt of consideration of the value
of at least $1,000 for the issuance of shares, in which case a director shall
not be liable for taking such actions if they were made with good faith and
ordinary care in reliance upon reports or information provided by experts, the
TBCA does not prescribe a standard of care for directors.
INDEMNIFICATION AND LIMITATION OF LIABILITY
North Carolina law permits a corporation to indemnify its directors,
officers, employees or agents under either or both a statutory or non-statutory
scheme of indemnification. Under the statutory scheme, a corporation may, with
certain exceptions, indemnify a director, officer, employee or agent of the
corporation who was, is, or is threatened to be made, a party to any threatened,
pending or completed legal action, suit or proceeding, whether civil, criminal,
administrative, or investigative, because of the fact that such person was a
director, officer, agent or employee of the corporation, or is or was serving at
the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. This indemnity may include the obligation to
pay any judgment, settlement, penalty, fine (including an excise tax assessed
with respect to an employee benefit plan) and reasonable expenses incurred in
connection with the proceeding (including counsel fees), but no such
indemnification may be granted unless such director, officer, agent or employee
(i) conducted himself in good faith, (ii) reasonably believed (1) that any
action taken in his official capacity with the corporation was in the best
interest of the corporation or (2) that in all other cases his conduct at least
was not opposed to the corporation's best interest, and (iii) in the case of any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. Whether a director has met the requisite standard of conduct for the
type of indemnification set forth above is determined by the corporation's board
of directors, a committee of directors, special legal counsel or the
stockholders in accordance with the statute. A corporation may not indemnify a
director under the statutory scheme in connection with a proceeding by or in the
right of the corporation in which the director was adjudged liable to the
corporation or in connection with a proceeding in which a director was adjudged
liable on the basis of having received an improper personal benefit.
In addition to, and separate and apart from the indemnification described
above under the statutory scheme, North Carolina law permits a corporation to
indemnify or agree to indemnify any of its directors, officers, employees or
agents against liability and expenses (including attorneys fees) in any
proceeding (including proceedings brought by or on behalf of the corporation)
arising out of their status as such or their activities in such capacities,
except for any liabilities or expenses incurred on account of activities that
were, at the time taken, known or believed by the person to be clearly in
conflict with the best interests of the corporation. Quintiles' Bylaws provide
for indemnification to the fullest extent permitted under North Carolina law,
provided, however, that Quintiles will indemnify any person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the Board of Directors. Accordingly, Quintiles
may indemnify its directors, officers, and employees in accordance with either
the statutory or non-statutory standard.
North Carolina law requires a corporation, unless its articles of
incorporation provide otherwise, to indemnify a director or officer who has been
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which such director or officer was a party. Unless prohibited by the articles
of incorporation, a director or officer also may make application and obtain
court-ordered indemnification if the court determines that such director or
officer is fairly and reasonably entitled to such indemnification.
Finally, North Carolina law provides that a corporation may purchase and
maintain insurance on behalf of an individual who is or was a director, officer,
employee or agent of the corporation against certain liabilities
43
<PAGE> 52
incurred by such persons, whether or not the corporation is otherwise authorized
under North Carolina law to indemnify such party. Quintiles currently maintains
directors' and officers' insurance policies covering its directors and officers.
As permitted by North Carolina law, Quintiles' Articles of Incorporation
limits the personal liability of directors for monetary damages for breaches of
duty as a director, provided that such limitation will not apply to (i) acts or
omissions that the director at the time of the breach knew or believed were
clearly in conflict with Quintiles' best interests, (ii) any liability for
unlawful distributions under North Carolina law, (iii) any transaction from
which the director derived an improper personal benefit or (iv) acts or
omissions occurring prior to the date the provision became effective.
Texas law permits a corporation to set limits on the extent of a director's
liability. The TBCA permits a corporation to indemnify a director who is the
defendant or respondent to a proceeding if such person (i) acted in good faith,
(ii) reasonably believed that his conduct was in the corporation's best interest
if he was acting in his official capacity, and if he was not acting in his
official capacity, that his conduct was not opposed to the best interests of the
corporation and (iii) had no reason to believe his conduct was unlawful in the
case of a criminal proceeding. Further, the TCBA allows a corporation to
indemnify such director for the reasonable expenses actually incurred by him in
connection with a proceeding finding the director in receipt of improper benefit
or liable to the corporation. However, the TCBA prohibits indemnification in any
proceeding where the director is found liable for willful or intentional
misconduct in the performance of his duty to the corporation. CVA's Articles
provide that a director of CVA shall not be liable to CVA or its stockholders
for monetary damages for an act or omission in the director's capacity as a
director, except for liability (i) for any breach of the director's duty of
loyalty to CVA or its stockholders, (ii) for any act or omission not in good
faith that constitutes a breach of duty of the director to CVA or any act or
omission that involves intentional misconduct or a knowing violation of the law,
(iii) for any transaction from which the director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope of the
director's office, or (iv) for any act or omission for which the liability of
the director is expressly provided for by statute. In addition, the CVA Articles
provide that to the extent that either the TCBA, the Texas Miscellaneous
Corporation Laws Act or any other applicable Texas statute is amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of CVA, in addition to the limitation on
liability referenced above, shall be limited to the fullest extent permitted by
such amended act.
DIVIDENDS AND REPURCHASES OF SHARES
North Carolina law dispenses with the concepts of par value of shares as
well as statutory definitions of capital, surplus and the like.
Under North Carolina law, a corporation may not make any distribution
(including dividends, whether in cash or other property, and redemptions or
repurchases of its shares) if it would result in either: (i) the corporation
being unable to pay its debts when they become due or (ii) the corporation's
assets being less than the sum of its liabilities plus any preferential
liquidation rights of stockholders. A director of a North Carolina corporation
may be personally liable to the corporation to the extent that the amount of the
distribution exceeds such permissible amounts if it is established that he did
not perform his duties as a director in good faith with reasonable care in a
manner which he believes to be in the best interests of the corporation. A
director held liable for unlawful distributions is entitled to contribution from
other directors voting in favor of the distribution and reimbursement from each
stockholder of the amount which the stockholder accepted with knowledge that the
distribution was unlawful.
A Texas corporation may make distributions only out of surplus, which is
defined as the excess of net assets of a corporation over its stated capital.
Further, a Texas corporation may not make a distribution if after giving effect
to the distribution, the corporation would be insolvent.
APPRAISAL RIGHTS
Under North Carolina law, a stockholder of a corporation participating in
certain major corporate transactions may, under varying circumstances be
entitled to appraisal rights pursuant to which such stockholder
44
<PAGE> 53
may receive cash in the amount of the fair market value of his or her shares in
lieu of the consideration he or she would otherwise receive in the transaction.
In North Carolina, appraisal rights are also available for certain amendments to
a corporation's articles of incorporation.
Stockholders of Texas corporations are entitled to exercise certain
dissenters' rights in the event of a sale, lease, exchange or other disposition
of all, or substantially all, of the property and assets of the corporation, a
share exchange and, with the exceptions discussed below, a merger. In general,
no stockholder vote is required for a sale of all or substantially all of the
assets of a Texas corporation under Texas law as long as the corporation
continues in business or applies a portion of the proceeds received in the sale
to a new business.
No appraisal rights are available under Texas law for the holders of any
shares of a class or series of stock of a Texas corporation which is a party to
a merger if that corporation survives the merger and if the merger did not
require the vote of the holders of that class or series of such corporation's
stock.
Texas law also contains a provision which states that stockholders do not
have appraisal rights in connection with a merger where, (i) on the record date
fixed to determine the stockholders entitled to vote on the merger , the stock
of the corporation is listed on a national securities exchange or is held of
record by not less than 2,000 stockholders, and (ii) the stockholder is not
required to accept for his shares any consideration other than (a) shares of
stock of a corporation which, immediately after the effective date of the
merger, are listed on a national securities exchange or are held of record by
not less than 2,000 stockholders and (b) cash in lieu of fractional shares
otherwise entitled to be received. See "Rights of Dissenting CVA Stockholders."
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon
for Quintiles by Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.,
2500 First Union Capitol Center, Raleigh, North Carolina 27601.
EXPERTS
The consolidated financial statements of Quintiles as of December 31, 1996
and 1995 and for each of the three years in the period ended December 31, 1996,
incorporated by reference herein from Quintiles' Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon incorporated by
reference herein which, as to the years 1995 and 1994, are based in part on the
reports of other independent auditors. Such financial statements have been
incorporated herein by reference in reliance upon such reports given upon
authority of such firm as experts in accounting and auditing.
The financial statements of CVA as of December 31, 1995 and for the year
then ended have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
report. The financial statements of CVA as of December 31, 1996 and for the year
then ended have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein. Such financial statements have
been included herein in reliance upon such report given upon authority of such
firm as experts in accounting and auditing.
45
<PAGE> 54
FORWARD LOOKING STATEMENTS
Information set forth in this Proxy Statement/Prospectus under the captions
"Summary," "Risk Factors"and "Certain Information Concerning Quintiles" contains
various "forward-looking statements" within the meaning of Section 27A of the
1933 Act, and Section 21E of the Exchange Act, which statements represent
Quintiles' judgment concerning the future and are subject to risks and
uncertainties that could cause Quintiles' actual operating results and financial
position to differ materially. Such forward looking statements can be identified
by the use of forward looking terminology, such as "may", "will", "expect",
"anticipate", "estimate", "believe", or "continue" or the negative thereof of
other variations thereof or comparable terminology.
Quintiles cautions that any such forward-looking statements are further
qualified by important factors that could cause the Company's actual operating
results to differ materially from those in the forward looking statements,
including without limitation, considerations described in connection with
specific forward looking statements, factors set forth in this Proxy
Statement/Prospectus under the caption "Risk Factors" and other cautionary
elements specified in documents incorporated by reference in this Proxy
Statement/Prospectus.
46
<PAGE> 55
INDEX TO FINANCIAL STATEMENTS
CerebroVascular Advances, Inc.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Audited Financial Statements
Balance Sheet as of December 31, 1996..................... F-3
Statement of Income for the year ended December 31,
1996................................................... F-4
Statement of Shareholders' Equity for the year ended
December 31, 1996...................................... F-5
Statement of Cash Flows for the year ended December 31,
1996................................................... F-6
Notes to Financial Statements............................. F-7
Report of Independent Public Accountants.................... F-12
Audited Financial Statements
Balance Sheet as of December 31, 1995..................... F-13
Statement of Income for the year ended December 31,
1995................................................... F-14
Statement of Shareholders' Equity for the year ended
December 31, 1995...................................... F-15
Statement of Cash Flows for the year ended December 31,
1995................................................... F-16
Notes to Financial Statements............................. F-17
</TABLE>
F-1
<PAGE> 56
REPORT OF INDEPENDENT AUDITORS
The Shareholders
CerebroVascular Advances, Inc.
We have audited the accompanying balance sheet of CerebroVascular Advances,
Inc. as of December 31, 1996, and the related statements of income,
shareholders' equity, and cash flows, for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CerebroVascular Advances,
Inc. at December 31, 1996, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Raleigh, North Carolina
February 12, 1997
F-2
<PAGE> 57
CEREBROVASCULAR ADVANCES, INC.
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $1,435,100
Accounts receivable....................................... 1,311,436
Prepaid expenses and other................................ 66,889
Note receivable from officer (Note 4)..................... 33,000
----------
Total current assets........................................ 2,846,425
Property and equipment:
Office furniture, fixtures and equipment.................. 477,074
Less accumulated depreciation............................. (141,841)
----------
335,233
Other assets:
Security deposit.......................................... 108,000
Organizational costs, net................................. 3,275
----------
111,275
----------
Total assets...................................... $3,292,933
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 152,856
Accrued expenses.......................................... 307,353
Income taxes payable...................................... 549,275
Unearned income (Note 3).................................. 358,640
----------
Total current liabilities................................... 1,368,124
Series A, redeemable, convertible preferred stock, $.001 par
value, 700,000 shares authorized, 523,810 shares issued
and outstanding........................................... 200,000
Shareholders' equity:
Common stock, $.001 par value, 10,000,000 shares
authorized, 1,737,000 shares issued and 1,723,875
shares outstanding..................................... 1,737
Additional paid-in capital................................ 27,654
Retained earnings......................................... 1,695,943
Treasury stock -- at cost, 13,125 shares.................. (525)
----------
Total shareholders' equity.................................. 1,724,809
----------
Total liabilities and shareholders' equity........ $3,292,933
==========
</TABLE>
See accompanying notes.
F-3
<PAGE> 58
CEREBROVASCULAR ADVANCES, INC.
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Professional fee income..................................... $7,573,026
Less reimbursed travel costs and investigator payments...... (3,027,475)
----------
Net revenue................................................. 4,545,551
Costs and expenses:
Direct costs.............................................. 1,282,562
General and administrative................................ 1,243,206
Depreciation and amortization............................. 89,652
----------
2,615,420
----------
Income from operations...................................... 1,930,131
Interest income............................................. 84,107
----------
Income before income taxes.................................. 2,014,238
Income taxes................................................ 745,362
----------
Net income.................................................. $1,268,876
==========
Net income per common share................................. $ 0.53
==========
</TABLE>
See accompanying notes.
F-4
<PAGE> 59
CEREBROVASCULAR ADVANCES, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------ PAID-IN RETAINED ----------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
--------- ------ ---------- ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995..................... 1,625,000 $1,625 $23,286 $ 427,067 (13,125) $(525) $ 451,453
Exercise of stock
options............... 112,000 112 4,368 -- -- -- 4,480
Net income............... -- -- -- 1,268,876 -- -- 1,268,876
--------- ------ ------- ---------- ------- ----- ----------
Balance at December 31,
1996..................... 1,737,000 $1,737 $27,654 $1,695,943 (13,125) $(525) $1,724,809
========= ====== ======= ========== ======= ===== ==========
</TABLE>
See accompanying notes.
F-5
<PAGE> 60
CEREBROVASCULAR ADVANCES, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 1,268,876
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 89,652
Loss on disposal of equipment.......................... 9,545
Change in operating assets and liabilities:
Accounts receivable.................................. (1,211,761)
Prepaid expenses and other........................... (656)
Accounts payable..................................... (636,429)
Accrued expenses..................................... 118,739
Income taxes payable................................. 395,605
Unearned income...................................... 31,857
-----------
Net cash provided by operating activities................... 65,428
INVESTING ACTIVITIES:
Acquisition of property and equipment..................... (259,200)
-----------
Net cash used in investing activities..................... (259,200)
FINANCING ACTIVITIES:
Principal payments under capital lease obligation......... (4,175)
Stock options exercised................................... 4,480
-----------
Net cash provided by financing activities................. 305
Decrease in cash and cash equivalents....................... (193,467)
Cash and cash equivalents at beginning of year.............. 1,628,567
-----------
Cash and cash equivalents at end of year.................... $ 1,435,100
===========
Supplemental cash flow information
Interest paid............................................... $ 526
===========
Income taxes paid........................................... $ 349,758
===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 61
CEREBROVASCULAR ADVANCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ACCOUNTING POLICIES
Description of Business
CerebroVascular Advances, Inc. (the "Company") was incorporated in February
1993 under the laws of the State of Texas. The Company is a specialized contract
research organization providing integrated product development services on a
global basis for the pharmaceutical and biotechnology industries. The Company
complements the research and development departments of pharmaceutical and
biotechnology sponsor companies by offering services designed to assure a high
quality product and reduce drug development time and cost. The Company's
professional services include clinical trials management, data management,
biostatistical analysis, pre-clinical testing, study design and strategic,
regulatory and health economics consulting.
A summary of the Company's significant accounting policies follows:
Revenue Recognition
Revenue from fixed contracts is recorded as costs are incurred on the basis
of the relationship between costs incurred and total estimated costs
(percentage-of-completion method of accounting). The Company's exposure to
credit loss in the event that payment is not received for revenue recognized is
equal to the outstanding accounts receivable balance. Certain contracts contain
provisions for price redetermination for cost overruns. Such redetermination
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 fixed contract, the entire
amount of the estimated ultimate loss is charged against income.
Unbilled Services and Unearned Income
Unbilled services represent amounts for services that have been rendered
but for which clients have not been billed. Unearned income represents
prebillings for services not yet rendered.
Property and Equipment
Property and equipment are carried at historical cost. Depreciation is
computed using the 200% declining balance method over estimated useful lives
ranging from three to seven years.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Net Income Per Common Share
Net income per common share has been computed using the weighted average
number of common shares and common share equivalents outstanding during each
period. Common equivalent shares are excluded from the computation in periods in
which they have an anti-dilutive effect. For all periods presented, the
difference between primary and fully diluted net income per common share is not
significant. There were 2,398,427 weighted average shares outstanding at
December 31, 1996.
Investigator Payments
Investigator payments are recognized as expense based upon patient
enrollment over the life of the contract. Investigator payments are made based
on predetermined contractual arrangements, which may differ from the
F-7
<PAGE> 62
CEREBROVASCULAR ADVANCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. ACCOUNTING POLICIES -- (CONTINUED)
recognition of the expenses. Payments to investigators in excess of the expenses
recognized are classified as prepaid expenses, and recognized expenses in excess
of amounts paid are classified as accrued expenses.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Long-Lived Assets
The Company adopted Financial Accounting Standard Board Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" ("Statement 121") in the first quarter of 1996. The adoption of
Statement 121 had no effect on the financial statements in 1996.
2. SIGNIFICANT CUSTOMERS
Net revenue from individual customers greater than 10% of total net revenue
is as follows:
<TABLE>
<S> <C>
Customer A.................................................. 62%
Customer B.................................................. 30%
</TABLE>
The majority of the Company's accounts receivable are with these customers.
Management believes its customers are financially strong and the credit risk is
minimal. Therefore, no reserve for doubtful accounts has been provided in the
accompanying financial statements.
3. UNEARNED INCOME
Unearned income on contracts was as follows:
<TABLE>
<S> <C>
Billings to date on uncompleted projects.................... $3,746,648
Less revenue to date recognized........................... 3,388,008
----------
$ 358,640
==========
</TABLE>
4. NOTE RECEIVABLE
Note receivable consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Note due from officer, non-interest bearing................. $33,000
=======
</TABLE>
Subsequent to year end, the officer repaid the entire balance due on this
note.
5. LEASES
The Company has leased office space and certain equipment under operating
leases expiring at various dates through 2000. Some leases contain renewal
options. Annual rental expense under these agreements was approximately $159,000
for the year ended December 31, 1996.
Future minimum rentals as of December 31, 1996 for noncancelable operating
leases are as follows:
<TABLE>
<S> <C>
1997........................................................ $241,428
1998........................................................ 235,560
1999........................................................ 219,070
2000........................................................ 54,452
--------
$750,510
========
</TABLE>
F-8
<PAGE> 63
CEREBROVASCULAR ADVANCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. ACCRUED EXPENSES
Accrued expenses at December 31, 1996, consist of the following:
<TABLE>
<S> <C>
Compensation and payroll taxes.............................. $205,899
Other....................................................... 101,454
--------
$307,353
========
</TABLE>
7. STOCK OPTION PLAN
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
The Company's 1994 Incentive Stock Option Plan (the "Plan") provides for
the grant of options to key employees, consultants and advisors of the Company
for up to 375,000 shares of the Company's common stock. All options granted have
10 year terms and vest and become fully exercisable in either 2 or 4 years. The
option price is established by the Board of Directors and may not be less than
100% of fair market value. The Plan imposes restrictions on the subsequent sale
of shares. Unless otherwise provided, all options expire immediately upon
termination of employment. The Plan, unless terminated by action of the Board of
Directors at an earlier date, will terminate on October 1, 2004.
Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1995 and 1996: risk-free interest rates of 6%; a dividend yield
of 0%; and a weighted-average expected life of the option of 10 years. The
Company is a non-public company and therefore is permitted under Statement 123
to use a zero volatility factor of the expected market price of the Company's
common stock. Therefore, "minimum" value of the common stock options is
disclosed.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options. The
Company's pro forma information follows:
<TABLE>
<CAPTION>
1996
----------
<S> <C>
Net income.................................................. $1,268,876
Pro forma net income........................................ $1,267,169
</TABLE>
Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1997.
F-9
<PAGE> 64
CEREBROVASCULAR ADVANCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. STOCK OPTION PLAN -- (CONTINUED)
A summary of the Company's stock option activity, and related information
for the year ended December 31, 1996 follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
OPTIONS EXERCISE PRICE
-------- --------------
<S> <C> <C>
Outstanding -- beginning of year............................ 284,500 $0.04
Granted..................................................... 23,775 1.57
Exercised................................................... (112,000) 0.04
Canceled.................................................... (22,500) 0.04
-------- -----
Outstanding -- end of year.................................. 173,775 $0.25
======== =====
Exercisable -- end of year.................................. 6,400 $0.04
======== =====
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 ranged from
$0.04 to $2.65. The weighted-average remaining contractual life of those options
is 8.1 years. At December 31, 1996, there were 89,230 options available for
grant.
8. SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Company has designated 700,000 of its 5,000,000 authorized shares of
preferred stock as Series A ("Series A"). Holders of Series A stock are entitled
to receive noncumulative dividends if and when declared by the board of
directors. Series A shares can be redeemed at the option of the Series A
stockholder beginning March 1, 1998, and thereafter on March 1, 1999 and 2000,
at $0.42 per share plus any declared, but unpaid dividends. The number of shares
eligible for redemption is as follows: 33 percent in 1998; 50 percent in 1999;
100 percent in 2002.
The Series A stockholder may convert Series A shares to common stock at any
time on a basis of one share of preferred stock to one share of common stock.
Series A shares provide for a liquidation value of $0.42 per share plus simple
interest at 15 percent per annum and any declared, but unpaid dividends.
Contingent accrued interest approximated $101,869 at December 31, 1996. The
merger of the Company into or with another company shall at the election of the
Series A stockholder, be deemed to be a liquidation and require the payment of
the liquidation value plus accrued interest.
Series A shares will be automatically converted to shares of common stock
at the conversion price then in effect upon the closing of a public offering in
which the aggregate gross proceeds are at least $5 million and in which the
public offering price is at least $5 per share.
The Series A stockholder is entitled to such number of votes per share as
equal to the number of shares of common stock into which Series A shares are
convertible and is entitled to vote on all matters which common stockholders may
vote. In addition, the Series A stockholder has the right to elect a majority of
the members of the Company's Board of Directors.
9. REPURCHASE OPTION
Certain shares of common stock issued pursuant to the Plan and certain
common stock shares sold to company employees, consultants and advisors are
subject to vesting requirements (generally vesting occurs over a four-year
period). Unvested shares are held in escrow until vesting requirements are met.
The Company has the right to repurchase the nonvested shares at the original
purchase price if the shareholder leaves employment of the Company or
discontinues consulting activities with the Company. At December 31, 1996,
106,250 shares of common stock are nonvested and subject to repurchase options.
F-10
<PAGE> 65
CEREBROVASCULAR ADVANCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. RELATED PARTY TRANSACTIONS
The Company utilizes the business, medical and scientific expertise of
outside consultants. Certain of these consultants are also shareholders of the
Company. For the year ended December 31, 1996, $247,500 was paid to these
shareholders pursuant to their consulting agreements.
11. INCOME TAXES
Components of current income tax expense are as follows for the year ended
December 31, 1996:
<TABLE>
<S> <C>
Federal..................................................... $654,721
State....................................................... 90,641
--------
$745,362
========
</TABLE>
As of December 31, 1996, the Company had no significant temporary
differences that would result in deferred tax assets or liabilities.
Tax expense at the Company's effective tax rate differed from tax expense
at the statutory rate as set forth below:
<TABLE>
<S> <C>
Federal taxes at statutory rate............................. $684,841
State and local income taxes net of federal benefit......... 60,173
Other....................................................... 348
--------
$745,362
========
</TABLE>
12. LETTER OF INTENT
On November 22, 1996, the Company signed a non-binding letter of intent to
exchange 100% of its outstanding common stock for 251,000 shares of Quintiles
Transnational Corporation's common stock. The proposed transaction is subject to
negotiation and execution of a definitive agreement and shareholder and other
approvals.
F-11
<PAGE> 66
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
CerebroVascular Advances, Inc.:
We have audited the accompanying balance sheet of CerebroVascular Advances,
Inc. (a Texas Corporation) as of December 31, 1995, and the related statements
of income, shareholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CerebroVascular Advances,
Inc. as of December 31, 1995, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
San Antonio, Texas
April 22, 1996
F-12
<PAGE> 67
CEREBROVASCULAR ADVANCES, INC.
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $1,628,567
Accounts receivable (Note 3).............................. 99,675
Prepaid expenses.......................................... 66,233
----------
Total current assets.............................. 1,794,475
Property and Equipment
Office furniture, fixtures and equipment.................. 237,890
Less accumulated depreciation............................. (65,458)
----------
172,432
Other Assets
Security deposit.......................................... 108,000
Organizational costs, net................................. 6,073
Note receivable (Note 4).................................. 33,000
----------
147,073
----------
Total assets...................................... $2,113,980
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable.......................................... $ 789,285
Accrued expenses.......................................... 188,225
Unearned income (Note 3).................................. 326,783
Current portion of capitalized lease obligations (Note
5)..................................................... 4,175
Income taxes payable...................................... 153,670
----------
Total current liabilities......................... 1,462,138
Long-Term Liabilities
Capitalized lease obligations, less current maturities
(Note 5)............................................... 389
----------
Total liabilities................................. 1,462,527
Redeemable, convertible preferred stock, Series A, $.001 par
value, 700,000 shares authorized, 523,810 shares issued
and outstanding........................................... 200,000
Shareholders' Equity
Common stock, $.001 par value, 10,000,000 shares
authorized, 1,625,000 shares issued and 1,611,875
outstanding............................................ 1,625
Additional paid in capital................................ 23,286
Retained earnings......................................... 427,067
Treasury stock -- at cost; 13,125 shares.................. (525)
----------
Total shareholders' equity........................ 451,453
----------
Total liabilities and shareholders' equity........ $2,113,980
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE> 68
CEREBROVASCULAR ADVANCES, INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Professional fee income..................................... $ 3,763,688
Less reimbursed travel and other costs...................... (1,613,045)
-----------
Net Revenue................................................. 2,150,643
Costs and expenses
Direct costs.............................................. 539,667
General and administrative................................ 1,037,777
Depreciation and amortization............................. 55,907
-----------
1,633,351
-----------
Income from operations...................................... 517,292
Other income
Interest Income........................................... 80,351
-----------
Income before income taxes and extraordinary item........... 597,643
Income taxes................................................ 206,962
-----------
Income before extraordinary item............................ 390,681
Extraordinary loss, net of income tax benefit of $23,980
(Note 11)................................................. (42,635)
-----------
Net Income.................................................. $ 348,046
===========
Earnings (loss) per common share:
Before Extraordinary loss................................. $ 0.18
Extraordinary loss........................................ (0.02)
-----------
Total............................................. $ 0.16
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE> 69
CEREBROVASCULAR ADVANCES, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK ADDITIONAL
------------------ ---------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------ ------- ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994........................ 1,625,000 $1,625 -- $ -- $23,286 $ 79,021 $103,932
Purchase of treasury
stock.................... -- -- (13,125) (525) -- -- (525)
Net income for 1995......... -- -- -- -- -- 348,046 348,046
--------- ------ ------- ----- ------- -------- --------
Balance at December 31,
1995........................ 1,625,000 $1,625 (13,125) $(525) $23,286 $427,067 $451,453
========= ====== ======= ===== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE> 70
CEREBROVASCULAR ADVANCES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash Flows From Operating Activities
Net income.................................................. $ 348,046
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization............................. 55,909
(Increase) decrease in operating assets:
Accounts receivable.................................... 32,792
Prepaid expenses....................................... (23,423)
Increase (decrease) in current liabilities:
Accounts payable and accrued expenses.................. 677,839
Unearned income........................................ (476,621)
----------
Net cash provided by operating activities................. 614,542
Cash Flows From Investing Activities
Purchase of certificate of deposit as security deposit for
office space........................................... (108,000)
Acquisition of property and equipment..................... (93,814)
----------
Net cash used in investing activities..................... (201,814)
Cash Flows From Financing Activities
Principal payments under capital lease obligation......... (3,631)
Purchase of treasury stock................................ (525)
----------
Net cash (used in) provided by financing activities....... (4,156)
Increase in cash and cash equivalents....................... 408,572
Cash and cash equivalents at beginning of year.............. 1,219,995
----------
Cash and cash equivalents at end of year.................... $1,628,567
==========
Cash paid for interest...................................... $ 2,382
==========
Cash paid for income taxes.................................. $ 66,780
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE> 71
CEREBROVASCULAR ADVANCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ACCOUNTING POLICIES
Description of Business
CerebroVascular Advances, Inc. (the Company) was incorporated in February
1993 under the laws of the State of Texas. The Company is a specialized contract
research organization providing integrated product development services on a
global basis for the pharmaceutical and biotechnology industries. The Company
complements the research and development departments of pharmaceutical and
biotechnology sponsor companies by offering services designed to assure a high
quality product and reduce drug development time and cost. The Company's
professional services include clinical trials management, data management,
biostatistical analysis, pre-clinical testing, study design and strategic,
regulatory and health economics consulting.
A summary of the Company's significant accounting policies follows:
Revenue Recognition
Revenue from fixed contracts is recorded as costs are incurred on the basis
of the relationship between costs incurred and total estimated costs
(percentage-of-completion method of accounting). Certain contracts contain
provisions for price redetermination for cost overruns. Such redetermination
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 fixed contract, the entire
amount of the estimated ultimate loss is charged against income.
Unbilled Services and Unearned Income
Unbilled services represent amounts for services that have been rendered
but for which clients have not been billed. Unearned income represents
prebillings for services not yet rendered.
Property and Equipment
Property and equipment are carried at historical cost. Depreciation is
computed using the accelerated method over estimated useful lives ranging from
three to seven years. The costs for regular maintenance and repairs are expensed
as incurred.
Net Income per Common Share
Net income per common share is based on the weighted average number of
shares of common stock outstanding during the year. There were 2,143,510
weighted average shares outstanding at December 31, 1995.
Redeemable Convertible Preferred Stock Accounting
In accordance with SEC rules and regulations, the Series A preferred stock
has been reclassified from shareholders' equity and is presented between
long-term liabilities and shareholders' equity in the accompanying balance
sheet.
Basis of Presentation and Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-17
<PAGE> 72
CEREBROVASCULAR ADVANCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT CUSTOMERS
One customer individually accounted for more than 90% of professional fee
income. The majority of the Company's accounts receivable are with this
customer. Management believes the customer is financially strong and the credit
risk is minimal. Therefore, no reserve for doubtful accounts has been provided
in the accompanying financial statements.
3. ACCOUNTS RECEIVABLE AND UNEARNED INCOME
Accounts receivable as of December 31, 1995 consisted of the following:
<TABLE>
<S> <C>
Trade receivables -- billed................................. $70,925
Interest receivable......................................... 24,939
Other....................................................... 3,811
-------
$99,675
=======
</TABLE>
Unearned income on contracts was as follows:
<TABLE>
<S> <C>
Revenue to date recognized on uncompleted projects.......... $ 3,823,108
Less: billings to date.................................... (4,149,891)
-----------
$ (326,783)
===========
</TABLE>
4. NOTE RECEIVABLE
Note receivable consists of the following at December 31, 1995:
<TABLE>
<S> <C>
Note due from officer, non-interest bearing................. $33,000
=======
</TABLE>
5. LEASES
The Company has leased office space and certain equipment under operating
leases expiring at various dates through 2000. Some leases contain renewal
options. Rental expense under these agreements was approximately $113,305 for
the year ended 1995.
Future minimum rentals as of December 31, 1995 for noncancelable operating
leases are as follows:
<TABLE>
<S> <C>
1996........................................................ $145,128
1997........................................................ 134,284
1998........................................................ 110,016
1999........................................................ 107,408
2000........................................................ 26,852
Thereafter.................................................. 0
--------
$523,688
========
</TABLE>
The following is a schedule of leased property under capital leases as of
December 31, 1995:
<TABLE>
<S> <C>
Computer equipment.......................................... $4,564
Less current maturities................................... 4,175
------
$ 389
======
</TABLE>
F-18
<PAGE> 73
CEREBROVASCULAR ADVANCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. LEASES -- (CONTINUED)
Future net minimum lease payments as of December 31, 1995 for capital
leases are as follows:
<TABLE>
<S> <C>
1996........................................................ $5,124
1997........................................................ 854
------
$5,978
Less executor costs (estimated)........................... 430
------
Net minimum lease payments.................................. $5,548
Less imputed interest..................................... 673
------
Present value of minimum lease payments..................... $4,875
======
</TABLE>
6. STOCK OPTIONS
In September 1994, the Company established a Stock Option Plan (the
"Plan"). The purpose of the Plan is to provide an incentive to key employees,
consultants and advisors of the Company through the granting of stock options.
The number of options granted under this plan may not exceed 375,000 shares of
common stock. The option price is established by the Board of Directors and may
not be less than 100 percent of fair market value. The Plan imposes restrictions
on the subsequent sale of shares.
Unless otherwise provided, all options expire immediately upon termination
of employment. The Plan, unless terminated by action of the Board of Directors
at an earlier date, will terminate on October 1, 2004.
Information with respect to the Plan is as follows:
<TABLE>
<S> <C>
Options outstanding December 31, 1994..................... 130,000
Options granted........................................ 154,500
-------
Options outstanding December 31, 1995..................... 284,500
=======
Option price at December 31, 1995......................... $ 0.04
=======
Options exercisable at December 31, 1995.................. 26,000
=======
</TABLE>
At December 31, 1995, there were 90,500 options available for grant.
Subsequent to year end 50,000 options were exercised at an option price of
$0.04.
7. REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Company has designated 700,000 of its 5,000,000 authorized shares of
preferred stock as Series A (Series A). Holders of Series A stock are entitled
to receive noncumulative dividends if and when declared by the board of
directors. Series A shares can be redeemed at the option of the Series A
stockholder beginning March 1, 1998, and thereafter on March 1, 1999 and 2000,
at $0.42 per share plus any declared, but unpaid dividends. The number of shares
eligible for redemption is as follows: 33 percent in 1998; 50 percent in 1999;
100 percent in 2002. Also, the Series A stockholder may convert Series A shares
to common stock at any time on a basis of one share of preferred stock to one
share of common stock. Series A shares provide for a liquidation value of $0.42
per share plus simple interest at 15 percent per annum and any declared, but
unpaid dividends. Contingent accrued interest approximated $69,000 at December
31, 1995. Series A shares will be automatically converted to shares of common
stock at the conversion price then in effect upon the closing of a public
offering in which the aggregate gross proceeds are at least $5 million and in
which the public offering price is at least $5 per share.
The Series A stockholder is entitled to such number of votes per share as
equal to the number of shares of common stock into which Series A shares are
convertible and is entitled to vote on all matters which common
F-19
<PAGE> 74
CEREBROVASCULAR ADVANCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. REDEEMABLE CONVERTIBLE PREFERRED STOCK -- (CONTINUED)
stockholders may vote. In addition, the Series A stockholder has the right to
elect a majority of the members of the Company's board of directors.
8. REPURCHASE OPTION
Certain common stock shares issued pursuant to the Plan and certain common
stock shares sold to company employees, consultants and advisors are subject to
vesting requirements (generally vesting occurs over a four-year period).
Unvested shares are held in escrow until vesting requirements are met. The
Company has the right to repurchase the nonvested shares at the original
purchase price if the shareholder leaves employment of the Company or
discontinues consulting activities with the Company. At December 31, 1995,
396,875 shares of common stock are nonvested and subject to repurchase options.
9. RELATED PARTY TRANSACTIONS
The Company utilizes the business, medical and scientific expertise of
outside consultants. Certain of these consultants are also shareholders of the
Company. For the year ended December 31, 1995, $239,232 was paid to these
shareholders pursuant to their consulting agreements.
10. INCOME TAXES
Components of current income tax expense are as follows for the year ended
December 31, 1995:
<TABLE>
<S> <C>
Federal................................................... $159,086
State..................................................... 23,896
--------
$182,982
========
</TABLE>
As of December 31, 1995, the Company had no significant temporary
differences that would result in deferred tax assets or liabilities.
11. EXTRAORDINARY ITEM
During 1995 the Company changed its outside payroll service. This payroll
service defrauded the Company by withdrawing funds totaling $66,615 from the
Company's bank account and never depositing them with the Internal Revenue
Service. Based on the Internal Revenue Code, the Company was still liable for
these funds.
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APPENDIX A
MERGER AGREEMENT
<PAGE> 76
================================================================================
MERGER AGREEMENT
Dated as of May 8, 1997
by and among
QUINTILES TRANSNATIONAL CORP.,
CVA ACQUISITION CORP.,
CERTAIN STOCKHOLDERS OF CEREBROVASCULAR ADVANCES, INC.
and
CEREBROVASCULAR ADVANCES, INC.
================================================================================
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I.........................................................................................................2
1.1 The Merger...........................................................................................2
1.2 Exchange Ratio.......................................................................................3
1.3 Pooling of Interests.................................................................................4
1.4 Payments Into Escrow.................................................................................4
1.5 Closing..............................................................................................5
1.6 Transaction Documents................................................................................5
ARTICLE II........................................................................................................5
2.1 Ownership of Stock...................................................................................5
2.2 Existence and Good Standing..........................................................................6
2.3 Capital Stock........................................................................................6
2.4 Power and Authority of the Company...................................................................6
2.5 Subsidiaries and Investments.........................................................................7
2.6 Financial Statements; No Material Changes; Budget and Projections....................................7
2.7 Books and Records....................................................................................8
2.8 Title to Properties; Encumbrances....................................................................9
2.9 Tangible Assets......................................................................................9
2.10 Real Property.......................................................................................9
2.11 Leases..............................................................................................9
2.12 Contracts..........................................................................................10
2.13 Restrictive Documents..............................................................................10
2.14 Litigation.........................................................................................11
2.15 Taxes..............................................................................................11
2.16 Independent Contractor Status......................................................................11
2.17 Liabilities; Indebtedness..........................................................................12
2.18 Insurance..........................................................................................12
2.19 Intellectual Property..............................................................................13
2.20 Licenses...........................................................................................13
2.21 Compliance with Laws...............................................................................13
2.22 Working Capital, Accounts Receivable...............................................................14
2.23 Employee Relations.................................................................................14
2.24 Employee Benefit Plans.............................................................................14
2.25 Environmental Matters..............................................................................15
2.26 Interests in Clients, Suppliers, Etc...............................................................17
2.27 Bank Accounts, Powers of Attorney..................................................................17
2.28 No Changes Since Balance Sheet Date................................................................17
2.29 Disclosure.........................................................................................18
2.30 Broker's or Finder's Fees..........................................................................18
2.31 Matters Affecting Key Employees or Stockholders....................................................18
2.32 Purchase for Investment............................................................................19
2.33 Copies of Documents................................................................................19
2.34 Absence of Certain Conditions......................................................................19
2.35 Information for Registration Statement and Prospectus..............................................19
2.36 FDA Debarment and Disqualification.................................................................20
2.37 Client Relations...................................................................................20
</TABLE>
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<TABLE>
<S> <C>
ARTICLE III......................................................................................................20
3.1 Existence and Good Standing of Purchaser and Acquisition; Power of Authority........................20
3.2 Capital Stock.......................................................................................21
3.3 Restrictive Documents...............................................................................21
3.4 Reports.............................................................................................22
3.5 Broker's or Finder's Fees...........................................................................22
ARTICLE IV.......................................................................................................22
4.1 Conduct of Business of the Company..................................................................22
4.2 Exclusive Dealing...................................................................................23
4.3 Review of the Company...............................................................................24
ARTICLE V........................................................................................................25
5.1 Opinion of the Stockholders' and the Company's Counsel..............................................25
5.2 Good Standing and Other Certificates................................................................25
5.3 No Adverse Change...................................................................................25
5.4 Truth of Representations and Warranties.............................................................26
5.5 Performance of Agreements...........................................................................26
5.6 Performance Consistent with Budget and Projections..................................................26
5.7 Net Worth...........................................................................................26
5.8 No Litigation Threatened............................................................................26
5.9 Escrow Agreement....................................................................................26
5.10 Pooling Letter.....................................................................................27
5.11 Opinions of Accountants............................................................................27
5.12 Affiliates Letter..................................................................................27
5.13 Governmental and Other Approvals and Consents......................................................27
5.14 Employment Agreements..............................................................................27
5.15 Resignations.......................................................................................27
5.16 Intra-Company Debt.................................................................................27
5.17 Current Employees..................................................................................28
5.18 No Dissent.........................................................................................28
5.19 Registration Statement.............................................................................28
5.20 Execution by Stockholders..........................................................................28
5.21 Total Number of Purchaser Shares...................................................................28
ARTICLE VI.......................................................................................................28
6.1 Opinion of Purchaser's Counsel......................................................................28
6.2 Truth of Representations and Warranties.............................................................28
6.3 Governmental and Other Approvals and Consents.......................................................29
6.4 Employment and Consulting Agreements................................................................29
6.5 Performance of Agreements...........................................................................29
6.6 No Litigation.......................................................................................29
6.7 Total Number of Purchaser Shares....................................................................29
6.8 Registration Statement..............................................................................29
6.9 Nasdaq Quotation....................................................................................29
ARTICLE VII......................................................................................................30
</TABLE>
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<TABLE>
<S> <C> <C>
7.1 Non-Competition; Non-Interference..................................................................30
7.2 Stock Transfer Restrictions and Related Matters.....................................................32
7.3 Distribution to Limited Partners....................................................................33
7.4 Approval of Transactions; Registration Statement....................................................33
ARTICLE VIII.....................................................................................................34
8.1 Survival of Representations.........................................................................34
8.2 Indemnification.....................................................................................34
ARTICLE IX.......................................................................................................37
9.1 Expenses............................................................................................37
9.2 Remedies Not Exclusive..............................................................................37
9.3 Governing Law.......................................................................................37
9.4 Further Assurances..................................................................................37
9.5 Captions............................................................................................38
9.6 Publicity...........................................................................................38
9.7 Notices.............................................................................................38
9.8 Parties in Interest.................................................................................39
9.9 Counterparts........................................................................................39
9.10 Entire Agreement...................................................................................39
9.11 Construction of Certain Disclosures................................................................39
9.12 Amendments.........................................................................................40
9.13 Severability.......................................................................................40
9.14 Third Party Beneficiaries..........................................................................40
9.15 Termination of Agreement...........................................................................40
9.16 Materiality Standard...............................................................................41
9.17 Definitions........................................................................................41
9.18 Arbitration........................................................................................42
</TABLE>
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EXHIBITS
A Plan of Merger
B Stockholder and Exchange Information
C Form of Escrow Agreement
D Form of Company's Pooling Letter
E Form of Affiliate Letter
F-1 Form of Edwards Employment Agreement
F-2 Form of Dwyer Employment Agreement
G-1 Form of Zivin Consulting Agreement
G-2 Form of Sherman Consulting Agreement
H Form of Purchaser Option Agreement
SCHEDULES
2.3. Capital Stock
2.6. Material Adverse Changes
2.8. Title to Properties; Encumbrances
2.9. Tangible Assets
2.11 Leases
2.12 Contracts
2.13 Restrictive Documents
2.14 Litigation
2.16 Independent Contractors
2.17 Indebtedness
2.18 Insurance
2.23 Employees
2.24 Employee Benefit Plans
2.26 Interests in Clients, Suppliers, Etc.
2.27 Bank Accounts; Powers of Attorney
2.28 Changes Since Balance Sheet Date
2.37 Clients and Revenues
4.1 Conduct of Business of the Company
7.1 Non-Competition; Non-Interference
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MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is made and dated as of May 8,
1997, by and among QUINTILES TRANSNATIONAL CORP., a North Carolina corporation
(the "Purchaser"), CVA ACQUISITION CORP., a North Carolina corporation and
wholly-owned subsidiary of the Purchaser ("Acquisition"), CEREBROVASCULAR
ADVANCES, INC., a Texas corporation (the "Company") and the stockholders of the
Company signatory hereto (the "Principal Stockholders").
WITNESSETH:
WHEREAS, the parties hereto desire for Acquisition and the Company to
engage in, and the Boards of Directors of the Purchaser, Acquisition and the
Company have approved, the merger of the Company with and into Acquisition (the
"Merger") upon the terms and subject to the conditions set forth herein and in
the related Plan of Merger attached as Exhibit A hereto (the "Plan of Merger");
and
WHEREAS, the Principal Stockholders are the owners of certain shares of
the issued and outstanding Common Stock and Preferred Stock of the Company as
set forth adjacent to their names on Exhibit B hereto (all of the issued and
outstanding shares of Common Stock and Preferred Stock of the Company are
sometimes referred to as the "Company Stock"); and
WHEREAS, the parties intend and desire for the Merger to constitute a
"pooling of interests" for the Purchaser's accounting purposes and a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended, for income tax purposes;
NOW, THEREFORE, in consideration of the premises, covenants and
agreements set forth in this Agreement and of other good and valuable
consideration, the receipt and legal sufficiency of which they hereby
acknowledge, and intending to be legally bound, the parties agree as follows:
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ARTICLE I
1.1 The Merger.
(a) Upon the performance of all covenants and obligations of the
parties contained herein and upon the fulfillment of all conditions to the
obligations of the parties contained herein (other than such covenants,
obligations and conditions as shall have been waived in accordance with the
terms hereof), and in accordance with the North Carolina Business Corporation
Act, as amended (the "NCBCA"), and the Texas Business Corporation Act, as
amended (the "Texas Code"), at the Effective Time (as defined in subsection (b),
below), the Company shall be merged with and into Acquisition in accordance with
the Plan of Merger, the separate existence of the Company shall cease, and
Acquisition shall be the surviving corporation (sometimes referred to herein as
the "Surviving Corporation") and shall continue its corporate existence under
the laws of the State of North Carolina. The name of the Surviving Corporation
shall be "Quintiles CVA, Inc."
(b) The Merger shall be effected by the filing of articles of merger
with the Secretaries of State of the States of North Carolina and Texas in
accordance with the provisions of Article 11 of the NCBCA and Section 5.04 of
the Texas Code, respectively. The Merger shall become effective at the time set
forth in the articles of merger, which shall be filed contemporaneously with the
closing conducted pursuant to Section 1.5 below. The time and date when the
Merger shall become effective is referred to as the "Effective Time".
(c) (i) For purposes of exchanging shares of Company Stock for shares
of Common Stock of the Purchaser, pursuant to the Plan of Merger, and subject to
the withholding and payments into escrow referred to in Section 1.4 below, the
Purchaser shall issue and deliver to each of the stockholders of the Company
listed on Exhibit B hereto (collectively, the "Stockholders" or individually, a
"Stockholder"), and each such Stockholder shall accept from the Purchaser the
number of shares (less any fractional share, which shall be eliminated) of
Common Stock of the Purchaser determined by multiplying (i) the number of shares
of Company Common Stock set forth opposite such Stockholder's name on Exhibit B
hereto times the Exchange Ratio (as defined below) and (ii) the number of shares
of Company Preferred Stock set forth opposite such Stockholder's name on Exhibit
B hereto on a Common Stock equivalent basis as set forth on Exhibit B times the
Exchange Ratio (as defined below).
(ii) In respect of each outstanding option to purchase shares of
Company Stock (as set forth in Exhibit B as Outstanding Company Options; each a
"Company Option"), Purchaser shall cause to be granted at Closing to the holder
thereof a substitute option on substantially similar terms (except with respect
to the number of shares covered thereby and the
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exercise price thereof) to purchase shares of Common Stock of the Purchaser (a
"Purchaser Option") which shall be exercisable (A) to purchase the number of
shares of Common Stock of the Purchaser (less any fractional share, which shall
be eliminated) determined by multiplying the shares of Company Stock then
purchasable under each holder's Company Option by the Exchange Ratio and (B) at
an exercise price per share of Common Stock of the Purchaser determined by
dividing the exercise price per share of Company Stock under each holder's
Company Option by the Exchange Ratio.
1.2 Exchange Ratio.
(a) Determination.
(i) The Exchange Ratio shall be the number (rounded
to five decimal places) determined by dividing the Total Number of Purchaser
Shares by the Company Base Capitalization.
(ii) In the event that between the date of this
Agreement and the Closing, the Purchaser shall change the number of shares of
Common Stock of the Purchaser that are issued and outstanding as a result of any
stock split, stock dividend or similar recapitalization, the Average Share Price
and the Total Number of Purchaser Shares (as defined below) shall each be
proportionately adjusted correspondingly.
(b) Definitions. For purposes of this Section 1.2, the
following capitalized terms shall have the respective meanings set forth below:
(i) "Average Share Price" shall mean the average of
the closing prices per share of the Purchaser's Common Stock on the Nasdaq
National Market (or such United States exchange on which the Purchaser's Common
Stock may then be listed) for the aggregate of the ten trading days ending three
trading days prior to the Closing Date.
(ii) "Company Base Capitalization" means 2,469,781
shares of the Common Stock of the Company, including shares into which
outstanding options are convertible and shares of Preferred Stock of the Company
on a Common Stock equivalent basis.
(iii) "Total Number of Purchaser Shares" shall mean:
(A) If the Average Share Price is between
$55.78 and $99.60 (inclusive), the Total Number of Purchaser Shares shall be
251,000.
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(B) If the Average Share Price is greater
than $99.60, the Total Number of Purchaser Shares shall be the number (rounded
to five decimal places) determined by dividing $25,000,000 by the Average Share
Price; and
(C) If the Average Share Price is less
than $55.78, the Total Number of Purchaser Shares shall be the number (rounded
to five decimal places) determined by dividing $14,000,000 by the Average Share
Price.
1.3 Pooling of Interests. The Purchaser and the Company intend for the
transactions contemplated by this Agreement to qualify for "pooling of
interests" treatment for purposes of the Purchaser's accounting. The Company
acknowledges that the Purchaser expressed a preference to exchange shares of the
Purchaser's voting Common Stock (as opposed to cash) for each Stockholder's
shares of Company Stock.
1.4 Payments Into Escrow.
(a) When making the issuances required by Section 1.1 above,
and pursuant to the Plan of Merger and notwithstanding any provision therein to
the contrary, the Purchaser shall withhold from each Stockholder and deliver to
the Escrow Agent (as defined in the Escrow Agreement referred to below) ten
percent of the Purchaser's Common Stock issuable in respect of each
Stockholder's shares of Company Stock, to be held and distributed by the Escrow
Agent pursuant to the terms of this Agreement and the Escrow Agreement attached
as Exhibit C hereto (the "Escrow Agreement").
(b) J.E. Campion shall, by virtue of the Merger, be
irrevocably appointed attorney-in-fact and authorized and empowered to act, for
and on behalf of any or all of the Stockholders (with full power of substitution
in the premises) in connection with the indemnity provisions of Article VIII as
they relate to the Stockholders generally, the Escrow Agreement, and such other
matters as are reasonably necessary for the consummation of the transactions
contemplated hereby including, without limitation, to act as the representative
of the Stockholders to review and authorize all claims authorized or directed by
the Escrow Agreement and dispute or question the accuracy thereof (the
above-named representative, as well as any subsequent representative of the
Stockholders appointed by him or after his death or incapacity elected in
accordance with the Escrow Agreement is referred to as the "Representative").
Each of the Purchaser and Acquisition shall be entitled to rely on such
appointment and treat such Representative as the duly appointed attorney-in-fact
of each Stockholder. Each Stockholder who votes in favor of the Merger pursuant
to the terms hereof, by such vote, without any further action, and each
Stockholder who receives shares of the
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Purchaser's Common Stock in connection with the Merger, by acceptance thereof
and without any further action, confirms such appointment and authority and
acknowledges and agrees that such appointment is irrevocable and coupled with an
interest.
1.5 Closing. Consummation of the Merger and the other transactions
contemplated by this Agreement and the Plan of Merger (the "Closing") shall take
place at 10:00 a.m. on July 2, 1997 at the offices of Smith, Anderson, Blount,
Dorsett, Mitchell & Jernigan, L.L.P., Raleigh, North Carolina, or, if the
Securities and Exchange Commission conducts a review of the Registration
Statement (as defined in Section 7.4(b)), then the closing shall take place as
soon as practicable after the satisfaction (or waiver, if permissible) of the
conditions set forth in this Agreement (including the SEC having declared the
Registration Statement effective), or at such other time and date as the
Purchaser, the Company and the Representative shall designate in writing (such
specified or other time and date, the "Closing Date").
1.6 Transaction Documents. As used in this Agreement, the term
"Transaction Documents" shall mean, collectively, this Agreement, the Plan of
Merger (and any related articles or certificates of merger), the Escrow
Agreement, the Employment Agreements, the Consulting Agreements (each as defined
in Section 5.14 below) and all agreements, instruments, certificates and other
documents executed or delivered in accordance with the terms of this Agreement
or any other Transaction Document.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
AND THE COMPANY
The Company and the Principal Stockholders, jointly and severally with
the Company and severally as among themselves, represent and warrant to the
Purchaser and Acquisition, solely for the benefit of the Purchaser and
Acquisition, and agree as follows:
2.1 Ownership of Stock. As of the date of this Agreement, each
Stockholder is the lawful owner of the number of shares of Company Stock listed
opposite such Stockholder's name in Exhibit B hereto as "Number of Company
Shares Held," free and clear of all liens, encumbrances, restrictions and claims
of every kind. As of the Closing Date, each Stockholder will be the lawful owner
of the number of shares of Company Stock listed opposite such Stockholder's name
in Exhibit B hereto as "Number of Company Shares to be Transferred," free and
clear of all liens, encumbrances, restrictions and claims of every kind, and
such shares owned by the Stockholders shall represent an aggregate of not less
than 100% of all issued and outstanding shares of Company Stock. Each
Stockholder has, and as of the Closing Date each Stockholder will have, the full
legal right, power and authority to enter into and deliver this Agreement and
the other Transaction Documents to which such Stockholder is a party, perform
such Stockholder's
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obligations hereunder and thereunder and consummate the transactions
contemplated hereby and thereby. This Agreement and the other Transaction
Documents to which any Stockholder is a party will constitute the valid and
legally binding obligations of such Stockholder, enforceable against such
Stockholder in accordance with their respective terms, subject to bankruptcy
laws and equitable limitations. Each Stockholder is a resident of the State or
other jurisdiction set forth adjacent to such Stockholder's name in Exhibit B.
2.2 Existence and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. The Company has the power to own its property and to carry on its
business as now being conducted. The Company is duly qualified to do business
and is in good standing in the State of Texas, which is the only jurisdiction in
which the character or location of the properties owned or leased by the Company
or the nature of the business conducted by the Company makes such qualification
necessary under applicable law, except to the extent that the failure to be so
qualified and in good standing would not have a material adverse change in the
condition, financial or otherwise, of the Company.
2.3 Capital Stock. The Company has an authorized capitalization
consisting of 10,000,000 shares of common stock, par value $.001 per share (the
"Common Stock"), and 5,000,000 shares of preferred stock, par value $.001 per
share ("the Preferred Stock"). As of the date of this Agreement, 1,723,875
shares of the Common Stock and 523,810 shares of the Preferred Stock, Series A,
are issued and outstanding and are held by the Persons and in the amounts set
forth in Schedule 2.3 attached hereto as "Shares Held as of Date of Agreement"
and no other shares of the Company's capital stock are issued or outstanding. As
of the Closing Date, 2,247,685 shares of the Company Stock will be issued and
outstanding and held by the Persons and in the amounts set forth in Schedule 2.3
as "Shares Held as of Closing Date," and no other shares of the Company's
capital stock will be issued or outstanding. All such outstanding shares so
designated have been and will be on the designated dates duly authorized and
validly issued and are and will be on the designated dates fully paid and
nonassessable. Except as shown on Schedule 2.3 as "Rights Outstanding as of Date
of Agreement" and "Rights Outstanding as of Closing Date," respectively, there
are and will be on the designated dates no outstanding options, warrants, rights
(pre-emptive or otherwise), calls, commitments, conversion rights, rights of
exchange, plans or other agreements of any character providing for the purchase,
issuance or sale of any shares of the capital stock of the Company, other than
as contemplated by this Agreement.
2.4 Power and Authority of the Company. The Company has all requisite
power and authority to enter into and deliver this Agreement, the Plan of Merger
and the other Transaction Documents to which it is a party, to perform its
obligations hereunder and thereunder and to
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consummate the transactions contemplated hereby and thereby. The Company's
execution, delivery and performance of this Agreement, the Plan of Merger and
the other Transaction Documents to which it is a party and the Company's
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all corporate, shareholder and other action required
of the Company by applicable law, its articles of incorporation or bylaws. This
Agreement, the Plan of Merger and the other Transaction Documents to which the
Company is a party constitute the valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms.
2.5 Subsidiaries and Investments. The Company does not (a) own,
directly or indirectly, any capital stock or other equity or ownership or
proprietary interest in, (b) have the power to elect a majority of the board of
directors or similar governing body of, or (c) have the power to direct the
business of, any Person.
2.6 Financial Statements; No Material Changes; Budget and Projections.
(a) The Company has furnished the Purchaser with the balance
sheets of the Company as of December 31, 1996 (the "Balance Sheet"), December
31, 1995 and December 31, 1994, and the related statements of income,
shareholders' equity and cash flows for the years then ended, audited as to
December 31, 1995 and 1994 and the years then ended by Arthur Andersen LLP and
audited as to December 31, 1996 and the year then ended by Ernst & Young LLP.
Further, the Company will provide prior to the Closing Date to the Purchaser,
internally prepared and unaudited, a balance sheet and statement of operations
for the Company for each of the one month periods ending January 31, 1997 and
February 28, 1997 and thereafter, to the extent that the Closing Date occurs on
or after the 20th day of a calendar month, an internally prepared and unaudited
balance sheet and statement of operations for the prior month, all of which will
be prepared on a basis consistent with the financial statements audited by Ernst
& Young, LLP. All such financial statements, including the notes thereto, have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated, except that such
unaudited financial statements do not contain notes and are subject to year-end
audit adjustments, and are correct, complete, and consistent with the Company's
books and records (which are correct and complete). The Balance Sheet and all
such other balance sheets fairly present the financial condition of the Company
at the respective dates thereof and reflect all claims against and all debts and
liabilities of the Company, fixed or contingent, required to be reflected
therein in accordance with generally accepted accounting principles, as at the
respective dates thereof; and the related statements of income, shareholders'
equity and cash flows fairly present the results of the operations of the
Company and the changes in its financial position for the periods
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indicated. There are no intercompany transactions between the Company and any
Stockholder (or any affiliate of any thereof) required to be reflected therein
in accordance with generally accepted accounting principles, which are not
disclosed in such financial statements. The Company's tangible net worth plus
preferred stock (determined in accordance with generally accepted accounting
principles) as of the date of this Agreement is not less than $1,900,000.
(b) Except as set forth on Schedule 2.6, since December 31,
1996 (the "Balance Sheet Date") there has been no material adverse change in the
assets or liabilities, or in the business or condition, financial or otherwise,
or in the results of operations or prospects of the Company, whether as a result
of any legislative or regulatory change, revocation of any license or rights to
do business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation or act of God or other public force or otherwise, and
no event has occurred or circumstance exists with respect to the Company (rather
than the contract research organization industry in general) that may result in
such a material adverse change.
(c) The Company has furnished the Purchaser with true and
complete copies of the Company's financial projections for the year 1997,
together with the assumptions upon which such projections are based, and its
estimate, based upon such assumptions, is that such projections will equal at
least 90% of the Company's actual revenue and operating profit for the projected
period. All such projections and the foregoing estimate were prepared and made
in good faith with no intent to deceive.
(d) The Company's backlog (calculated in good faith based on
fee payments anticipated to be received under letters of intent and legally
binding written agreements for the provision of services to third parties and
the other assumptions described in Schedule 2.6) ("Backlog") as of the Balance
Sheet Date was at least $8,206,000, of which at least $4,801,000 is estimated to
be attributable to the 12-month period ended December 31, 1997. The Company has
delivered to the Purchaser a true and correct report describing such Backlog on
Schedule 2.6.
2.7 Books and Records. The minute books of the Company, as previously
made available to the Purchaser and its representatives, contain accurate
records of all meetings of and corporate action taken by the shareholders and
Board of Directors (including committees thereof) of the Company and none of the
Company's records, systems, controls, data or information are recorded, stored,
maintained, operated or otherwise wholly or partly dependent upon or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of the Company.
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2.8 Title to Properties; Encumbrances. Except as set forth in Schedule
2.8 and except for properties and assets which have been sold or otherwise
disposed of in the ordinary course of business since the Balance Sheet Date, the
Company has good, valid and indefeasible title to (a) all of its properties and
assets (real and personal, tangible and intangible), including without
limitation all of the properties and assets reflected in the Balance Sheet,
except as indicated in the notes thereto, and (b) all of the properties and
assets purchased by the Company since the Balance Sheet Date; in each case
subject to no encumbrance, lien, security interest, mortgage, pledge, charge or
other restriction of any kind or character, except for (i) liens reflected in
the Balance Sheet, (ii) liens or limitations on the use of real property or
irregularities in title thereto which do not detract from the value of, or
impair the use of, such property by the Company in the operation of its
business, (iii) liens for current taxes, assessments or governmental charges or
levies on property not yet due and delinquent, (iv) liens described in Schedule
2.8 and (v) inchoate liens arising in the ordinary course of business with
respect to matters not yet due and delinquent (liens of the types described in
clauses (i), (ii), (iii), (iv) and (v) above are sometimes referred to as
"Permitted Liens").
2.9 Tangible Assets. Schedule 2.9 contains an accurate and complete
list of all tangible assets of the Company, whether owned or leased (as so
indicated), having a value (individually or in the aggregate with other like
items) in excess of $5,000. The tangible assets listed in Schedule 2.9 are in a
state of good maintenance and repair, are adequate and suitable for the purposes
for which they are currently being used and constitute all of the tangible
assets (having such value) used in or necessary to conduct the Company's
business as currently conducted.
2.10 Real Property. The Company does not currently own, and has not at
any time owned, in whole or in part, any interest in any real property.
2.11 Leases. Schedule 2.11 attached hereto contains an accurate and
complete list of each lease to which the Company is a party (as lessee or
lessor). Each lease set forth in Schedule 2.11 (or required to be set forth in
Schedule 2.11) is in full force and effect; all rents and additional rents due
to date on each such lease have been paid; in each case, the lessee is in
peaceable possession and is not in default thereunder, and no waiver, indulgence
or postponement of the lessee's obligations thereunder has been granted by the
lessor; and there exists no event of default or event, occurrence, condition or
act (including the transactions contemplated by this Agreement) which, with the
giving of notice, the lapse of time or the happening of any further event or
condition, would become a default under such lease. The property leased by the
Company is in a state of good maintenance and repair and is reasonably adequate
and suitable for the purposes for which it is presently being used.
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2.12 Contracts. Except as set forth in Schedule 2.12 the Company
neither has nor is bound by (a) any agreement, contract or commitment relating
to the performance by the Company of services for or on behalf of any person or
entity, (b) any agreement, contract or commitment relating to the engagement as
an independent contractor or employment of any person by the Company, or any
bonus, deferred compensation, pension, profit sharing, stock option, employee
stock purchase, retirement or other employee benefit plan, (c) any agreement,
indenture or other instrument which contains restrictions with respect to the
payment of dividends or any other distribution in respect of the Company's
capital stock, (d) any agreement, contract or commitment relating to capital
expenditures, (e) any loan or advance to, or investment in, any Person or any
agreement, contract or commitment relating to the making of any such loan,
advance or investment, (f) any guarantee or other contingent liability in
respect of any indebtedness or obligation of any Person (other than the
endorsement of negotiable instruments for collection in the ordinary course of
business), (g) any management service, consulting or any other similar type
contract, (h) any agreement, contract or commitment limiting the freedom of the
Company to engage in any line of business or any geographic area, or to compete
with any Person, (i) any agreement, contract or commitment which involves
payments by the Company of $20,000 or more or (j) any agreement, contract or
commitment which might reasonably be expected to have a potential adverse impact
on the business or operations of the Company. Each contract or agreement set
forth in Schedule 2.12 (or required to be set forth in Schedule 2.12) is in full
force and effect, and no Stockholder or the Company has received any notice or
other communication asserting the actual or alleged existence of any, default or
event of default or event, occurrence, condition or act (including the
consummation of the transactions contemplated by this Agreement) which, with the
giving of notice, the lapse of time or the occurrence of any other event or
condition, would become a default or event of default thereunder. None of the
Stockholders nor the Company has violated any of the terms or conditions of any
contract or agreement set forth in Schedule 2.12 (or required to be set forth in
Schedule 2.12), in any material respect.
2.13 Restrictive Documents. Except as set forth in Schedule 2.13, the
Company is not subject to, or a party to, any charter, bylaw, mortgage, lien,
lease, license, permit, agreement, contract, instrument, law (including without
limitation the Worker Adjustment and Retraining Notification Act, as amended),
rule, ordinance, regulation, order, judgment or decree, or any other restriction
of any kind or character, which would be violated by, prevent or impair (whether
by acceleration of any liability, creation of any lien or encumbrance or
otherwise) the consummation of the transactions contemplated by this Agreement
or any other Transaction Document or compliance by the Company with the terms,
conditions and provisions hereof or thereof or present or continued operation of
the Company's business after the date hereof or the Closing Date on
substantially the
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same basis as heretofore operated or which would restrict the ability of the
Company to acquire any property or conduct business in any area.
2.14 Litigation. Except as set forth in Schedule 2.14, there is no
action, suit, proceeding at law or in equity, arbitration or administrative or
other proceeding or investigation by or before any governmental or other
instrumentality or agency pending or, to the Knowledge of the Company,
threatened, against or affecting the Company, or any affiliate of the Company or
any of their respective properties or rights which could affect the right or
ability of the Company to carry on its business as now conducted, or which could
have a material adverse effect on the Company; and the Company is not aware of
any basis for any such action, proceeding or investigation. Neither the Company
nor any of its affiliates is subject to any judgment, order or decree entered in
any lawsuit or proceeding which may affect any of the Company's operations or
business practices, or the ability of the Company to acquire any property or
conduct business in any area.
2.15 Taxes. The Company has filed or caused to be filed, within the
times and manners prescribed by law, all federal, state, local and foreign tax
returns and tax reports which are required to be filed by, or with respect to,
the Company. True and complete copies of all such returns have been provided to
the Purchaser. Such returns and reports reflect accurately all liability for
taxes of the Company for the periods covered thereby. All federal, state, local
and foreign income, profits, franchise, sales, use, occupancy, excise and other
taxes and assessments (including interest and penalties) payable by or due from
the Company have been fully paid or adequately disclosed and fully provided for
in the books and financial statements of the Company. The federal income tax
liability of the Company has been finally determined by the Company for all
fiscal years to and including the fiscal year ended December 31, 1996. No
examination of any tax return of the Company is currently in progress. There are
no outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of the Company.
2.16 Independent Contractor Status. Schedule 2.16 sets forth a complete
list of the Persons, including without limitation all investigators and monitors
or clinical research associates and other study personnel, engaged by the
Company in the last three years to render management, consulting, research,
investigative or similar services to the Company as an independent contractor
(collectively, the "Company Contractors"). The Company has previously provided
to the Purchaser true and complete copies of each and every agreement between
the Company and any Company Contractor. Each Company Contractor is and at all
times has been an independent contractor to, and not an employee of, the Company
for purposes of all applicable federal and state income tax withholding
requirements and otherwise.
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2.17 Liabilities; Indebtedness.
(a) Except as described in Schedule 2.17, there are no
liabilities, obligations or indebtedness of or claims against the Company,
whether known or unknown, due or not yet due, asserted or unasserted (whether or
not probable of assertion), actual or potential, choate or inchoate, fixed,
contingent, or otherwise, arising from, or in connection with, or based upon
acts, omissions, events, things, facts, conditions, matters or occurrences
existing, occurring or taking place on or before the Closing Date, whether or
not discovered, known, asserted, expected or contemplated by any party or third
party, or in any way choate on the Closing Date and the Purchaser shall not
suffer or be subject to any Losses (as defined in Section 8.2(a), below) arising
from the foregoing, whether such Losses occur before or after the Closing Date,
except: (i) those liabilities as set forth in the Balance Sheet or referred to
in the notes thereto, and (ii) non-material liabilities incurred subsequent to
the Balance Sheet Date and prior to Closing in the ordinary course of business.
The Company is not in default in respect of the terms or conditions of any
indebtedness.
(b) Schedule 2.17 is a complete and correct listing of all (i)
existing indebtedness for money borrowed of the Company, (ii) guarantees of the
Company and (iii) letters of credit and other credit enhancements extended to
the Company (all obligations described by (i) through (iii) being referred to
herein as "Indebtedness"). The Company has performed and is in compliance with
all of the terms of such Indebtedness and all instruments and agreements
relating thereto, and no default or event of default, or event or condition
which with the giving of notice, the lapse of time, a determination of
materiality, the satisfaction of any other condition or any combination of the
foregoing, would constitute such a default or event of default, exists with
respect to any such Indebtedness.
2.18 Insurance. Set forth in Schedule 2.18 is a complete list of
insurance policies which the Company maintains with respect to its business,
properties and employees, together with a description of all claims made thereon
in excess of $10,000, except with respect to the Company's group medical
insurance policies for which there are listed claims made thereon in excess of
$20,000 for the preceding two years. Such policies are in full force and effect
and, to the Knowledge of the Company, are free from any right of termination on
the part of the applicable insurance carriers. There are no outstanding unpaid
premiums except in the ordinary course of business, and the Company has not
received any notice of cancellation or non-renewal of any such policy. Except as
set forth in Schedule 2.18, the Company is not aware of any risks, situations,
occurrences or other matters which have been disclosed, or should have been
disclosed, to insurance carriers or brokers in connection with any applications
for insurance except to the extent
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that any such failure to disclose would not reasonably affect coverage under
such insurance. Since January 1, 1995, there has not been any material adverse
change in the relationship of the Company with its insurers or in the premiums
payable pursuant to such policies. There exists no event of default or event,
occurrence, condition or act (including the transactions contemplated by this
Agreement) which, with the giving of notice, the lapse of time or the happening
of any further event or condition would become a default under any such policy
or give rise to, and the Company has no anticipation of, any termination or
cancellation thereof. The Company has been covered by one or more policies of
insurance of the types described in Schedule 2.18 continuously since the
commencement of their operations for all services provided by them at any time.
2.19 Intellectual Property. The Company has no rights under any
Intellectual Property (as defined below). No claim adverse to the interests of
the Company in any Intellectual Property has been made in litigation. To the
Knowledge of the Company, no such claim has been threatened or asserted, no
basis or alleged basis exists for any such claim, and no Person has infringed or
otherwise violated the Company's right in any Intellectual Property. The Company
has not infringed at any time upon the valid Intellectual Property rights of
another, and no litigation is pending wherein the Company is accused of
infringing or otherwise violating the Intellectual Property right of another, or
of breaching a contract conveying rights under Intellectual Property. No such
claim has been asserted or threatened against the Company, nor to the Knowledge
of the Company are there any facts that would give rise to such a claim. For
purposes of this Section 2.19, "Intellectual Property" means domestic and
foreign patents, patent applications, registered and unregistered trademarks and
service marks, registered and unregistered copyrights, computer programs and
databases, trade secrets and proprietary information.
2.20 Licenses. The Company owns or otherwise lawfully uses each
license, franchise, permit, right and other authorization (collectively,
"Licenses") necessary or required by applicable law to conduct its business as
conducted as of the date of this Agreement, free and clear of all liens,
encumbrances, restrictions and claims of every kind. All of the Company's
Licenses are in full force and effect, not subject to any current default or
right of cancellation, termination or revocation.
2.21 Compliance with Laws. The Company is and at all times has been in
compliance with all applicable laws, regulations, orders, judgments and decrees.
There exists no event, occurrence, condition or act which, with the giving of
notice, the lapse of time or the occurrence of any further event or condition
would constitute a violation of any applicable law, regulation, order, judgment
or decree. Neither the Company nor any of its affiliates, nor any Person acting
for or on behalf of any thereof has at any time made or participated in any
bribe, kickback or illegal payment.
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2.22 Working Capital, Accounts Receivable. The amount of all accounts
receivable, unbilled invoices and other debts due or recorded in the respective
records and books of account of the Company as being due to the Company as at
the Closing Date (less the amount of any provision or reserve therefor made in
the respective records and books of account of the Company) will, subject to
bankruptcy and equitable limitations, be good and collectible in full in the
ordinary course of business and in any event not later than 240 days after the
Closing Date; and none of such accounts receivable or other debts is or will at
the Closing Date be subject to any counterclaim or set-off except to the extent
of any such provision or reserve. There has been no material adverse change
since the Balance Sheet Date in the amount of accounts receivable or other debts
due the Company or the allowances with respect thereto, or accounts payable of
the Company, from that reflected in the Balance Sheet.
2.23 Employee Relations. Schedule 2.23 contains an accurate list of all
of the Company's employees, showing for each his or her position, date of
employment, 1996 compensation, and current annualized salary. The Company is in
substantial compliance with all federal, state and other applicable laws,
domestic or foreign, respecting employment and employment practices, terms and
conditions of employment and wages and hours, and labor practices. No unfair
labor practice complaint against the Company is pending before the National
Labor Relations Board or any other governmental authority. There is no labor
strike, slowdown or stoppage actually pending or threatened against or involving
the Company. No representation question exists respecting the employees of the
Company. No grievance which might have an adverse effect upon the Company or the
conduct of its respective business exists, no arbitration proceeding arising out
of or under any collective bargaining agreement is pending, and no claim
therefor has been asserted. No collective bargaining agreement is currently
being negotiated by the Company. The Company has not experienced any labor
strike, slowdown or stoppage during the last three years. None of the employees
designated by Purchaser with an asterisk on Schedule 2.23 has expressed or
communicated to the Company any intent to leave or contemplation of leaving the
Company's employ. To the Knowledge of the Company, there has not been any
adverse change in relations with employees of the Company as a result of any
announcement or the consummation of the transactions contemplated by this
Agreement.
2.24 Employee Benefit Plans.
(a) Set forth in Schedule 2.24 is an accurate and complete
list of all employee benefit plans of any variety whatsoever (the "Employee
Benefit Plans"), including without limitation any within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as
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amended, and the rules and regulations thereunder ("ERISA") (whether or not any
such Employee Benefit Plans are otherwise exempt from the provisions of ERISA),
established, maintained or contributed to by or with respect to the Company at
any time. The Company has provided the Purchaser with true and complete copies
of all documents governing or relating to each such Employee Benefit Plan.
(b) Each Employee Benefit Plan has been administered in all
respects in accordance with its terms and is in compliance in all respects with
the applicable provisions, if any, of ERISA and the Internal Revenue Code of
1986, as amended (the "Code"). All reports, returns and similar documents with
respect to the Employee Benefit Plans required to be filed with any government
agency or distributed to any Employee Benefit Plan participant have been duly
and timely filed or distributed. To the Knowledge of the Company, there are no
investigations by any government agency, and no termination proceedings or other
claims, suits or proceedings against or involving any Employee Benefit Plan or
asserting any rights or claims to benefits under any Employee Benefit Plan that
could give rise to any liability to the Company or such Employee Benefit Plan.
All of the Employee Benefit Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the Internal
Revenue Service to the effect that such Employee Benefit Plans are qualified;
the Employee Benefit Plans and the trusts related thereto are exempt from
federal income taxes; no such determination letter has been revoked and, to the
Knowledge of the Company, revocation has not been threatened; and no such
Employee Benefit Plan has been amended since the date of its most recent
determination letter or application therefor in any respect that would adversely
affect its qualification or increase its cost. No Employee Benefit Plans have
been terminated; there have not been any "reportable events" (as defined in
Section 4043 of ERISA and the regulations thereunder) with respect thereto; and
no Employee Benefit Plan has an "accumulated funding deficiency" within the
meaning of Section 412(a) of the Code or any unfunded liability of any kind.
2.25 Environmental Matters.
(a) For purposes of this Section 2.25, the following terms
shall have the following meanings: (A) "Facilities" shall mean any and all
buildings, structures and properties of any sort owned, leased, operated or
occupied by the Company at any time; (B) "Hazardous Materials" shall mean any
solid or liquid substance, waste, or material characterized, defined or listed
as "hazardous" or "toxic" or regulated under Environmental Laws (as defined
below), including any and all constituents of such substance, waste, or
material. The term "Hazardous Materials" shall include, without limitation,
solid or liquid raw materials, wastes, petroleum and petroleum products, and
source, special nuclear or by-product material as defined by the Atomic Energy
Act of
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1954, as amended; (C) "CERCLA" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended; (D) "RCRA" shall
mean the Resource Conservation and Recovery Act, as amended; (E) "Claim" shall
mean any and all claims, demands, causes of actions, suits, proceedings,
administrative proceedings, losses, judgments, decrees, debts, damages,
liabilities, court costs, attorneys' fees and any other expenses incurred,
assessed or sustained by or against the Company; and (F) "Environmental Laws"
shall mean any and all federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, judicial decisions,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions or requirements relating to the environment or
hazardous or toxic materials or substances, the protection of human health and
the environment, or the release of any materials or substances into the
environment, whether existing or hereafter enacted or issued which govern
behavior, activities or conditions with respect to the Facilities prior to the
Closing Date.
(b) Compliance with Environmental Laws. The Company has
provided to the Purchaser all material information relating to the following
items: (i) the nature, quantities and ultimate disposal locations of any
Hazardous Materials generated, transported, treated or disposed of by the
Company, together with a description of the location of each such activity, and
(ii) a summary of the nature and quantities of any Hazardous Materials that have
been disposed of or found at any site or facility owned, operated or occupied
presently or at any previous time by the Company. The Company is in compliance
with all applicable Environmental Laws, including without limitation those
relating to product registration, pollution control and environmental
contamination and those governing the generation, use, collection, discharge, or
disposal of Hazardous Materials and record keeping, notification and reporting
requirements respecting Hazardous Materials. The Company has not violated or
been alleged to have violated any Environmental Law, nor has the Company been
subject to any administrative or judicial proceeding pursuant to any
Environmental Law at any time. There are no facts or circumstances which could
form the basis for the assertion of any Claim against the Company relating to
environmental matters, including without limitation any Claim arising from past
or present environmental practices asserted under CERCLA or RCRA or any other
Environmental Law, which might have an adverse effect on the business, results
of operations, financial condition or prospects of the Company.
(c) Asbestos, Urea Formaldehyde, and Underground Storage
Tanks. There is not and has never been constructed, placed, deposited, stored,
disposed of nor located on or at any Facility any asbestos or
asbestos-containing-materials or any insulating materials containing urea
formaldehyde in any form, and no underground treatment or storage tanks
(excluding non-industrial waste septic tanks) or sumps are or have ever been
located on or at the Facilities.
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(d) Investigations There have been no environmental
investigations, studies, audits, tests, reviews or other analyses conducted by,
on behalf of, or which are in the possession or control of the Company in
relation to the Facilities.
(e) Liens. There are no liens arising under or pursuant to any
Environmental Laws on the Facilities and no actions by any governmental
authority have been taken or are in process which likely would subject the
Facilities to such liens, and the Company would not be required to place any
notice or restriction relating to the presence of any Hazardous Materials at the
Facilities or in any deed to the Facilities.
2.26 Interests in Clients, Suppliers, Etc. Except as described in
Schedule 2.26, neither the Company nor any officer or director of the Company
possesses, directly or indirectly, any financial or other interest in any
corporation, firm, association or business organization which is a client,
supplier, customer, lessor, lessee, or competitor or potential competitor of the
Company.
2.27 Bank Accounts, Powers of Attorney. Set forth in Schedule 2.27 is
an accurate and complete list showing (a) the name and address of each bank in
which the Company has an account or safe deposit box, the number of any such
account or any such box and the names of all persons authorized to draw thereon
or to have access thereto, and (b) the names of all persons, if any, holding
powers of attorney (including without limitation with respect to tax matters)
from the Company and a summary statement of the terms thereof.
2.28 No Changes Since Balance Sheet Date. Except as described on
Schedule 2.28, since the Balance Sheet Date, the Company has not (a) incurred
any liability or obligation of any nature (whether accrued, absolute, contingent
or otherwise) except in the ordinary course of business in an amount less than
$75,000, (b) individually or in the aggregate permitted any of its assets to be
subjected to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind (other than Permitted Liens), (c) individually
or in the aggregate sold, transferred or otherwise disposed of any assets except
in the ordinary course of business for an amount less than $10,000, (d)
individually or in the aggregate made any capital expenditure or commitment
therefor except in the ordinary course of business in an amount less than
$75,000, (e) declared or paid any dividend or made any distribution on any
shares of its capital stock, or redeemed, purchased or otherwise acquired any
shares of its capital stock or any option, warrant or other right to purchase or
acquire any such shares, (f) made any bonus or profit sharing distribution or
payment of any kind, (g) increased its indebtedness for borrowed money, except
current borrowings from banks in the ordinary course of business in an amount
individually or in the aggregate less than $20,000, or made any loan to any
Person, (h) written off as uncollectible any notes or accounts
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receivable except write-offs in the ordinary course of business charged to
applicable reserves, none of which individually or in the aggregate exceeds
$10,000, (i) granted any increase in the rate of wages, salaries, bonuses or
other remuneration of any executive employee or other employees, (j) cancelled
or waived any claims or rights, (k) made any change in any method of accounting
or auditing practice, (l) otherwise conducted its business or entered into any
transaction, except in the usual and ordinary manner and in the ordinary course
of business, or (m) agreed, whether or not in writing, to do any of the
foregoing.
2.29 Disclosure. None of this Agreement, the financial statements
referred to in Section 2.6 hereof (including the notes thereto), or any
schedule, exhibit or certificate attached hereto or delivered in accordance with
the terms hereof or any document or statement in writing which has been supplied
by or on behalf of any Stockholder or the Company in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits any statement of a material fact necessary in order to
make the statements contained herein or therein not misleading.
2.30 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of any Stockholder or the Company is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated by this
Agreement.
2.31 Matters Affecting Key Employees or Stockholders. As of the date of
this Agreement, and as of the Closing Date, no Key Employee, Consultant (each as
defined in Section 5.14 below) or Stockholder is subject to any agreement, law,
regulation, judgment, decree or obligation which adversely affects or which
might adversely affect such Key Employee's, Consultant's or Stockholder's
ability to act as an employee of the Purchaser following consummation of the
transactions contemplated by this Agreement. Each Key Employee, Consultant and
Stockholder has all requisite power and authority to enter into and deliver the
Transaction Documents to which he is a party, perform such Key Employee's,
Consultant's or Stockholder's obligations thereunder and consummate the
transactions contemplated thereby. The Transaction Documents to which each Key
Employee, Consultant or Stockholder is a party constitute the valid and legally
binding obligations of such Key Employee, Consultant or Stockholder, as the case
may be, enforceable against such Key Employee, Consultant or Stockholder in
accordance with their respective terms, subject to bankruptcy and equitable
limitations. The representations and warranties of each Key Employee contained
in the Employment Agreements and each Consultant contained in the
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Consulting Agreements (as defined in Section 5.14 below) to which each such Key
Employee or Consultant is a party are true and correct.
2.32 Purchase for Investment. Each Stockholder acquiring shares of
Common Stock of the Purchaser pursuant to Section 1.1 above and the Plan of
Merger will do so for such Stockholder's own account for investment and not with
a view toward any resale or distribution thereof. The Stockholders are under no
binding obligation and have no present plan, intention or arrangement to dispose
of any of such shares that would reduce the aggregate fair value of all such
shares retained by the Stockholders to an amount less than fifty percent (50%)
of the aggregate fair value of the Company's issued and outstanding common stock
immediately prior to consummation of the Merger. Notwithstanding any of the
foregoing, the Purchaser acknowledges that following the later of (a) such time
as financial results covering at least 30 days of post Merger combined
operations of Purchaser and the Company have been published, whether by issuance
of a quarterly earnings report on Form 10-K or Form 10-Q, or other public
issuance (such as press release) that includes such information and (b) 90 days
after March 6, 1997, the Woodside Fund III, L.P., a Principal Stockholder,
intends to distribute the shares of Common Stock of the Purchaser which it
acquired pursuant to this Agreement to its limited partners (such distribution
shall be herein referenced as the "Fund Distribution").
2.33 Copies of Documents. The Company has caused to be made available
for inspection and copying by the Purchaser and its advisers true, complete and
correct copies of all documents referred to in this Article II or in any
schedule attached to this Agreement.
2.34 Absence of Certain Conditions. To the actual knowledge of the
Company and the Stockholders, there exists no event, occurrence, condition or
act which the Company or such Stockholder understands, with the giving of
notice, the lapse of time or the occurrence of any further event or condition,
would constitute a breach of or cause any of the representations and warranties
in this Article II to become untrue.
2.35 Information for Registration Statement and Prospectus. No
information furnished by any Stockholder or by the Company or any of its
employees, accountants or representatives for inclusion in the Registration
Statement (as defined in Section 7.4(b)) or the prospectus referenced therein
will contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein not misleading.
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2.36 FDA Debarment and Disqualification.
(a) Neither the Company nor, to its Knowledge, any of its
employees, any subcontractor which may be utilized by the Company, any
investigator selected by the Company or any person employed by such investigator
to perform any study project or other assignment, is under investigation by the
U.S. Food and Drug Administration (the "FDA") for debarment action or has been
debarred pursuant to the Generic Drug Enforcement Act of 1992 (21 U.S.C. 301 et.
seq.).
(b) The Company and, to the Knowledge of the Company, all
Company employees, any subcontractors utilized by the Company, any investigators
selected by the Company and any persons employed by such investigators to
perform any study project or other assignment, are in good standing with the FDA
and all other governmental agencies regulating the Company, or its business.
2.37 Client Relations. Set forth in Schedule 2.37 is a list of the
largest three clients of the Company ranked by percentage of the net revenue of
the Company for the fiscal year ended December 31, 1996 (including unaudited
revenue rankings) attributable to each such client. Except as set forth therein,
none of the clients listed in Schedule 2.37 or any other former client has
registered any written material complaint regarding the services rendered by the
Company, or stated verbally or in writing any intention to terminate any
contract with the Company.
The subject matter covered by any section, subsection or provision of this
Article II shall not be exclusive as to such subject matter to the extent
covered by another section, subsection or provision of this Article II, and the
specificity of any representation or warranty or other provision or part thereof
shall not affect or limit the generality of any other representation or warranty
or other provision or part thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND ACQUISITION
The Purchaser and Acquisition, jointly and severally, represent and
warrant to the Company and agree as follows:
3.1 Existence and Good Standing of Purchaser and Acquisition;
Power of Authority .
(a) The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of North
Carolina. The Purchaser has the corporate power and
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authority to make, execute, deliver and perform this Agreement. The Purchaser
has all requisite power and authority to enter into and deliver this Agreement,
the Plan of Merger and the other Transaction Documents, and to perform its
obligations hereunder and thereunder and consummate the transactions
contemplated hereby and thereby. The Purchaser's execution, delivery and
performance of this Agreement, the Plan of Merger and the other Transaction
Documents and the Purchaser's consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all corporate,
shareholder and other action required of the Purchaser by applicable law, its
Articles of Incorporation or Bylaws. This Agreement, the Plan of Merger and the
other Transaction Documents to which the Purchaser is a party constitute the
valid and legally binding obligations of the Purchaser, enforceable against the
Purchaser in accordance with their respective terms.
(b) Acquisition is a corporation duly organized, validly
existing and in good standing under the laws of the State of North Carolina.
Acquisition has all requisite power and authority to enter into and deliver this
Agreement, the Plan of Merger and the other Transaction Documents, and to
perform its obligations hereunder and thereunder and consummate the transactions
contemplated hereby and thereby. Acquisition's execution, delivery and
performance of this Agreement, the Plan of Merger and the other Transaction
Documents and Acquisition's consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by all corporate, shareholder
and other action required of Acquisition by applicable law, its Articles of
Incorporation or Bylaws. This Agreement, the Plan of Merger and the other
Transaction Documents to which Acquisition is a party constitute the valid and
legally binding obligations of Acquisition, enforceable against Acquisition in
accordance with their respective terms.
3.2 Capital Stock. Acquisition has an authorized capitalization
consisting of 100,000 shares of common stock, no par value per share, of which
1,000 shares are issued and outstanding and are held by the Purchaser. All such
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable.
3.3 Restrictive Documents. Neither the Purchaser nor Acquisition is
subject to any charter, bylaw, mortgage, lien, lease, agreement, instrument,
order, law, rule, regulation, judgment or decree, or any other restriction of
any kind or character which would be violated by, prevent or impair materially
(whether by acceleration of any liability, creation of any lien or encumbrance
or otherwise) or require any declaration, filing, registration, notice, approval
or consent to, with or of any person or entity in connection with consummation
of the transactions contemplated by this Agreement or compliance by the
Purchaser or Acquisition with the terms, conditions and provisions hereof.
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3.4 Reports. Purchaser has filed all registration statements, proxy
statements, reports and other filings, including without limitation reports on
Form 10-K, Form 10-Q and Form 8-K and all amendments thereto required to be
made, which it was required to file with the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended (the "Securities Act") and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As of its
date, none of such documents contained any untrue statement of material fact or
omitted any material fact required to be stated therein or necessary to make the
statements therein not misleading, except to the extent any such statement or
omission has been modified or superseded in a document subsequently filed with
the SEC. No information furnished by and with respect to Purchaser or
Acquisition which will be included in the Registration Statement (as defined in
Section 7.4), or the prospectus referenced therein, will contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not misleading.
3.5 Broker's or Finder's Fees No agent, broker, person or firm acting
on behalf of the Purchaser or Acquisition is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated herein.
ARTICLE IV
CONDUCT OF BUSINESS; EXCLUSIVE DEALING; REVIEW
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement to the Closing Date, the Company shall conduct its operations
only according to its ordinary and usual course of business and use its best
efforts to preserve intact its business organization, keep available the
services of its officers and employees, maintain satisfactory relationships with
licensors, suppliers, distributors, clients and others having business
relationships with the Company, and perform in all material respects all of the
Company's obligations under all contracts and agreements to which the Company is
a party or by which it or any of its assets or properties are bound.
Notwithstanding the immediately preceding sentence, prior to the Closing Date,
except as may be first approved in writing by the Purchaser or as is otherwise
permitted or required by this Agreement or disclosed on Schedule 4.1, the
Company and the Principal Stockholders shall cause (a) the Company's articles of
incorporation and bylaws to be maintained in their forms on the date of this
Agreement, (b) the compensation payable or to become payable by the Company to
each officer, employee or agent of the Company to be maintained at their levels
on the date of this Agreement, (c) the Company to refrain from making any bonus,
pension, retirement or insurance payment or arrangement to or with any such
persons except those that may have
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already been accrued, (d) the Company to refrain from entering into any contract
or commitment except contracts in the ordinary course of business requiring
expenditures by the Company, or providing revenues, of less than $75,000
individually or in the aggregate, (e) the Company to refrain from making any
change affecting any bank, safe deposit or power of attorney arrangements of the
Company, (f) the Company to refrain from issuing or selling, or issuing any
rights to purchase or subscribe for, or subdividing or otherwise changing in any
respect any shares of the Company's capital stock, and (g) the Company to
refrain from taking any of the actions referred to in Section 2.28 (except
2.28(a)) hereof. Neither the Company nor any Stockholder shall take or fail to
take any action with the intent to cause the representations and warranties
contained in Article II of this Agreement to be or become untrue or incorrect.
During the period from the date of this Agreement to the Closing Date, the
Company and the Principal Stockholders shall, at the request of Purchaser,
confer on a regular and frequent basis with one or more designated
representatives of the Purchaser to report operational matters and to report the
general status of ongoing operations. The Company and the Principal Stockholders
shall notify the Purchaser of any unexpected emergency or other change in the
normal course of the Company's business or in the operation of its properties
and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), adjudicatory
proceedings, budget meetings or submissions involving any property of the
Company, and keep the Purchaser reasonably informed of such events and permit
its representatives reasonably prompt access to all materials prepared in
connection therewith.
4.2 Exclusive Dealing. During the period from the date of this
Agreement to the Closing Date, the Company shall refrain from taking any action
directly or indirectly to encourage, initiate or engage in discussions or
negotiations with, or provide any information to, any Person other than the
Purchaser concerning any proposal for the sale of the capital stock or
substantially all of the assets of, or merger or other business combination
involving the Company. The Company shall notify the Purchaser immediately if any
proposals concerning any merger, consolidation, sale of assets, tender offer,
sale of shares or similar transaction involving the Company or any significant
assets of the Company (any such proposal being referred to herein as an
"Acquisition Proposal"), or if any request for confidential information
regarding the Company, is received, and shall provide to the Purchaser such
information regarding any such Acquisition Proposal or request as the Purchaser
shall request. The Company shall pay to the Purchaser immediately upon the first
to occur of any of the following events, an overbid fee of $1,000,000:
(a) the Stockholders or the Company close any transaction
subject to any Acquisition Proposal within 12 months from the date of this
Agreement, other than the transactions contemplated by this Agreement; or
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(b) at any time within 12 months from the date of this
Agreement, any person other than the Stockholders and their respective
affiliates holds 20% or more of the then current Company Stock and (i) the
Stockholders do not reject the Acquisition Proposal of any party other than the
Purchaser or Acquisition, or (ii) this Agreement is terminated or abandoned as a
result of the Stockholders' failure to gain approval of the Merger by all
necessary parties (other than the Purchaser and Acquisition), or (iii) this
Agreement is terminated as a result of the dissent of more than 10% of the
shareholders of the Company, or (iv) this Agreement is terminated by the
Purchaser as a result of (A) any material breach by the Company or the
Stockholders of any binding agreement contained in Articles I, IV, VII or VIII
of this Agreement or (B) the knowing breach by the Company or the Stockholders
of any representation, warranty or covenant contained in this Agreement; or
(c) the Stockholders fail to approve the transactions
contemplated by this Agreement and the Plan of Merger.
(d) the Company shall not be liable under this Section 4.2 for
any event described in subsection (a) or subsection (b) above which shall occur
following (i) a termination of this Agreement by the Purchaser or the Company
due to the failure of any condition under Article VI or Sections 5.3, 5.6, 5.7,
5.8, 5.11, 5.17, 5.19 or 5.21 of this Agreement (provided that the provisions of
Section 4.1, 7.2 and 7.4 shall have been satisfied) or (ii) a termination of
this Agreement by the Purchaser or the Company due to the failure to obtain any
necessary regulatory approval (provided that the Company shall have used its
best efforts to obtain any such approval).
4.3 Review of the Company. The Purchaser may, at reasonable times
during normal business hours prior to the Closing Date, through its
representatives, review the properties, books and records of the Company and its
financial and legal conditions as they deem reasonably necessary or advisable to
familiarize themselves with such properties and other matters; such review, and
any information known to the Purchaser, shall not, however, affect the binding
nature of representations and warranties made by the Stockholders hereunder or
the remedies of the Purchaser for breaches of those representations and
warranties. The Principal Stockholders shall, and shall cause the Company to
permit the Purchaser and its representatives to have, at reasonable times during
normal business hours after the date of execution of this Agreement, reasonable
access during normal business hours to the premises, personnel, accountants and
all books and records of the Company and cause the officers of the Company to
furnish the Purchaser with such financial and operating data and other
information with respect to the business and properties of the Company as the
Purchaser shall from time to time reasonably request. In the event of
termination
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of this Agreement without consummation of the transactions contemplated hereby,
the Purchaser shall keep confidential any information obtained from the
Stockholders or the Company concerning the Company's properties, operations and
business (unless readily ascertainable from public or published information or
trade sources) until the same becomes so ascertainable and, at the request of
the Stockholders, shall return to the Stockholders or the Company all originals
and copies of any schedules, statements, documents or other written information
obtained in connection therewith.
ARTICLE V
CONDITIONS TO PURCHASER'S AND ACQUISITION'S OBLIGATIONS
The Purchaser's and Acquisition's obligations pursuant to this
Agreement are conditioned upon satisfaction, on or prior to the Closing Date, of
each of the following conditions:
5.1 Opinion of the Company's Counsel. The Company and the Stockholders
shall have furnished the Purchaser with a favorable opinion, dated the Closing
Date, of Fulbright & Jaworski L.L.P., in form and substance satisfactory to the
Purchaser and addressing such other matters as the Purchaser shall have
requested, if any.
5.2 Good Standing and Other Certificates. The Company shall have
delivered to the Purchaser (a) a copy of the Company's articles of
incorporation, including all amendments thereto, certified by the Secretary of
State of Texas as of the Closing Date, (b) a certificate from the Secretary of
State (or equivalent governmental official) of the State of Texas to the effect
that the Company is in good standing in such jurisdiction and listing all
charter documents of the Company on file as of the Closing Date, (c) a
certificate as to the tax status of the Company from the appropriate officials
in Texas as of the Closing Date, to the extent such officials issue such
certificates, and (d) a copy of the bylaws of the Company, certified by the
President and Secretary of the Company as being true and correct and in effect
on the Closing Date.
5.3 No Adverse Change. Prior to the Closing Date, there shall be no
material adverse change in the assets or liabilities, the business or condition,
financial or otherwise, the results of operations, or prospects of the Company,
whether as a result of any legislative or regulatory change, revocation of any
license or rights to do business, fire, explosion, accident, casualty, labor
trouble, flood, drought, riot, storm, condemnation or act of god or other public
force or otherwise, and the Company shall have delivered to the Purchaser a
certificate, dated the Closing Date, to such effect. For purposes of this
Section 5.3, and notwithstanding the provisions of Section 9.16 of this
Agreement, no adverse change shall be deemed to be material unless the effect of
such
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change, taken as a whole with any other changes, shall be reasonably likely to
diminish the value of the Company by an amount equal to or more than $200,000.
5.4 Truth of Representations and Warranties. The representations and
warranties of the Company and the Principal Stockholders contained in this
Agreement or in any schedule attached hereto shall be true and correct on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date, and the Company and the
Principal Stockholders shall have delivered to the Purchaser a certificate,
dated the Closing Date, to such effect.
5.5 Performance of Agreements. All of the agreements of the
Stockholders and the Company to be performed on or before the Closing Date
pursuant to the terms hereof shall have been duly performed, and the Company
shall have delivered to the Purchaser a certificate, dated the Closing Date, to
such effect.
5.6 Performance Consistent with Budget and Projections. The Company's
actual revenues and operating profit for the period beginning January 1, 1997
through the end of the last calendar month ending not less than 20 days prior
to the Closing Date and for the month immediately preceding the Closing Date
shall equal at least 90% of the Company's revenues and operating profit set
forth in the financial projections and budget referred to in Section 2.6(c)
above for such periods.
5.7 Net Worth. The Company's tangible net worth plus preferred stock
(determined in accordance with generally accepted accounting principals) as of
the end of the last calendar month ending not less than 20 days prior to the
Closing Date shall not be less than $1,700,000.
5.8 No Litigation. No action or proceeding shall have been instituted
or threatened before a court or other government body or by any public
authority, and no claim shall have been asserted or threatened to be asserted,
to restrain or prohibit any of the transactions contemplated hereby.
5.9 Escrow Agreement. The Stockholders (or their representative) shall
have entered into an escrow agreement substantially in the form of that attached
as Exhibit C hereto (the "Escrow Agreement," as defined in Section 1.4 above).
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5.10 Pooling Letter. The Company shall have executed and delivered to
the Purchaser's accountants a letter in the form of Exhibit D attached hereto
relating to "pooling of interests" accounting.
5.11 Opinions of Accountants. The Purchaser shall have received a
letter, dated the Closing Date, from Ernst & Young LLP, accountants to the
Purchaser, each in form and substance satisfactory to the Purchaser, regarding
(a) the appropriateness of pooling of interests accounting for the transactions
contemplated by this Agreement and (b) the treatment of the transactions
contemplated by this Agreement as a nontaxable acquisition by the Stockholders
of the Purchaser's Common Stock for purposes of federal income tax law.
5.12 Affiliates Letter. The Purchaser shall have received a letter (the
"Affiliates Letter"), signed by all executive officers, directors, the Principal
Stockholders and Key Employees of the Company and in the form of Exhibit E
hereto.
5.13 Governmental and Other Approvals and Consents. All governmental
and other consents and approvals, if any, necessary to permit the consummation
of the transactions contemplated by this Agreement, or the transfer of any
License (as defined in Section 2.20 above) or any material contract or other
agreement described in Schedules 2.12 or 2.13, shall have been received.
5.14 Employment and Consulting Agreements. Each of David L. Edwards and
Michael T. Dwyer (each a "Key Employee") shall have executed and delivered to
the Purchaser an Employment Agreement substantially in the forms of Exhibits F-1
and F-2, respectively, attached hereto (collectively, the "Employment
Agreements") and each of Justin A. Zivin and David G. Sherman (each a
"Consultant") shall have executed and delivered to the Purchaser a Consulting
Agreement substantially in the forms of Exhibit G-1 and G-2 attached hereto
(collectively, the "Consulting Agreements").
5.15 Resignations. The Purchaser shall have received a written
resignation, satisfactory in form and substance to the Purchaser, from each
officer and director of the Company requested by the Purchaser to resign on or
prior to the Closing Date.
5.16 Intra-Company Debt. All indebtedness of the Company's directors,
officers and employees to the Company, other than travel and other normal
reimbursable expense advances outstanding in the ordinary course of business,
shall have been repaid in full.
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5.17 Current Employees. All of the employees designated by Purchaser
with an asterisk on Schedule 2.23 hereto shall continue to be employees of the
Company, and none shall have communicated to the Company any intent to leave the
Company's employ within 12 months after the date of this Agreement.
5.18 No Dissent. As of the Closing Date, no Stockholder shall have
demanded or otherwise purported to exercise dissenters' rights, if any, pursuant
to the Texas Code with respect to all or any portion of the Company Stock of
such Stockholder.
5.19 Registration Statement. The Registration Statement (as defined in
Section 7.4) shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose shall have
been initiated and be continuing.
5.20 Execution by Stockholders. On the Closing Date, all of the
Stockholders, except J. Linquist, T. May and A. Sixt (the "Excluded
Stockholders") shall each have been made a party to and joined in the execution,
delivery and performance of this Agreement and each other Transaction Document
to which they are a party and agreed to be bound by their respective provisions
including, without limitation, Articles II and VIII of this Agreement. In
addition, all Stockholders who hold Company Options shall have executed and
delivered to Purchaser an option agreement for a Purchaser Option substantially
in the form of Exhibit H attached hereto.
5.21 Total Number of Purchaser Shares. The Total Number of Purchaser
Shares (as defined in Section 1.2(b)) shall not exceed 350,000.
ARTICLE VI
CONDITIONS TO THE COMPANY'S AND THE STOCKHOLDERS' OBLIGATIONS
The Company's and the Stockholders' obligations pursuant to this
Agreement are conditioned upon satisfaction, on or prior to the Closing Date, of
each of the following conditions:
6.1 Opinion of Purchaser's Counsel. The Purchaser shall have furnished
the Stockholders with an opinion, dated the Closing Date, of Smith, Anderson,
Blount, Dorsett, Mitchell & Jernigan, L.L.P.
6.2 Truth of Representations and Warranties. The representations and
warranties of the Purchaser and Acquisition contained in this Agreement shall be
true and correct on and as of the
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Closing Date with the same effect as though such representations and warranties
had been made on and as of such date, and the Purchaser shall have delivered to
the Company a certificate, dated the Closing Date, to such effect.
6.3 Governmental and Other Approvals and Consents. All governmental and
other consents and approvals concerning the Purchaser or Acquisition, if any,
necessary to permit the consummation of the transactions contemplated by this
Agreement shall have been received.
6.4 Employment and Consulting Agreements. Purchaser shall have entered
into each of the Employment Agreements and Consulting Agreements.
6.5 Performance of Agreements. All of the agreements of the Purchaser
and Acquisition to be performed on or before the Closing Date pursuant to the
terms hereof shall have been duly performed, and the Purchaser shall have
delivered to the Company a certificate, dated the Closing Date, to such effect.
6.6 No Litigation. No action or proceeding shall have been instituted
or threatened before a court or other government body or by any public
authority, and no claim shall have been asserted or threatened to be asserted,
to restrain or prohibit any of the transactions contemplated hereby.
6.7 Total Number of Purchaser Shares. The Total Number of Purchaser
Shares (as defined in Section 1.2(b)) shall not exceed 350,000.
6.8 Registration Statement. The Registration Statement shall have been
declared effective by the SEC under the Securities Act. No stop order suspending
the effectiveness of the Registration Statement shall have been issued by the
SEC and no proceedings for that purpose shall have been initiated and be
continuing.
6.9 Nasdaq Quotation. The Company shall have received from the
Purchaser evidence reasonably satisfactory to the Company that all shares of the
Purchaser's Common Stock to be issued in connection with the Merger shall be
quoted on the Nasdaq National Market (or listed on a United States stock
exchange) immediately after the Effective Time.
6.10 Tax Opinion. The Company shall have received a written opinion
from Ernst & Young LLP to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended, and that no gain or loss will be
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recognized by the Stockholders upon their receipt of the Purchaser's Common
Stock in exchange for the Company Stock.
ARTICLE VII
CERTAIN COVENANTS AND AGREEMENTS OF THE PARTIES
7.1 Non-Competition; Non-Interference. Except for the activities
described in Schedule 7.1, to the extent performed by those Stockholders named
in Schedule 7.1, each such Stockholder shall agree that from the Closing Date
until the third anniversary of the Closing Date, in partial consideration for
the performance by the Purchaser and Acquisition of the transactions
contemplated by this Agreement and in recognition of the fact that such
transactions reflect the acquisition for value by the Purchaser and Acquisition
of the Company and its rights, assets and liabilities, such Stockholder shall
not:
(a) directly or indirectly, as an officer, director,
stockholder, partner, associate, owner, employee, consultant or otherwise,
become or be interested in or associated with, work for and/or assist (except in
the sole capacity as an investigator) any other contract research organization
or business engaged in the same or a competitive business with the Company's
business, as conducted as of the date of this Agreement, in any county of any
state of the United States, any of the United States or any other nation in
which the Company or the Purchaser has an office or does business (directly or
indirectly) or in any geographical area in which the Company or the Purchaser is
engaged in, soliciting or doing business. For purposes of this subsection (a),
direct or indirect ownership of not more than one percent of the issued and
outstanding stock of a corporation, the shares of which are regularly traded on
a national securities exchange or in the over-the-counter market, shall not be
deemed to be a violation of the preceding sentence;
(b) directly or indirectly, solicit, make materially
detrimental remarks regarding the Company to, or entice away from the Company or
the Purchaser any customer, supplier, person, firm or corporation who or which
has at any time during the three years immediately preceding the date of this
Agreement or at any time during which such Stockholder was an employee of or
consultant to the Purchaser, done business with the Company, or offer employment
to or procure employment for any person who has at any time during the three
years immediately preceding the date of this Agreement been employed by the
Company; or
(c) use for any purpose or knowingly divulge, directly or
indirectly, to any entity or person, any material information concerning the
Company's monitor database and records, formulae, computer programming
techniques, documentation, software source codes, object codes,
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documentation, "know-how", processes, methods, research, development or
marketing techniques, programs, standard operating procedures and practices,
materials or plans, client list or any other of the Company's trade secrets,
confidential information, price lists or pricing policies, except information
which is (i) in the public domain or (ii) becomes public knowledge through no
fault of such Stockholder or (iii) is required to be disclosed by court
order or other government process or the disclosure of which is necessary to
enable such Stockholder to comply with applicable law or defend against claims.
In the event that such Stockholder shall be required to make disclosure pursuant
to the provisions of clause (iii) of the preceding sentence, such Stockholder
shall promptly notify the Company and the Purchaser and take, at the expense of
the Company or the Purchaser, all reasonably necessary steps requested by the
Company or the Purchaser to defend against the enforcement of such court order
or other government process, and permit the Company and the Purchaser to
participate with counsel of its choice in any proceeding relating to the
enforcement thereof.
It is the desire and intent of the parties to this Agreement that the
provisions of this Section 7.1 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. If any particular provisions or portion of this
Section 7.1 shall be adjudicated to be invalid or unenforceable, this Section
shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of such Section in the particular jurisdiction in which
such adjudication is made.
The parties recognize that the performance of the obligations under
this Section 7.1 by each of such Stockholders is special, unique and
extraordinary in character, and that in the event of the breach by any such
Stockholder of the terms and conditions of this Section 7.1 to be performed, the
Purchaser shall be entitled, if it so elects, to institute and prosecute
proceedings in any court of competent jurisdiction, either in law or in equity,
to obtain damages for any breach of this Section 7.1, to enforce the specific
performance thereof by such Stockholder or to enjoin such Stockholder from
performing services for any such other person, firm or corporation.
For purposes of this Section 7.1 only, the term "Purchaser" shall
include the Purchaser and all affiliates of the Purchaser and the term "Company"
shall include the Company and all affiliates of the Company.
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7.2 Stock Transfer Restrictions and Related Matters.
(a) Compliance with Securities Laws. The Company acknowledges
that the shares of Common Stock of the Purchaser issued pursuant to Section 1.1
above and the Plan of Merger, upon issuance, shall not have been registered
under any federal or state securities laws, except as provided under Section
7.4, below.
(b) Pooling of Interests Accounting. The Company shall use its
best efforts not to, and shall use its best efforts to cause the Stockholders
not to, take any action which would disqualify the transactions contemplated by
this Agreement from pooling of interests accounting treatment by the Purchaser.
Without limiting the foregoing, the Company shall cause each Stockholder not to
sell, transfer, pledge, or otherwise dispose of such Stockholder's interests in
or reduce such Stockholder's risk relative to any of the shares of the
Purchaser's Common Stock issued to such Stockholder pursuant to Section 1.1
above prior to the consummation of the transaction contemplated by this
Agreement.
(c) Tax-Free Reorganization. The Company shall not, nor permit
any Stockholder to, nor shall Purchaser or Acquisition, take any action which
would disqualify the transactions contemplated by this Agreement from treatment
as a tax-free reorganization of the Company, to the extent that such treatment
is otherwise available to the Stockholders.
(d) Stop Transfer Order. The Purchaser shall not be bound by
any attempted transfer, sale or other disposition in violation of any of the
restrictions set forth in this Section 7.2, and the Purchaser shall be entitled
to deliver to the Purchaser's transfer agent an appropriate stop transfer order
in connection therewith, pursuant to which such transfer agent shall refrain
from registering any such attempted transfer, sale or disposition.
(e) Certificate Legends. The certificates representing any
shares of the Purchaser's Common Stock issued pursuant to Section 1.1 above and
the Plan of Merger shall bear legends in substantially the following forms:
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO COMPLIANCE WITH CERTAIN TRANSFER RESTRICTIONS SET FORTH IN A MERGER AGREEMENT
DATED AS OF MAY 8, 1997 AMONG THE CORPORATION AND CERTAIN OTHER PARTIES, A
COPY OF WHICH IS ON FILE IN THE OFFICE OF THE CORPORATION AND AVAILABLE TO THE
HOLDER HEREOF UPON WRITTEN REQUEST THEREFOR.
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7.3 Distribution to Limited Partners. Notwithstanding any of the
foregoing, the Purchaser acknowledges that immediately following the date on
which restrictions on dispositions of shares of Purchaser's Common Stock imposed
by the requirements for pooling-of-interests accounting treatment expire in
accordance with the Affiliates Letter (as defined in Section 5.12), the Woodside
Fund III, L.P., a Principal Stockholder, intends to make the Fund Distribution.
7.4 Approval of Transactions; Registration Statement
(a) The Company shall cause a special meeting of the
shareholders of the Company (the "Shareholder Meeting") to be duly called and
held as soon as reasonably practicable for the purpose of approving and adopting
this Agreement, the Plan of Merger and the other Transaction Documents and all
other actions contemplated hereby or thereby which require the approval of the
Company's shareholders.
(b) In connection with the Shareholder Meeting and the related
securities of the Purchaser to be issued pursuant to the Plan of Merger, the
Purchaser will prepare and file with the SEC, and the Company will cooperate
with the Purchaser in the preparation and filing of, a registration statement on
Form S-4 under the Securities Act relating to the transactions contemplated by
this Agreement (the "Registration Statement"), which shall contain a prospectus
relating to the shares of the Purchaser's Common Stock to be issued in
connection with the Merger and other matters (the "Prospectus"). The Company
shall, and shall cause the Stockholders to, furnish to the Purchaser, as
promptly as is practicable after the date hereof, such data and information
relating to the Company and such financial statements of the Company and
opinions of independent certified public accountants relating thereto, and
fairness opinions, as, in the reasonable opinion of counsel for the Purchaser,
shall be required by law, including the applicable rules and regulations of the
SEC, for the preparation of, or to be included in, the Registration Statement or
the Prospectus. The Company shall approve or disapprove any disclosures
concerning the Company and the Stockholders in the Registration Statement
promptly following receipt of each draft of the Registration Statement. In the
event that the Company shall not have responded as promptly as practicable to
the delivery of any draft of the Registration Statement, the Company shall be
deemed to have approved any disclosures concerning the Company and the
Stockholders. If, at any time prior to the Shareholder Meeting, any material
event should occur relating to the Company, the Company will promptly inform the
Purchaser. Whenever any event occurs which should be set forth in an amendment
of, or a supplement to, the Registration Statement, the Purchaser, with the
cooperation of the
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Company, will, upon learning of such event, promptly prepare, file and, if
required, mail any such required amendment or supplement to the Registration
Statement to the Company's Stockholders. The Purchaser, with the cooperation of
the Company, will use its reasonable best efforts in good faith to respond to
the comments of the SEC, to cause the Registration Statement to become effective
under the Securities Act and to assist in mailing the Prospectus to the
Company's Stockholders, all as soon as is reasonably practicable.
(c) The Purchaser shall also use its best efforts to cause the
shares of its Common Stock to be issued in the Merger to be approved for
quotation on the National Market System of the Nasdaq Stock Market or for
listing on any United States stock exchange.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNITY
8.1 Survival of Representations. The respective representations
and warranties of the Company, the Stockholders, the Purchaser and Acquisition
contained in this Agreement or in any schedule attached hereto shall survive the
consummation of the Merger and the other transactions contemplated hereby and
shall remain in full force and effect notwithstanding any investigation or
examination of, or Knowledge with respect to, the subject matter thereof by or
on behalf of the Company, the Stockholders, Acquisition or the Purchaser, as the
case may be, until the date 365 days following the Closing Date (the period
ending on such date is referred to as the "Representations Period"), except that
such representations and warranties shall survive indefinitely in the event of
fraud with respect thereto. No claim under this Agreement, including for
indemnification pursuant to Section 8.2(a), may be brought after the expiration
of the Representations Period, except for claims made in good faith in writing
prior to such expiration setting forth in reasonable detail the basis for such
claims (whether or not any action, demand or proceeding is instituted with
respect to such claims prior to the expiration of the Representations Period, it
being understood, without limitation, that any and all Losses arising after the
expiration of the Representations Period shall be recoverable upon notice
properly given prior to the expiration of the Representations Period in
accordance with this Section 8.1).
8.2 Indemnification.
(a) From and after the date hereof the Company and the
Principal Stockholders, jointly and severally with the Company and severally as
among themselves, shall agree, and the Stockholders shall from and after the
Closing Date, severally, but not jointly, hereby agree to defend, indemnify and
hold harmless the Purchaser and its affiliates (including the Company and
Acquisition) and all of their respective officers, directors, employees (other
than the Key Employees), agents (other than the Consultants) and shareholders
(other than Stockholders) (each, an "Indemnitee") to the full extent permitted
in law or equity, from and against any and all losses,
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claims, actions, damages, liabilities, costs and expenses (including reasonable
attorneys' fees and expenses) (collectively, "Losses") relating to or arising
from or in connection with (i) any misrepresentation, or any non-fulfillment of
any representation, warranty, covenant, obligation or agreement by the Company
or any Stockholder contained in or made pursuant to this Agreement or any of the
other Transaction Documents or in any other agreement, officer's certificate or
other certificate delivered to the Purchaser or Acquisition in connection with
this Agreement, (ii) any litigation, action, claim, proceeding or investigation
by any third party relating to or arising out of the business or operations of
the Company (or any affiliate controlled by the Company) prior to the Closing
Date or the actions of any Stockholder, and (iii) the enforcement by the
Purchaser of its rights pursuant to this Section 8.2, or any litigation,
proceeding or investigation relating to any of the foregoing. In addition, the
Stockholders shall on the Closing Date hereby agree, jointly and severally, to
advance or reimburse each Indemnitee, on demand and prior to a final
determination, for any and all expenses reasonably incurred by such Indemnitee
in investigating, preparing for, defending or taking any other action in respect
of any such Loss or any proceeding related thereto, whether or not such
Indemnitee is a party to such proceeding.
(b) Notwithstanding the foregoing provisions of this Section
8.2, (i) if Losses arise in the period (the "Initial Indemnity Period") that
ends at the later of (A) 90 days from the date of this Agreement or (B) the date
on which affiliates of the Company are no longer subject to Sections 2 and 7 (as
it relates to Section 2) of the Affiliate Letter, then the maximum aggregate
recourse by the Indemnitees pursuant to Section 8.2(a) shall not exceed 25% of
the aggregate value (calculated with reference to closing prices on the Closing
Date) of Purchaser's Common Stock issued to the Stockholders on the Closing Date
("Initial Indemnity Cap") it being understood, without limitation, that any and
all Losses arising during the Initial Indemnity Period shall be recoverable up
to the Initial Indemnity Cap upon notice properly given prior to the expiration
of the Initial Indemnity Period, and if Losses arise thereafter, then the
maximum aggregate recourse by the Indemnitees pursuant to Section 8.2(a) shall
not exceed the Purchaser's Common Stock held in escrow pursuant to the Escrow
Agreement (the "Subsequent Indemnity Cap") and (ii) the Indemnitees shall not be
entitled to indemnification under Section 8.2(a) above for any amount unless and
until the aggregate of all amounts for which the Indemnitees would otherwise be
entitled to be indemnified exceeds $150,000 (in the aggregate), all amounts in
excess for which the Indemnitees shall be indemnified in full up to the Initial
Indemnify Cap or the Subsequent Indemnity Cap, as applicable. For purposes of
determining whether the aggregate of all amounts for which the Purchaser and its
affiliates would otherwise be entitled to be indemnified exceeds $150,000, the
amount of each indemnifiable claim and the aggregate amount of all indemnifiable
claims shall not be limited by the definition of "material" in Section 9.16 of
this Agreement, or the use of the term "material" or its related forms in any
representations or warranties, or by the establishment of any dollar threshold
in any
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representation or warranty for inclusion of any event or matter therein.
Accordingly, indemnifiable claims may consist of Losses (whether or not arising
from a breach of an individual representation, warranty, covenant or indemnity)
that individually or in the aggregate do not constitute material amounts or
amounts in excess of specified thresholds, provided such amounts in the
aggregate exceed $150,000.
(c) From and after any termination of this Agreement pursuant
to Section 9.15 hereof, the Company shall be jointly and severally liable with
the Stockholders for any amounts payable under subsection (a), above; prior to
such termination, if any, and following the Closing Date, the Company shall have
no liability under this Section 8.2, and no Stockholder shall threaten or bring
any claim or action whatsoever against the Company for contribution to any
amounts payable under this Section 8.2 by such Stockholder.
(d) The Purchaser and Acquisition shall jointly and severally
agree to defend, indemnify and hold harmless the Stockholders and the Company
and its affiliates and all of its officers, directors, employees, agents and
shareholders (each a "Seller Indemnitee") to the full extent permitted in law or
equity, from and against any Losses relating to or arising from or in connection
with (i) any misrepresentation, or any non-fulfillment of any representation,
warranty, covenant, obligation or agreement by the Purchaser and Acquisition
contained in or made pursuant to the Agreement or any of the other Transaction
Documents or in any other agreement, officer's certificate delivered to the
Company or the Stockholders in connection with this Agreement, and (ii) the
enforcement by each of the Company or the Stockholders of its rights pursuant to
this Section 8.2, or any litigation, proceeding or investigation relating to any
of the foregoing, provided that the Purchaser shall not be liable in any such
case to the extent that any such Losses arise out of, or are based on, any
untrue statement or alleged untrue statement or omission (or alleged omission)
based upon information furnished to the Purchaser by the Company or its
officers, directors, employees, agents or representatives for inclusion in the
Registration Statement, and that the aggregate liability of the Purchaser for
Losses under this Section 8.2(d) and for any other Losses that may be incurred
by the Company or any Stockholder for any reason under any theory of recovery
shall not exceed 10% of the aggregate value (calculated with reference to
closing prices on the Closing Date) of the Common Stock of the Purchaser issued
in connection with the Merger. In addition, the Purchaser and Acquisition,
hereby agree on the Closing Date, jointly and severally to advance or reimburse
each Seller Indemnitee, on demand and prior to a final determination, for any
and all expenses reasonably incurred by such Seller Indemnitee in investigating,
preparing for, defending or taking any other action in respect of any such Loss
or any proceeding relating thereto, whether or not such Selling Indemnitee is a
party to such proceeding.
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(e) The right of the Indemnitee to indemnification pursuant to
this Section 8.2 shall survive the consummation of the transactions contemplated
by this Agreement and shall be secured by the shares of Common Stock of the
Purchaser deposited with the Escrow Agent, pursuant to the Escrow Agreement, and
the right of each Indemnitee and Seller Indemnitee to indemnification shall be
the exclusive right and remedy available to the Indemnitees and Seller
Indemnitees under this Agreement.
(f) Procedure. The provisions of Article IV of the Escrow
Agreement are hereby expressly incorporated in this Agreement as though a part
of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Expenses. Each party hereto shall pay all of its own expenses
relating to the transactions contemplated by this Agreement, including without
limitation the fees and expenses of its respective counsel. The Company shall
pay a portion of its own expenses incurred from and after January 1, 1997
relating to the transactions contemplated by this Agreement, including its
legal, accounting and consulting fees (excluding (a) the fees of Ernst & Young
relating to its audit of the Company's 1996 financial statements and (b) the
consulting fees of John Platt and the time and Company-reimbursable expenses of
directors, officers and employees of the Company), not to exceed $150,000 in the
aggregate, and the Stockholders shall pay all remaining expenses of the Company,
if any.
9.2 Remedies Not Exclusive. Nothing in this Agreement shall limit or
restrict in any manner any other rights or remedies any party hereto may have
against any other party hereto at law, in equity or otherwise, pursuant to the
Escrow Agreement, any Employment Agreement or any Consulting Agreement.
9.3 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of North Carolina, without regard to the choice of law provisions thereof.
9.4 Further Assurances. In addition to the actions, documents and
instruments specifically required by this Agreement or any other Transaction
Document to be taken or delivered on or before the Closing Date or from time to
time thereafter, each of the parties to this Agreement shall, before and after
the Closing Date, without further consideration, take such other actions and
execute and deliver such other documents and instruments as another party hereto
reasonably may
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request in order to effect and perfect the transactions contemplated by this
Agreement and the other Transaction Documents.
9.5 Captions. The Article and Section captions used herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
9.6 Publicity. Except as otherwise required by applicable law, no party
and no affiliate of any party shall issue any press release or make any other
public statement relating to, connected with or arising out of this Agreement or
the matters contained herein without the other parties' prior written approval
of the contents and the manner of presentation and publication thereof.
9.7 Notices. Notice or other communication required or permitted
hereunder shall be sufficiently given if delivered in person or sent by telex,
telecopy or by registered or certified mail or by recognized overnight courier,
postage prepaid, addressed as follows:
If to the Purchaser, to:
Quintiles Transnational Corp.
4709 Creekstone Drive, Riverbirch Building, Suite 300
Durham, North Carolina 27703
Attention: Gregory D. Porter, Esq.
with a copy to its counsel,
Smith, Anderson, Blount, Dorsett, Mitchell &
Jernigan, LLP
Post Office Box 2611
Raleigh, North Carolina 27602-2611
Attention: Gerald F. Roach, Esq.
If to the Company, to:
CerebroVascular Advances, Inc.
9901 1H-10 West
Suite 400
San Antonio, Texas 78230
Attention: Chief Executive Officer
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with a copy to its counsel:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Phillip M. Renfro, Esq.
If to the Stockholders, to:
J.E. Campion
18585 Sigma Road
San Antonio, Texas 78258
Vincent M. Occhipinti
Woodside Fund III
850 Woodside Drive
Woodside, California 94062
or to such other address or number as shall be furnished in writing by any such
party in such manner, and such notice or communication shall be deemed to have
been given as of the date so delivered, sent by telecopier, telex or mailed.
9.8 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto without the other parties'
prior written consent. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns.
9.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
9.10 Entire Agreement. This Agreement, including the other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter. All exhibits and
schedules referred to in this Agreement are intended to be and hereby are
specifically made a part of this Agreement.
9.11 Construction of Certain Disclosures. No information disclosed in
any schedule to this Agreement shall be deemed to be disclosed for purposes of
any other section hereof or schedule hereto unless otherwise specifically stated
therein. The representations and warranties set forth in Articles II and III
above, respectively, are cumulative. The subject matter covered by any section
of either such article shall not be exclusive as to such subject matter to the
extent covered by another section of such article, and the specificity of any
representation or warranty shall not
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affect or limit the generality of any other representation or warranty made or
given by the same party.
9.12 Amendments. This Agreement may be waived, amended, supplemented or
modified only by a written agreement executed by each of the parties hereto.
9.13 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
9.14 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
9.15 Termination of Agreement.
(a) The parties hereto shall be entitled to terminate this
Agreement as follows, provided that no such termination shall limit or terminate
any liability of one party to another for any breach hereof, and provided
further that the provisions of Sections 7.1(c) (confidentiality), 8.2
(indemnification) and 9.6 (publicity) shall survive any such termination:
(i) the parties hereto may terminate this Agreement by mutual
written consent at any time;
(ii) (a) the Purchaser may terminate this Agreement by written
notice to the Stockholders and the Company on or prior to the Closing
Date if any Stockholder or the Company shall have breached in any
material respect any representation, warranty or covenant contained in
this Agreement or if the consummation of the transactions contemplated
hereby shall not have occurred on or before July 31, 1997, and (b) the
Company may terminate this Agreement by written notice to the Purchaser
and Acquisition on or prior to the Closing Date if the Purchaser or
Acquisition shall have breached in any material respect any
representation, warranty or covenant contained in this Agreement or if
the consummation of the transactions contemplated hereby shall not have
occurred on or before July 31, 1997, unless in either case (A) such
breach has been waived or (B) the SEC undertakes a review of the
Registration Statement (in which case such date shall be extended to
July 31, 1997).
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(iii) the Purchaser may terminate this Agreement by written
notice to the Stockholders and the Company on or prior to the Closing
Date upon the occurrence of the events set forth in either Sections
4.2(a) or (b) of this Agreement; and
(iv) any party may terminate this Agreement by written notice
to the other parties hereto on or prior to the Closing Date if any
court or other governmental instrumentality of competent jurisdiction
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement.
(b) Notwithstanding approval of this Agreement and the Plan of
Merger by the Shareholders of Acquisition and the Company, the parties hereto
agree that termination of this Agreement shall constitute mutual termination and
abandonment of the Plan of Merger and that, upon any such termination, neither
Acquisition nor the Company shall have any further rights or obligations under
or arising out of the Plan of Merger.
9.16 Materiality Standard. For purposes of this Agreement, when the
term "material" is used, a matter shall be deemed "material" if the matter
involves or affects an amount in excess of $10,000 individually or $25,000 in
the aggregate with all other matters. Notwithstanding the foregoing, the parties
acknowledge and agree that for purposes of Section 5.3, when the term material
is used, a matter shall not be deemed "material" unless and until the Losses
reasonably likely to be associated with such matter exceed $200,000.
9.17 Definitions. For purposes of this Agreement the following terms
have the meanings specified in this Section:
(a) "Person" - any individual, partnership, joint venture,
corporation, trust, unincorporated organization, limited liability company or
other entity.
(b) "Knowledge" - an individual will be deemed to have
"Knowledge" of a particular fact or other matter if (i) such individual is
actually aware of such fact or other matter or (ii) a prudent individual could
be expected to discover or otherwise become aware of such fact or other matter
in the course of conducting a reasonably comprehensive investigation concerning
the existence of such fact or other matter. A Person (other than an individual)
will be deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving, or has at any time served, as a director or officer
of such person (or in any similar capacity) has, or at any time had, Knowledge
of such fact or other matter.
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9.18 Arbitration. Subject to the terms of the Escrow Agreement, any
unresolved disputes arising under this Agreement in excess of $300,000,
individually or in the aggregate, shall be submitted to and settled by binding
arbitration in accordance with the Commercial Rules, existing at the date
thereof, of the American Arbitration Association. The dispute shall be submitted
by the Representative (on behalf of any Stockholders) or the Purchaser to one
arbitrator agreed to by the Representative and the Purchaser or, if the
Representative and the Purchaser cannot agree on one arbitrator, by three
arbitrators selected in accordance with such Rules, and shall be heard in
Raleigh, North Carolina. Each arbitrator must be experienced in the
subject matter in dispute.
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IN WITNESS WHEREOF, the parties have caused their respective corporate
names to be hereunto subscribed by their respective officers thereunto duly
authorized, and otherwise executed this Agreement, all as of the day and year
first above written.
QUINTILES TRANSNATIONAL CORP.
By: /s/ Gregory Connors
----------------------------
Name: Gregory Connors
Title: Vice President
CVA ACQUISITION CORP.
By: /s/ Gregory Connors
----------------------------
Name: Gregory Connors
Title: Vice President
CEREBROVASCULAR ADVANCES, INC.
By: /s/ David L. Edwards
-----------------------------
Name: David L. Edwards, Ph.D.
Title: President and Chief
Executive Officer
PRINCIPAL STOCKHOLDERS:
WOODSIDE FUND III
By: /s/ V.M. Occhipinti, General Partner
------------------------------------
/s/ David L. Edwards
-----------------------------------------
DAVID L. EDWARDS
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APPENDIX B
FORM OF PLAN OF MERGER
<PAGE> 125
PLAN OF MERGER
THIS PLAN OF MERGER (this "Plan of Merger") is made and dated as
of__________ __, 1997 by and among Quintiles CVA, Inc. (formerly known as CVA
Acquisition Corp.), a North Carolina Corporation ("Acquisition" or the
"Surviving Corporation"), Quintiles Transnational Corp., a North Carolina
corporation and the sole shareholder of Acquisition ("Quintiles"), and Cerebro
Vascular Advances, Inc., a Texas corporation (the "Company").
WHEREAS, Quintiles, Acquisition and the Company desire to effect the
merger of the Company with and into Acquisition upon the terms set forth
herein; and
WHEREAS, Quintiles, Acquisition and the Company have entered into a Merger
Agreement, dated as of May 8, 1997 (the "Merger Agreement"), setting forth
certain representations, warranties, covenants and agreements in connection
with the transactions therein and herein contemplated; and
WHEREAS, the boards of directors of Quintiles, Acquisition and the
Company, and Quintiles as sole shareholder of Acquisition, by resolution duly
approved the Merger Agreement and this Plan of Merger, and the board of
directors of the Company has directed that the Merger Agreement and this Plan
of Merger be submitted to the shareholders of the Company for approval and
adoption.
NOW, THEREFORE, the parties hereto do hereby approve and adopt this Plan
of Merger for the purpose of setting forth the terms and conditions of the
merger referred to above and the means of carrying the same into effect.
ARTICLE I
THE MERGER
1.1 Merger. The Company shall be merged with and into Acquisition (the
"Merger") pursuant to Article 11 of the North Carolina Business Corporation
Act, as amended (the "NCBCA"), and Article 5.04 of the Texas Business
Corporation Act (the "TBCA ").
1.2 Effective Time. The Merger shall be effected by the filing of
articles of merger with the Secretary of State of the State of North Carolina
and the Secretary of State of the State of Texas in accordance with the
provisions of Article 11 of the NCBCA and Article 5.04 of the TBCA,
respectively. The Merger shall become effective at 12:01 a.m. on the date
hereof, on which date the articles of merger shall be filed with each of the
North Carolina Secretary of State and the Secretary of State of the State of
Texas contemporaneously with the closing conducted pursuant to Section 1.5 of
the Merger Agreement. The time and date when the Merger shall become effective
is herein referred to as the "Effective Time".
1.3 Effect of the Merger. At the Effective Time, the separate corporate
existence of the Company shall cease, and Acquisition, as the Surviving
Corporation, shall continue its corporate existence under the laws of the State
of North Carolina and shall thereupon and thereafter possess all of the rights,
privileges, immunities, powers and franchises of each of the Company and
Acquisition; all of the property, real, personal and mixed, and every other
asset of each of Acquisition and the Company shall vest in the Surviving
Corporation without further act or deed; the Surviving Corporation shall assume
and be liable for all the liabilities and obligations of each of Acquisition
and the Company;
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and all other effects of the Merger specified in Section 55-11-06 of the NCBCA
and Article ___ of the TBCA shall result therefrom.
ARTICLE II
CONVERSION AND ISSUANCE OF SHARES
2.1 Conversion of Shares.
(a) For purposes of exchanging shares of Company common and
preferred stock (the "Company Stock"), issued and outstanding immediately prior
to the Effective Time (other than (i) shares held by any Stockholder of the
Company who elects to exercise dissenters' rights under Section ___ of the TBCA,
and (ii) shares held in the Company's treasury), for shares of Quintiles Common
Stock by virtue of the Merger and without any action on the part of the holder
thereof, Quintiles shall issue and deliver to stockholders of the Company
(holders of Company Stock being referred to herein as, the "Stockholders") and
each such Stockholder shall accept from Quintiles the number of shares (less any
fractional share, which shall be eliminated) of Common Stock of Quintiles, par
value $.01 per share, (the "Quintiles Common Stock") determined by multiplying
(i) the number of shares of Company Common Stock set forth opposite such
Stockholder's name on Exhibit B to the Merger Agreement times the Exchange Ratio
(as defined below) and (ii) the number of shares of Company Preferred Stock set
forth opposite such Stockholder's name on Exhibit B to the Merger Agreement on a
Common Stock equivalent basis times the Exchange Ratio (as defined below), upon
surrender of the certificate representing such share.
(b) Exchange Ratio.
(i) Determination of Exchange Ratio: The Exchange Ratio
shall be the number (rounded to five decimal places) determined by dividing the
Company Base Capitalization by the Total Number of Quintiles Shares.
(ii) In the event that between the date of the Merger
Agreement and the date hereof, Quintiles shall have changed the number of shares
of Quintiles Common Stock that are issued and outstanding as a result of any
stock split, stock dividend or similar recapitalization, the Average Share Price
and the Total Number of Quintiles Shares (as defined below) shall each be
proportionately adjusted correspondingly.
(iii) Definitions. For purposes of this Section 2.1(b),
the following capitalized terms shall have the respective meanings set forth
below:
(A) "Average Share Price" shall mean the average of
the closing prices per share of Quintiles Common Stock on the Nasdaq National
Market (or such United States exchange on which the Quintiles Common Stock may
then be listed) for the aggregate of the ten trading days ending three trading
days prior to the date hereof.
(B) "Company Base Capitalization" means 2,469,781
shares of Common Stock of the Company, including shares into which outstanding
options are convertible and shares of Preferred Stock of the Company on a common
stock equivalent basis.
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(C) "Total Number of Quintiles Shares" shall
mean:
(1) If the Average Share Price is between
$55.78 and $99.60 (inclusive), the Total Number of Quintiles Shares shall be
251,000.
(2) If the Average Share Price is greater
than $99.60, the Total Number of Quintiles Shares shall be the number (rounded
to five decimal places) determined by dividing $25,000,000 by the Average Share
Price.
(3) If the Average Share Price is less
than $55.78, the Total Number of Quintiles Shares shall be the number (rounded
to five decimal places) determined by dividing $14,000,000 by the Average Share
Price.
(c) No fractional shares of Quintiles Common Stock shall be
issuable by Quintiles upon the conversion of shares of Company Common Stock in
the Merger.
(d) In respect of each outstanding option to purchase shares of
Company Common Stock (each a "Company Option"), Quintiles shall cause to be
granted on the date hereof to the holder thereof a substitute option on
identical terms (except with respect to the number of shares covered thereby and
the exercise price thereof) to purchase shares of Quintiles Common Stock (a
"Quintiles Option") which shall be exercisable (i) to purchase the number of
shares of Quintiles Common Stock (less any fractional share, which shall be
eliminated) determined by multiplying the shares of Company Common Stock then
purchasable under each holder's Company Option by the Exchange Ratio and (ii) at
an exercise price per share of Quintiles Common Stock determined by dividing the
exercise price per share of Company Common Stock under each holder's Company
Option by the Exchange Ratio.
(e) The outstanding shares of Acquisition, which is the
Surviving Corporation, will not be converted, exchanged or altered in any manner
as a result of the Merger and will remain outstanding as shares of Acquisition.
From and after the Effective Time, each outstanding certificate which
theretofore represented shares of common stock of Acquisition shall continue to
evidence ownership of and to represent the same number of shares of common stock
of the Surviving Corporation.
(f) In the event any certificate representing Company Common
Stock shall have been lost, stolen or destroyed, upon the making of affidavit
setting forth that fact by the person claiming such certificate to be lost,
stolen or destroyed and granting indemnity against any claim that may be made
against Quintiles with respect to such certificate, Quintiles shall issue in
exchange for such lost, stolen or destroyed certificate, the Quintiles Common
Stock deliverable in respect thereof pursuant to this Plan of Merger.
2.2 Exchange of Certificates.
(a) At the Effective Time, certificates representing all of the
issued and outstanding shares of Company Stock (other than any dissenting or
treasury shares) shall be canceled, and, simultaneous with such cancellation,
and upon surrender of the corresponding certificates evidencing Company Stock in
accordance with the Merger Agreement, Quintiles shall issue certificates
evidencing the number of shares of Quintiles Common Stock issuable pursuant to
the Merger to each surrendering Stockholder.
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(b) When making the issuances required by Section 2.2 above and
pursuant to the Merger Agreement, and notwithstanding any provision herein to
the contrary, Quintiles shall withhold from all of the Stockholders of the
Company, 10% of the shares of Quintiles Common Stock issuable to each
Stockholder and deliver to the Escrow Agent (as defined in the Escrow Agreement,
of even date herewith, among Quintiles, Acquisition, [Escrow Agent] and the
Representative named therein) an aggregate of _______ shares of Quintiles Common
Stock, to be held and distributed by the Escrow Agent pursuant to the terms of
the Merger Agreement and the Escrow Agreement. All such Quintiles Common Stock
shall be issued in the name of the Escrow Agent, as escrow agent under the
Escrow Agreement.
2.3 Dissenting Shares. Each outstanding share of the Company's Stock,
the holder of which has demanded and perfected his right to dissent in
accordance with Sections 5.12 and 5.13 of the TBCA and has not effectively
withdrawn or lost such holder's right to dissent ("Dissenting Shares"), shall
not be converted into or represent a right to receive Quintiles Common Stock,
but the holder thereof shall be entitled only to such rights as are granted by
Sections 5.12 and 5.13. Each holder of Dissenting Shares who becomes entitled
to payment for such holder's Stock of the Company pursuant to Sections 5.12 and
5.13 shall receive payment therefor from the Surviving Corporation from funds
provided by Quintiles (but only after the amount thereof shall have been agreed
upon or finally determined pursuant to such Sections 5.12 and 5.13).
ARTICLE III
ARTICLES OF INCORPORATION, BYLAWS, DIRECTORS AND OFFICERS
3.1 Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of the Surviving Corporation shall be identical to the
Articles of Incorporation and Bylaws of Acquisition in effect immediately prior
to the Effective Time, until thereafter amended as provided by law.
3.2 Directors and Officers. The directors of the Surviving
Corporation shall be Dennis B. Gillings and Gregory D. Porter, each of whom
shall hold office until his or her respective successor shall have been elected
and qualified as provided in the bylaws of the Surviving Corporation or by law.
The officers of the Surviving Corporation shall be as listed below, each holding
office until his or her respective successor has been duly elected and qualified
as provided in the bylaws of the Surviving Corporation or by law:
Dennis B. Gillings Chairman of the Board,
Chief Executive Officer and
President
Gregory D. Porter Executive Vice President and Secretary
Rachel R. Selisker Executive Vice President and Treasurer
Gregory Connors Vice President
Tom Perkins Assistant Secretary
Martha Henderson Assistant Secretary
ARTICLE IV
SUBMISSION TO STOCKHOLDERS; TERMINATION AND AMENDMENT
4.1 Approval by Stockholders. This Plan of Merger shall be submitted
to the Stockholders of the Company for their approval and shall have no force or
effect unless approved by the Stockholders of the Company in the manner provided
by the NCBCA and the TBCA.
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4.2 Termination. This Plan of Merger shall terminate automatically,
whether before or after approval by the Stockholders of the Company, if the
Merger Agreement shall be terminated pursuant to Section 9.15 thereof.
4.3 Amendment. This Plan of Merger may be amended by the parties
hereto, by action taken by their respective boards of directors, at any time
before or after approval hereof by the Stockholders of the Company, but, after
any such approval, no amendment shall be made which shall reduce the amount or
change the form of the consideration to be received by the Stockholders of the
Company without the further approval of such Stockholders. This Plan of Merger
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
ARTICLE V
MISCELLANEOUS
5.1 Headings. The article and section captions used herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Plan of Merger.
5.2 Publicity. Except as otherwise required by law, none of the
parties hereto shall issue any press release or make any other public statement,
in each case relating to, connected with or arising out of this Plan of Merger
or the matters contained herein, without obtaining the prior approval of
Quintiles and the Company to the contents and the manner of presentation and
publication thereof.
5.3 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, its right, title or interest in, to or under any of the rights,
properties or assets of the Company or Acquisition acquired or to be acquired by
reason of, or as a result of, the Merger, or otherwise to carry out the purposes
of this Agreement, the Surviving Corporation and its proper officers and
directors shall be authorized to execute and deliver, in the name and on behalf
of the Company or Acquisition, all such deeds, bills of sale, assignments and
assurances and to do, in the name and on behalf of the Company or Acquisition,
all such other acts and things necessary or desirable to vest, perfect or
confirm any and all right, title or interest in, to or under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out the
purposes of this Agreement and the Plan of Merger.
5.4 Counterparts. This Plan of Merger may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
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IN WITNESS WHEREOF, the parties have caused their respective corporate
names to be hereunder subscribed by their respective officers thereunto duly
authorized, all as of the day and year first above written.
QUINTILES TRANSNATIONAL CORP.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
QUINTILES CVA, INC.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
CEREBROVASCULAR ADVANCES, INC.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
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APPENDIX C
FORM OF ESCROW AGREEMENT
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ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and dated as of
_______________, 1997 by and among QUINTILES TRANSNATIONAL CORP., a North
Carolina corporation (the "Purchaser"), CVA ACQUISITION CORP., a North Carolina
corporation to be known from and after the date hereof as Quintiles CVA, Inc.
("Acquisition"), [ESCROW AGENT], a North Carolina banking corporation (the
"Escrow Agent"), and J.E. CAMPION (the "Representative"), acting by virtue of
the Merger Agreement (as defined below) as the attorney-in-fact and
representative of the Stockholders of CerebroVascular Advances, Inc., a Texas
corporation (the "Company").
WITNESSETH:
WHEREAS, the Purchaser, Acquisition, the Company and certain Stockholders
of the Company have entered into a Merger Agreement dated as of May 8, 1997
(the "Merger Agreement"; capitalized terms used and not defined herein have the
meanings assigned to such terms in the Merger Agreement), providing for the
merger of the Company with and into Acquisition, in connection with which the
Stockholders (as defined in the Merger Agreement) shall receive as
consideration a number of shares of registered Common Stock of the Purchaser
(the "Purchaser's Stock") determined pursuant to Article I of the Merger
Agreement, allocated among the Stockholders as provided in the Merger
Agreement;
WHEREAS, pursuant to Section 1.4(b) of the Merger Agreement, the
Representative has been appointed by the Stockholders as their attorney-in-fact
and authorized and empowered to act, for and on behalf of any or all of the
Stockholders (with full power of substitution in the premises) in connection
with the indemnity provisions of the Merger Agreement, this Escrow Agreement,
and such other matters as are reasonably necessary for the consummation of the
transactions contemplated hereby and thereby;
WHEREAS, pursuant to the Merger Agreement, the Purchaser, Acquisition and
the Company have agreed that the Indemnitees' rights of indemnification under
Article VIII of the Merger Agreement shall survive the consummation of the
transactions contemplated by the Merger Agreement and shall be secured,
pursuant to this Agreement, by the shares of the Purchaser's Stock (together
with any accumulations thereto as provided herein, the "Escrow Shares") to be
initially issued in the name of the Escrow Agent, as escrow agent hereunder,
and deposited in escrow with the Escrow Agent pursuant to Section 1.4 of the
Merger Agreement; and
WHEREAS, the Escrow Agent is willing to act in the capacity of Escrow
Agent hereunder subject to, and upon the terms and conditions of this
Agreement;
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NOW, THEREFORE, in consideration of the premises, covenants and agreements
set forth in this Agreement and of other good and valuable consideration, the
receipt and legal sufficiency of which they hereby acknowledge, and intending
to be legally bound hereby, and as an inducement for the execution and delivery
of the Merger Agreement, the Purchaser, Acquisition, the Escrow Agent, and the
Representative hereby agree as follows:
ARTICLE I
DESIGNATION OF ESCROW AGENT AND SHARES
SUBJECT TO ESCROW
1.1. Designation of Escrow Agent. The Purchaser and the Stockholders (by
and through the Representative) hereby mutually designate and appoint
_________________________, a North Carolina banking corporation having an
office and place of business located at __________________,
______________________ _____, as Escrow Agent for the purposes set forth
herein. The Escrow Agent hereby accepts such appointment and agrees to act in
furtherance of the provisions of the Merger Agreement, but only upon the terms
and conditions provided in this Agreement.
1.2. Capital Stock Subject to Escrow. In accordance with Section 1.4 of
the Merger Agreement, upon execution of this Agreement and subject to
compliance by the Company with the provisions of the Merger Agreement, the
Purchaser shall on the Closing Date (as defined in the Merger Agreement) issue
and deliver, or cause to be delivered, to the Escrow Agent one or more stock
certificates (the "Escrow Certificates"), each of which shall be in the name of
the Escrow Agent as escrow agent hereunder, representing an aggregate of ten
percent of the shares of the Purchaser's Stock issued in consummation of the
merger provided for by the Merger Agreement. The Escrow Agent shall hold and
distribute the Escrow Certificates and Escrow Shares in accordance with the
terms hereof.
1.3. Value of Escrow Shares. For all purposes pursuant to this Agreement,
including without limitation the distribution of Escrow Shares, the value of
each Escrow Share shall be deemed to be equal to the closing price per share of
the Purchaser's Common Stock on the National Market System of The Nasdaq Stock
Market (or such other United States stock exchange on which Purchaser's Common
Stock is then listed) on the Closing Date.
1.4. Powers of Stockholders' Representative. Pursuant to the Merger
Agreement, subject to Section 6.1 of this Agreement, the Stockholders have
irrevocably appointed the Representative as their true and lawful agent and
attorney-in-fact with respect to all matters arising in connection with this
Agreement, including but not limited to the power and authority on
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behalf of each Stockholder (other than in his or her own right) to do any one or
all of the following:
(a) give any written notices or consents and seek any
declaratory judgments, damages or other appropriate relief from a court or other
tribunal that the Representative may consider necessary or appropriate;
(b) give any written direction to the Escrow Agent as the
Representative may consider necessary or appropriate;
(c) make, execute and deliver such amendments of and
supplements to this Agreement or any other agreements, instruments or documents
relating hereto that the Representative may consider necessary or appropriate
and not materially adverse to the Stockholders' interests hereunder, such
authority to be conclusively evidenced by the execution and delivery thereof;
and
(d) take all actions and do all things, including but not
limited to the execution and delivery of all documents necessary or proper,
required, contemplated or deemed advisable by the Representative, including the
execution, delivery and surrender of the Escrow Certificates and accompanying
stock powers, and generally to act for and in the name of each such Stockholder
with respect to this Agreement.
ARTICLE II
TREATMENT OF ACCUMULATIONS TO ESCROW SHARES
2.1. Duration of Escrow. The Escrow Agent shall hold the Escrow Shares
as provided in this Agreement until complete distribution thereof in accordance
with the applicable provisions of Article III or Article IV hereof.
2.2. Additional Property Subject to Escrow. At any time after the date
hereof and prior to the distribution of the Escrow Shares either (i) by delivery
to the Stockholders in accordance with Article III hereof or (ii) by delivery to
the Purchaser in accordance with Article IV hereof, or by a combination of (i)
and (ii), if any of the Stockholders shall become entitled to receive or shall
receive in connection with the Escrow Shares any (i) non-taxable distribution of
securities of the Purchaser or of any other entity including, without
limitation, any certificate in connection with any increase or reduction of
capital, reclassification, recapitalization, merger, business combination,
consolidation, sale of assets, stock split-up or spin-off; or (ii) any
non-taxable distribution of stock options, warrants or rights, whether as an
addition to or in substitution of or exchange for any of the Escrow Shares; or
(iii) non-taxable stock dividend or other non-taxable distribution payable in
securities or property of any description, all of the shares of capital stock,
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or other property resulting from any such distribution, stock option,
warrant, right or stock dividend shall be deemed to be Escrow Shares and shall
be subject to the terms hereof to the same extent as the original Escrow
Shares. Any cash dividends and any taxable stock dividends paid with respect
to the Escrow Shares shall be paid to the Stockholders in accordance with their
respective interests in the Escrow Shares. Each of the Stockholders shall
recognize as income on a current basis all of the cash dividends to which such
Stockholder is entitled, and for any non-cash dividend and any other
non-taxable distribution shall, through the Representative, execute stock
powers or other appropriate instruments of transfer for all shares, options,
warrants or rights as required for transfer hereunder.
2.3. Retained Voting and Other Rights. The Escrow Agent shall hold the
Escrow Shares and any additional property acquired with respect thereto pursuant
to Section 2.2 above in safekeeping and dispose thereof only in accordance with
the terms of this Agreement. The Escrow Agent may treat the Representative as
the duly authorized agent and representative of the Stockholders with respect to
any additional property related to the Escrow Shares. The Escrow Agent shall
hold the Escrow Shares in accordance with this Agreement and shall (to the
extent legally permissible and provided that written instructions in form and
substance satisfactory to the Escrow Agent have been provided by the
Stockholder) vote the Escrow Shares in accordance with the written instructions
of each Stockholder for whose account such Escrow Shares are held.
ARTICLE III
DISTRIBUTION OF ESCROW SHARES UPON TERMINATION OF THE AGREEMENT
3.1. Deadline For Claims and Termination of Agreement. The Purchaser
shall not be entitled to assert any claim against the Escrow Shares after the
expiration of the Representations Period (as defined in Section 8.1 of the
Merger Agreement), the last day of which shall be referred to herein as the
"Claims Deadline"; provided, however, that any claim made in good faith and in
writing on or prior to the Claims Deadline setting forth in reasonable detail
the basis for such claim (whether or not any action, demand or proceeding is
instituted with respect to such claim prior to the Claims Deadline) shall
continue, subject to final resolution as provided herein. This Agreement shall
terminate upon complete distribution of the Escrow Shares in accordance with
this Agreement.
3.2. Distribution of the Escrow Shares Upon Termination of the
Agreement.
(a) Within five (5) business days after the Claims Deadline,
the Escrow Agent shall deliver to the Stockholders that portion of the Escrow
Shares not previously distributed or otherwise subject to claims pursuant to
Article IV, in proportion to the initial deposits of shares made on their behalf
by the Purchaser. Thereafter, the balance of the Escrow Shares shall
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continue to be held by the Escrow Agent in accordance with the terms of this
Agreement until all claims asserted against the Escrow Shares have been finally
resolved in accordance with Article IV below; whereupon, the balance of the
Escrow Shares shall be distributed to the Stockholders as provided above in full
discharge of the Escrow Agent's obligations under this Agreement.
(b) Notwithstanding the foregoing, in the event that under any
of the provisions contained herein, the Escrow Agent would be required to
deliver fractional interests in Escrow Shares to the Stockholders, the Purchaser
shall be entitled at its option to purchase from the Escrow Agent such a number
of Escrow Shares (or fractional interests therein) as shall be necessary to
eliminate such fractional interests, at a purchase price calculated according to
the closing price of the Purchaser's Common Stock on the Nasdaq National Market
(or such other United States stock exchange on which the Purchaser's Common
Stock is then listed) on the Closing Date. In such event, the Escrow Agent
shall distribute to the Stockholders who otherwise would have been entitled to
fractional interests in Escrow Shares, the cash equivalent of such fractional
shares (based on the purchase price as described above).
ARTICLE IV
DELIVERY OF CAPITAL STOCK AND OTHER PROPERTY OUT OF ESCROW
4.1. Claims Against Escrow Shares. If, at any time on or prior to the
Claims Deadline, the Purchaser (on its own behalf or on behalf of any other
Indemnitee) shall assert a claim for indemnification pursuant to Article VIII of
the Merger Agreement, the Purchaser shall submit to the Escrow Agent and to the
Representative a written claim in good faith signed by an authorized officer of
the Purchaser stating: (i) that an Indemnitee has incurred or reasonably
believes it may incur Losses and the reasonable estimate of the amount of any
such Losses; (ii) in reasonable detail, the facts alleged as the basis for such
claim and the section or sections of the Merger Agreement alleged as the basis
or bases for the claim; and (iii) if the Losses have actually been incurred, the
number of Escrow Shares to which such Indemnitee is entitled with respect to
such Losses which shall be determined by dividing the amount thereof by the
closing price of the Purchaser's Common Stock on the Nasdaq National Market (or
such other United States stock exchange on which the Purchaser's Common Stock is
then listed) on the Closing Date. If the claim is for Losses which the
Indemnitee reasonably believes it may incur or is otherwise unliquidated, the
written claim of the Purchaser shall state the reasonable estimate of such
Losses, in which event a claim shall be deemed to have been asserted against the
Escrow Shares on behalf of the Purchaser in the amount of such estimated Losses,
but no payment or distribution shall be made by the Escrow Agent out of the
Escrow Shares until such Losses have actually been incurred and the Purchaser
submits a notice to the Escrow Agent and the Representative in accordance with
Section 4.1(ii), whether or not the Losses are incurred prior to the Claims
Deadline.
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4.2. Resolution of Asserted Claims Against the Escrow Shares. If,
within 25 days after the Purchaser gives notice to the Escrow Agent and the
Representative of an asserted claim pursuant to Section 4.1 above that the
Indemnitee has incurred Losses, the Representative shall fail to notify the
Escrow Agent and the Purchaser, in writing, that the Representative reasonably
disputes in good faith the asserted claim, then the Escrow Agent, at the
expiration of such 25 day period, shall make immediate payment to the Purchaser,
out of the Escrow Shares, of the amount of the asserted claim by distributing to
the Purchaser the number of Escrow Shares having an aggregate value equal to the
amount of the claim.
4.3. Resolution of Disputed Claims Against Escrow Shares. If, within
the 25 day period after notice of an asserted claim is given to the Escrow Agent
and the Representative under Section 4.1 above, the Representative shall notify
the Escrow Agent and the Purchaser, in writing, that the Representative
reasonably disputes in good faith the asserted claim made by the Purchaser
against the Escrow Shares, then the Representative and the Purchaser shall use
their respective reasonable best efforts to effect a settlement and compromise
of such asserted claim. Each party indemnified under the provisions of the
Merger Agreement, upon receipt of written notice of any claim or the service of
a summons or other initial legal process upon it in any action instituted
against it, in respect of the agreements contained in the Merger Agreement,
shall promptly give written notice of such claim, or the commencement of such
action, or threat thereof, to the party from whom indemnity is to be sought;
provided, however, the failure to provide such notice within a reasonable period
of time shall not relieve the indemnifying party of any of its obligations
except to the extent the indemnifying party is prejudiced by such failure. Each
indemnifying party shall be entitled at its own expense to participate in the
defense of such claim or action, or, if it shall elect, to assume such defense,
in which event such defense shall be conducted by counsel chosen by such
indemnifying party, which counsel may be any counsel reasonably satisfactory to
the indemnified party against whom such claim is asserted or who shall be the
defendant in such action, and such indemnified party shall bear all fees and
expenses of any additional counsel retained by it or them. Notwithstanding the
immediately preceding sentence, if the named parties in such action (including
impleaded parties) include the indemnified and the indemnifying parties, and
the indemnified party shall have been advised by counsel that there may be a
conflict between the positions of the indemnifying party and the indemnified
party in conducting the defense of such action or that there are legal defenses
available to such indemnified party different from or in addition to those
available to the indemnifying party, then counsel for the indemnified party
shall be entitled, if the indemnified party so elects, to conduct the defense
to the extent reasonably determined by such counsel to be necessary to protect
the interests of the indemnified party, at the expense of the indemnifying
party, if it is determined by agreement of the indemnifying party and the
indemnified party or by a court of competent jurisdiction that the indemnified
party is entitled to indemnification for the Losses giving rise to such action.
If the indemnifying party shall elect not to assume the defense of such claim
or action, such indemnifying party shall reimburse such indemnified party for
the reasonable fees
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and expenses of any counsel retained by it, and shall be bound by the results
obtained by the indemnified party in respect of such claim or action if it is
determined by agreement of the indemnifying party and the indemnified party or
by a court of competent jurisdiction that the indemnified party is entitled to
indemnification hereunder for the Losses giving rise to such action; provided,
however, that no such claim or action shall be settled without the written
consent of the indemnifying party. Any liability, loss, damage or expense
established by reason of any such settlement and compromise shall be certified
in writing to the Escrow Agent by the Representative and the Purchaser, and the
Escrow Agent shall pay to the Purchaser out of the Escrow Shares (by transfer to
the Purchaser of a number of Escrow Shares set forth in the certification
received from the Purchaser and the Representative) any amount due and owing to
the Purchaser by reason of such settlement and compromise in Escrow Shares. If
any such settlement and compromise so certified to the Escrow Agent establishes
that no amount shall be due and owing to the Purchaser under the asserted claim,
then the Escrow Agent shall treat the asserted claim as rejected by mutual
agreement of the parties, and the asserted claim shall be totally disregarded by
the Escrow Agent as if never the subject of assertion against the Escrow Shares.
4.4. Unresolved Claims Against Escrow Shares. If the Purchaser and the
Representative are unable to settle and compromise any disputed claim asserted
against the Escrow Shares, the Escrow Agent shall not make any payment or
distribution out of the Escrow Shares with respect to such unresolved asserted
claim unless and until the Escrow Agent shall have received either:
(a) a certificate signed on behalf of the Purchaser and the
Representative certifying the amount of the asserted claim in dispute and
directing payment thereof; or
(b) a certified copy of an award of an arbitrator referred to
in Article VII hereof determining the amount of the asserted claim in dispute;
or
(c) a certified copy of a final unappealable judgment of a
court of competent jurisdiction determining the amount of the asserted claim in
dispute, certified by the party providing such copy as being binding and
nonappealable.
Upon receipt of any such certification, the claim shall be treated as a
resolved asserted claim pursuant to Section 4.2 above and the Escrow Agent
shall pay and distribute Escrow Shares in the manner described in Section 4.2.
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ARTICLE V
RESPONSIBILITIES AND DUTIES OF ESCROW AGENT
5.1. Rights, Duties, Liabilities and Immunities of Escrow Agent. The
Purchaser and the Stockholders (by and through the Representative) hereby agree
as follows with respect to the rights, duties, liabilities and immunities of the
Escrow Agent:
(a) The Escrow Agent shall act as a depository only and shall
not be responsible or liable in any manner whatsoever for the sufficiency,
correctness, genuineness, or validity of the Escrow Shares deposited with it, or
any part thereof. The Escrow Agent shall have no implied duties or obligations,
and shall not be charged with knowledge or notice of any fact except as
specifically provided herein.
(b) The Escrow Agent shall be protected in acting upon any
written certificate, notice, request, waiver, consent, receipt or other paper or
document furnished to it, not only as to its due execution and the validity and
effectiveness of its provisions, but also as to the truth and acceptability of
any information therein contained which the Escrow Agent in good faith believes
to be genuine and what it purports to be.
(c) The Escrow Agent shall not be liable for any error of
judgment, or for any act done or steps taken or made by it in good faith, or for
any mistake of fact or law, or for any things which it may do or refrain from
doing in connection herewith, except due to the Escrow Agent's own gross
negligence or intentional misconduct. In no event shall the Escrow Agent be
liable for incidental, indirect, special, consequential or punitive damages,
except due to the Escrow Agent's own gross negligence or willful misconduct.
(d) The Escrow Agent may consult with and obtain advice from
legal counsel in the event of any question as to any of the provisions of this
Agreement or its duties hereunder, and the Escrow Agent shall incur no liability
and shall be fully protected in acting in good faith in accordance with the
opinion and instructions of such counsel. Subject to the provisions of Section
5.3 hereof, the cost of such services shall be added to and shall become a part
of the Escrow Agent's compensation hereunder.
(e) The Escrow Agent shall have no duties except those
expressly set forth herein, and shall not be bound by any notice of a claim or
demand with respect thereto, or any waiver, modification, amendment, termination
or rescission of this Agreement, unless in a writing received by it, and, if its
duties herein are affected, unless it shall have given its prior written consent
thereto.
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(f) The Escrow Agent is not a party to and is not bound by the
Merger Agreement, nor is it a party to or bound by or charged with notice of any
other agreement (other than this Agreement) to which the Escrow Shares may
relate.
(g) From and at all times after the date of this Escrow
Agreement, the Purchaser and the Stockholders (collectively, the "Indemnifying
Parties") shall, to the fullest extent permitted by law, jointly and severally
indemnify and hold harmless the Escrow Agent and each director, officer,
employee, attorney, agent and affiliate of the Escrow Agent (collectively, the
"Indemnified Parties") against any and all actions, claims (whether or not
valid), losses, damages, liabilities, costs and expenses of any kind or nature
whatsoever (including, without limitation, reasonable attorneys' fees, costs and
expenses) ("Losses") incurred by or asserted against any of the Indemnified
Parties from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
claim, demand, suit, action or proceeding (including any inquiry or
investigation) by any person, including, without limitation, any Indemnifying
Party, whether threatened or initiated, asserting a claim for any legal or
equitable remedy under any statute or regulation, including, but not limited to,
any federal or state securities law, or under any common law or equitable cause
or otherwise, arising from or in connection with the negotiation, preparation,
execution, performance or failure of performance of this Escrow Agreement or any
transactions contemplated herein, whether or not any such Indemnifying Party is
a party to any such action, proceeding, suit or the target of any such inquiry
or investigation; provided, however, that no Indemnified Party shall have the
right to be indemnified hereunder for any liability finally determined by a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of such Indemnified Party. The Stockholders (in accordance
with their pro rata interest in the Escrow Shares) and the Purchaser shall be
jointly and severally liable to the Escrow Agent for the obligations under this
subsection (g); provided however that as between the Purchaser and the
Stockholders, 50% of the indemnified amount shall be paid by the Stockholders
(in accordance with their pro rata interests in the Escrow Shares), and 50%
shall be paid by Purchaser. The Purchaser shall have the option at any time to
pay any amount due to the Escrow Agent in satisfaction of the Stockholders'
obligations hereunder, and upon any such payment, the Purchaser may treat the
amount of such payment as an immediate liquidated claim against the Escrow
Shares pursuant to Section 4.2 above.
(h) The Escrow Agent is authorized, in its discretion, to
comply with orders issued or process entered by any court with respect to the
Escrow Shares, without determination by the Escrow Agent of such court's
jurisdiction in the matter.
(i) If, at any time, there shall exist any dispute with respect
to the holding or disposition of any portion of the Escrow Shares or any other
obligations of the Escrow Agent hereunder, or if at any time the Escrow Agent is
unable to determine, to the Escrow Agent's sole
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satisfaction, the proper disposition of any portion of the Escrow Shares or the
Escrow Agent's proper actions with respect to its obligations hereunder, or if
the Purchaser and the Representative have not within thirty (30) days of the
furnishing by the Escrow Agent of a notice of resignation pursuant to Section
5.4 hereof appointed a successor escrow agent to act hereunder, then the Escrow
Agent may, in its sole discretion, take either or both of the following actions
upon written notice to Purchaser and the Representative:
(i) Hold and decline to make further disbursements of the
Escrow Shares that the Escrow Agent would otherwise be obligated to make
hereunder until such dispute or uncertainty shall be resolved to the sole
satisfaction of the Escrow Agent or until a successor Escrow Agent shall
have been appointed (as the case may be);
(ii) Petition (by means of an interpleader action or any
other appropriate method) the Superior Court for Wake County, North
Carolina, or if said Court should be without subject matter jurisdiction
or should decline to exercise jurisdiction, any other state or federal
court of competent jurisdiction in North Carolina, for instructions with
respect to such dispute or uncertainty, and pay into such court all Escrow
Shares for holding and disposition in accordance with the instructions of
such court.
The Escrow Agent shall have no liability to the Purchaser, the Stockholders or
any other person with respect to any such actions taken pursuant to this
Section 5.1(i), specifically including any liability or claimed liability that
may arise, or be alleged to have arisen, out of or as a result of any delay in
the disbursement of Escrow Shares or any delay in or with respect to any other
action required or requested of the Escrow Agent, except for any Losses
resulting from the negligence or willful misconduct of the Escrow Agent.
5.2. Copies of Certifications, Notices and Other Documentation.
Promptly after receipt by the Escrow Agent from the Representative or the
Purchaser of any written certificate, notice, request, waiver, consent, receipt
or other document, the Escrow Agent shall furnish a copy of any of such items to
the Representative or the Purchaser, as the case may be. Upon receipt by the
Escrow Agent of the Escrow Shares to be held in escrow pursuant to this
Agreement, the Escrow Agent shall execute and deliver a written receipt therefor
to the Purchaser and the Representative.
5.3. Compensation. The Escrow Agent shall receive a fee of $1,000 per
year for its services hereunder. The first year's fee shall be payable upon the
execution of this Agreement and such fee shall not be subject to proration in
the event that the escrow arrangement terminates before the end of a year. The
Escrow Agent shall also be entitled to reimbursement for all reasonable
expenses, disbursements and advances (including reasonable attorneys' fees)
incurred or made by the Escrow Agent in accordance with any of the provisions
of this
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Agreement (including the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ),
exclusive of any such expense, disbursement or advance that may arise from its
own negligence or willful misconduct. All such compensation and reimbursement
of the Escrow Agent under the provisions of this Section 5.3 shall be paid by
the Stockholders and the Purchaser as follows: the Purchaser shall be severally
liable for 50% of such compensation and reimbursement, and the Stockholders
shall be liable (in accordance with their pro rata interest in the Escrow
Shares) for 50% of such compensation and reimbursement.
5.4. Successor Escrow Agent. The Escrow Agent or any successor to it
hereafter appointed may at any time resign by giving notice in writing to the
Representative and the Purchaser, and such resignation shall become effective
and the Escrow Agent shall be discharged from its duties hereunder upon the
appointment of a successor Escrow Agent as hereinafter provided. In the event
of any such resignation, a successor Escrow Agent shall be appointed by written
consent of the Representative and the Purchaser. Any successor Escrow Agent
shall deliver to the Representative and the Purchaser a written instrument
accepting the appointment hereunder, and thereupon it shall succeed to all the
rights and duties of the Escrow Agent hereunder and shall be entitled to receive
all assets then held by the predecessor Escrow Agent hereunder.
ARTICLE VI
THE REPRESENTATIVE
6.1. General. The Representative may be removed and a new
Representative or Representatives may be appointed at any time and from time to
time by the written agreement of a majority of the Stockholders. Any such
removal and appointment shall be effective upon receipt by the Escrow Agent and
the Purchaser of a duly executed copy of the instrument appointing the new
Representative. In the event that the Representative shall resign or otherwise
cease to act as the Representative, the Stockholders shall immediately select a
successor Representative to act hereunder.
6.2. Responsibility. The Representative shall have no liability to the
Stockholders with respect to any action taken by him or her under this
Agreement, except with respect to the Representative's negligence or willful
misconduct. The Representative may act in reliance upon the advice of counsel
in reference to any matter in connection with this Agreement and shall not
incur any liability to the other Stockholders, or any one of them, for any
action taken in good faith in accordance with such advice. All Stockholders
(inclusive of the Representative) shall jointly and severally indemnify the
Representative, ratably according to their respective interests in the Escrow
Shares, from and against any and all Losses incurred in connection with the
Representative's actions under this Agreement or by virtue of acting in his
capacity as the
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Representative, except to the extent resulting from the Representative's
negligence or willful misconduct.
6.3. Reimbursement. The Representative shall be entitled to
reimbursement from the Stockholders, in accordance with their pro rata interest
in the Escrow Shares, for all reasonable expenses, disbursements and advances
(including reasonable attorneys' fees) incurred or made by the Representative in
connection with his actions under this Agreement or by virtue of acting in his
capacity as the Representative, except to the extent resulting from the
Representative's negligence or willful misconduct.
ARTICLE VII
ARBITRATION
7.1. Resolution of Disputed Claims. Subject to any prior resolution in
the manner described in Section 4.3 above, any unresolved dispute under this
Agreement with respect to any matter that is the subject of an asserted claim
against the Escrow Shares shall be submitted to and settled by binding
arbitration in accordance with the Commercial Rules, existing at the date
thereof, of the American Arbitration Association. The dispute shall be
submitted by the Representative (on behalf of any Stockholders) or the Purchaser
to one arbitrator agreed to by the Representative and the Purchaser or, if the
Representative and the Purchaser cannot agree on one arbitrator, by three
arbitrators selected in accordance with said Rules, and shall be heard in
Raleigh, North Carolina. Each arbitrator must be experienced in the subject
matter in dispute.
ARTICLE VIII
MISCELLANEOUS
8.1. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of Stockholders (by and through the Representative),
the Purchaser, Acquisition and the Escrow Agent, and their respective
successors, heirs, and assigns, whether so expressed or not.
8.2. Waiver of Consent. No failure or delay on the part of any party
hereto in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the parties hereunder are
cumulative and not exclusive of any rights or remedies which they would
otherwise have. No modification or waiver of any provision of this Agreement,
nor consent to any departure by any party therefrom, shall in any event be
effective unless the same shall be in writing, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No
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<PAGE> 144
notice to or demand on any party in any case shall entitle such party to any
other or further notice or demand in similar or other circumstances.
8.3. Captions. The Article and Section captions used herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
8.4. Notices. Any notice or other communication required or permitted
hereunder shall be sufficiently given if delivered in person or sent by telex,
telecopy or by registered or certified mail or by recognized overnight courier,
postage prepaid, addressed as follows:
If to the Purchaser or Acquisition, to:
Quintiles Transnational Corp.
4709 Creekstone Drive
Riverbirch Building, Suite 300
Durham, North Carolina 27703
Attention: Gregory D. Porter, Esq.
with a copy to its counsel,
Smith, Anderson, Blount, Dorsett,
Mitchell & Jernigan, L.L.P.
Post Office Box 2611
Raleigh, North Carolina 27602-2611
Attention: Gerald F. Roach, Esq.
if to the Escrow Agent, to:
if to the Representative, to:
J. E. Campion
18585 Sigma Road
San Antonio, Texas 78258
with a copy to his counsel:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Phillip M. Renfro, Esq.
Vincent M. Occhipinti
Woodside Fund III
850 Woodside Drive
Woodside, California 94062
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<PAGE> 145
and if to any Stockholder, to such Stockholder at such Stockholder's address
appearing in the Purchaser's books and records or to such other address or
number as shall be furnished in writing by any such party, and such notice or
communication shall be deemed to have been given as of the date so delivered,
sent by telecopier, telex or mailed.
8.5. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
8.6. Governing Law. The interpretation and construction of this
Agreement, and all matters relating thereto, shall be governed by the laws of
the State of North Carolina, without regard to the choice of law provisions
thereof. The non-prevailing party in any dispute arising hereunder between the
Purchaser and the Stockholders (or the Representative acting on their behalf)
shall bear and pay the costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred by the prevailing party or
parties in connection with resolving such dispute, however resolved, including
by arbitration. The Purchaser may treat any such amount due from the
Stockholders as an immediate liquidated claim against the Escrow Shares pursuant
to Section 4.2 above.
8.7. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
8.8. Other Purchaser Remedies. The remedies available to the Purchaser
under this Agreement, including without limitation the right to assert claims
against the Escrow Fund, shall be in addition to and not to the exclusion of any
other rights or remedies available to the Purchaser under applicable law,
whether pursuant to this Agreement, the Merger Agreement or otherwise.
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<PAGE> 146
IN WITNESS WHEREOF, the Purchaser, Acquisition and the Escrow Agent have
caused their corporate names to be hereunto subscribed by their respective
officers thereunto duly authorized, and the Representative has executed this
Agreement, all as of the day and year first above written.
QUINTILES TRANSNATIONAL CORP.
By:
------------------------------
Name:
Title:
CVA ACQUISITION CORP.
By:
------------------------------
Name:
Title:
ESCROW AGENT:
[TO BE DETERMINED]
By:
------------------------------
Name:
Title:
REPRESENTATIVE:
---------------------------------
J.E. CAMPION
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<PAGE> 147
APPENDIX D
TEXAS BUSINESS CORPORATION ACT
SECTIONS RELATING TO DISSENTERS' RIGHTS
ART. 5.12. PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTIONS
A. Any Shareholder of any domestic corporation who has the right to dissent
from any of the corporate actions referred to in Article 5.11 of this Act may
exercise that right to dissent only by complying with the following procedures:
(1) (a) With respect to proposed corporate action that is submitted to
a vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action,
setting out that the shareholder's right to dissent will be exercised if
the action is effective and giving the shareholder's address, to which
notice thereof shall be delivered or mailed in that event. If the action is
effected and the shareholder shall not have voted in favor of the action,
the corporation, in the case of action other than a merger, or the
surviving, or new corporation (foreign or domestic) or other entity that is
liable to discharge the shareholder's right of dissent, in the case of a
merger, shall, within ten (10) days after the action is effected, deliver
or mail to the shareholder written notice that the action has been
effected, and the shareholder may, within ten (10) days from the delivery
or mailing of the notice, make written demand on the existing, surviving or
new corporation (foreign or domestic) or other entity, as the case may be,
for payment of the fair value of the shareholder's shares. The fair value
of the shares shall be the value thereof as of the day immediately
preceding the meeting, excluding any appreciation or depreciation in
anticipation of the proposed action. The demand shall state the number and
class of the shares owned by the shareholder and the fair value of the
shares as estimated by the shareholder. Any shareholder failing to make
demand within the ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the
case of action other than a merger, and the surviving or new corporation
(foreign or domestic) or other entity that is liable to discharge the
shareholder's right of dissent, in the case of a merger, shall, within ten
(10) days after the date the action is effected, mail to each shareholder
of record as of the effective date of the action notice of the fact and
date of the action and that the shareholder may exercise the shareholder's
right to dissent from the action. The notice shall be accompanied by a copy
of this Article and any articles or documents filed by the corporation with
the Secretary of State to effect the action. If the shareholder shall not
have consented to the taking of the action, the shareholder may, within
twenty (20) days after the mailing of the notice, make written demand on
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, for payment of the fair value of the
shareholder's shares. The fair value of the shares shall be the value
thereof as of the date the written consent authorizing the action was
delivered to the corporation pursuant to Section A of Article 9.10 of this
Act, excluding any appreciation or depreciation in anticipation of the
action. The demand shall state the number and class of shares owned by the
dissenting shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the twenty (20)
day period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may
be, of a demand for payment made by a dissenting shareholder in accordance
with Subsection (1) of this Section, the corporation (foreign or domestic)
or other entity shall deliver or mail to the shareholder a written notice
that shall either set out that the corporation (foreign or domestic) or
other entity accepts the amount claimed in the demand and agrees to pay
that amount within ninety (90) days after the date on which the action was
effected, and, in the case of shares represented by certificates, upon the
surrender of the certificates duly endorsed, or shall contain an estimate
by the corporation (foreign or domestic) or other entity of the fair value
of the shares, together with an offer to pay the amount of that estimate
within ninety (90) days after the date on which the action was effected,
upon receipt of notice within sixty (60) days after that date from the
shareholder that the shareholder agrees to accept that amount and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed.
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(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall
be made within ninety (90) days after the date on which the action was
effected and, in the case of shares represented by certificates, upon
surrender of the certificates duly endorsed. Upon payment of the agreed
value, the shareholder shall cease to have any interest in the shares or in
the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The appraisers
shall have power to examine any of the books and records of the corporation the
shares of which they are charged with the duty of valuing, and they shall make a
determination of the fair value of the shares upon such investigation as to them
may seem proper. The appraisers shall also afford a reasonable opportunity to
the parties interested to submit to them pertinent evidence as to the value of
the shares. The appraisers shall also have such power and authority as may be
conferred on Masters in Chancery by the Rules of Civil Procedure or by the order
of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation (foreign
or domestic) or other entity, as the case may be, pursuant to the payment of the
agreed value of the shares or pursuant to payment of the judgment entered for
the value of the shares, as in this Article provided, shall, in the case of a
merger, be treated as provided in the plan of merger and, in all other cases,
may be held and disposed of by the corporation as in the case of other treasury
shares.
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<PAGE> 149
F. The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by this
Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action. If
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
ART. 5.13. PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was fraudulent, and the respective shares for which
payment has been demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder, the
corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided in Article 5.12 or 5.16 of this Act, as
the case may be, of if after the hearing of a petition filed pursuant to Article
5.12 or 5.16, the court shall determine that such shareholder is not entitled to
the relief provided by those articles, then, in any such case, such shareholder
and all persons claiming under him shall be conclusively presumed to have
approved and ratified the corporate action from which he dissented and shall be
bound thereby, the right of such shareholder to be paid the fair value of his
shares shall cease, and his status as a shareholder shall be restored without
prejudice to any corporate proceedings which may have been taken during the
interim, and such shareholder shall be entitled to receive any dividends or
other distributions made to shareholders in the interim.
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<PAGE> 150
REVOCABLE PROXY
CEREBROVASCULAR ADVANCES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of CerebroVascular Advances, Inc., a Texas
corporation ("CVA"), hereby appoints , , , or any of them,
attorneys and proxies of the undersigned, with full power of substitution and
with authority in each of them to act in the absence of the other, to vote and
act for the undersigned stockholder at the Special Meeting of Stockholders to be
held at 9:00 a.m., local time, on , 1997, at 9901 1H-10 West, Suite 400,
San Antonio, Texas 78230 and at any adjournments thereof, upon the following
matters:
PROPOSAL: Approval and adoption of the Merger Agreement including the Plan of
Merger, attached as Exhibit A thereto, dated as of May 7, 1997, among
Quintiles Transnational Corp., a North Carolina corporation
("Quintiles"), CVA Acquisition Corp., Inc., a North Carolina
corporation which has not engaged in any material operations since its
incorporation and is a wholly-owned subsidiary of Quintiles
("Acquisition"), CVA, and the stockholders of CVA signatory thereto,
and the transactions contemplated thereunder, including a merger (the
"Merger") pursuant to which CVA would be merged with and into
Acquisition, with Acquisition being the surviving corporation in the
Merger, as more fully described in the accompanying Proxy
Statement/Prospectus.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This proxy will be voted as directed by the undersigned stockholder. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSAL. The
undersigned stockholder may revoke this proxy at any time before it is voted by
delivering to the Secretary of CVA either a written revocation of the proxy or a
duly executed proxy bearing a later date, or by appearing at the Special Meeting
and voting in person. The undersigned stockholder hereby acknowledges receipt of
notice of the Special Meeting and Proxy Statement/Prospectus dated ,
1997 and hereby revokes any proxy or proxies heretofore given.
(Continued and to be dated and signed on reverse side)
(Continued from other side)
If you receive more than one proxy card, please sign and return all cards in
the accompanying envelope.
[ ] I PLAN TO ATTEND THE , 1997 SPECIAL STOCKHOLDERS MEETING
Date: , 1997
--------------------------
--------------------------------------
(Signature of Stockholder or
Authorized Representative)
--------------------------------------
(Print name)
Please date and sign exactly as
name appears hereon. Each executor,
administrator, trustee, guardian,
attorney-in-fact and other fiduciary
should sign and indicate his or her
full title. In the case of stock
ownership in the name of two or more
persons, both persons should sign.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE SPECIAL MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
FAILURE TO RETURN THIS PROXY WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
PROPOSAL.
<PAGE> 151
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporation
Act permit a corporation to indemnify its directors, officers, employees or
agents under either or both a statutory or non-statutory scheme of
indemnification. Under the statutory scheme, a corporation may, with certain
exceptions, indemnify a director, officer, employee or agent of the corporation
who was, is, or is threatened to be made, a party to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative, or investigative, because of the fact that such person was a
director, officer, agent or employee of the corporation, or is or was serving at
the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. This indemnity may include the obligation to
pay any judgment, settlement, penalty, fine (including an excise tax assessed
with respect to an employee benefit plan) and reasonable expenses incurred in
connection with the proceeding (including attorney's fees), but no such
indemnification may be granted unless such director, officer, agent or employee
(i) conducted himself in good faith, (ii) reasonably believed (1) that any
action taken in his official capacity with the corporation was in the best
interest of the corporation or (2) that in all other cases his conduct at least
was not opposed to the corporation's best interest, and (iii) in the case of any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. Whether a director has met the requisite standard of conduct for the
type of indemnification set forth above is determined by the board of directors,
a committee of directors, special legal counsel or the stockholders in
accordance with Section 55-8-55. A corporation may not indemnify a director
under the statutory scheme in connection with the proceeding by or in the right
of the corporation in which the director was adjudged liable to the corporation
or in connection with a proceeding in which a director was adjudged liable on
the basis of having received an improper personal benefit.
In addition to, and separate and apart from the indemnification described
above under the statutory scheme, Section 55-8-57 of the North Carolina Business
Corporation Act permits a corporation to indemnify or agree to indemnify any of
its directors, officers, employees or agents against liability and expenses
(including attorneys fees) in any proceeding (including proceedings brought by
or on behalf of the corporation) arising out of their status as such or their
activities in any of the foregoing capacities, provided a corporation may not
indemnify or agree to indemnify a person against liability or expenses he may
incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interests of the
corporation. Quintiles' bylaws provide for indemnification to the fullest extent
permitted under the North Carolina Business Corporation Act, provided, however,
that Quintiles will indemnify any person seeking indemnification in connection
with a proceeding initiated by such person only if such proceeding was
authorized by the Board of Directors of Quintiles. Accordingly, Quintiles may
indemnify its directors, officers, and employees in accordance with either the
statutory or non-statutory standard.
Sections 55-8-52 and 55-8-56 of the North Carolina Business Corporation Act
require a corporation, unless its articles of incorporation provide otherwise,
to indemnify a director or officer who has been wholly successful, on the merits
or otherwise, in the defense of any proceeding to which such director or officer
was a party. Unless prohibited by the articles of incorporation, a director or
officer also may make application and obtain court-ordered indemnification if
the court determines that such director or officer is fairly and reasonably
entitled to such indemnification as provided in Sections 55-8-54 and 55-8-56.
Finally, Section 55-8-57 of the North Carolina Business Corporation Act
provides that a corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee or agent of the
corporation against certain liabilities incurred by such persons, whether or not
the corporation is otherwise authorized by the North Carolina Business
Corporation Act to indemnify such party. Quintiles' directors and officers are
currently covered under directors' and officers' insurance policies maintained
by Quintiles.
As permitted by North Carolina law, Article XI of Quintiles' Articles of
Incorporation limits the personal liability of directors for monetary damages
for breaches of duty as a director provided that such limitation will not apply
to (i) acts or omissions that the director at the time of the breach knew or
believed were clearly in conflict with the best interests of Quintiles, (ii) any
liability for unlawful distributions under N.C. Gen. Stat.
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<PAGE> 152
Section 55-8-33, (iii) any transaction from which the director derived an
improper personal benefit or (iv) acts or omissions occurring prior to the date
the provision became effective.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents (unless indicated) are filed herewith and made a
part of this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
2.01 Merger Agreement dated as of May 8, 1997 by and among
Quintiles, Acquisition and CVA (included as Appendix A of
the Proxy Statement/Prospectus)
2.02 Form of Plan of Merger (included as Appendix B of the Proxy
Statement/Prospectus)
2.03 Agreement to furnish omitted Schedules
4.01(1) Specimen Common Stock Certificate
4.02(2) Amended and Restated Articles of Incorporation, as amended
4.03(3) Amended and Restated Bylaws
5.01 Opinion of Smith, Anderson, Blount, Dorsett, Mitchell &
Jernigan, L.L.P.
23.01 Consent of Ernst & Young LLP
23.02 Consent of Arthur Andersen LLP
23.03 Consent of Smith, Anderson, Blount, Dorsett, Mitchell &
Jernigan, L.L.P. (included in Exhibit 5.01 hereto)
24.01 Powers of Attorney (see Page II-4)
</TABLE>
- ---------------
(1) Incorporated herein by reference to the identically numbered exhibit to the
Registrant's Registration Statement on Form S-1 (Registration No. 33-75766)
initially filed February 28, 1994, as amended.
(2) Incorporated herein by reference to the identically numbered exhibit to the
Registrant's Registration Statement on Form S-3 (Registration No. 333-19009)
initially filed December 30, 1996, as amended.
(3) Incorporated herein by reference to the identically numbered exhibit to
Quintiles' Annual Report on Form 10-K as filed with the Commission on March
25, 1996 and amended May 16, 1996.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file during, any period in which offers and sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high of the estimated
maximum offering range may be reflected in the form of the prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
II-2
<PAGE> 153
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first-class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
Company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 154
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Durham, State of North
Carolina, on May 8, 1997.
QUINTILES TRANSNATIONAL CORP.
By: /s/ DENNIS B. GILLINGS
------------------------------------
Dennis B. Gillings
Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis B. Gillings and Rachel R. Selisker and
each of them, each with full power to act without the other, his true and lawful
attorneys-in-fact and agents, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully for all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons on May 8,
1997 in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ DENNIS B. GILLINGS Chairman of the Board of Directors and Chief
- ----------------------------------------------------- Executive Officer
Dennis B. Gillings
Vice Chairman of the Board of Directors and
- ----------------------------------------------------- Chief Customer Officer
Barrie S. Haigh
/s/ SANTO J. COSTA President and Chief Operating Officer and
- ----------------------------------------------------- Director
Santo J. Costa
/s/ RACHEL R. SELISKER Chief Financial Officer, Executive Vice
- ----------------------------------------------------- President -- Finance and Director
Rachel R. Selisker
/s/ ROBERT C. BISHOP Director
- -----------------------------------------------------
Robert C. Bishop
Director
- -----------------------------------------------------
Vaughn D. Bryson
/s/ CHESTER W. DOUGLASS Director
- -----------------------------------------------------
Chester W. Douglass
</TABLE>
II-4
<PAGE> 155
<TABLE>
<C> <S>
- ------------------------------------------------------ Director
John G. Fryer
Director
- ------------------------------------------------------
Paul Knott
/s/ LAWRENCE S. LEWIN Director
- ------------------------------------------------------
Lawrence S. Lewin
/s/ ARTHUR M. PAPPAS Director
- ------------------------------------------------------
Arthur M. Pappas
/s/ LUDO J. REYNDERS Director
- ------------------------------------------------------
Ludo J. Reynders
Director
- ------------------------------------------------------
Richard H. Thompson
</TABLE>
II-5
<PAGE> 156
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
2.01 Merger Agreement dated as of May 8, 1997 by and among
Quintiles, Acquisition and CVA (included as Appendix A of
the Proxy Statement/Prospectus)
2.02 Form of Plan of Merger (included as Appendix B of the Proxy
Statement/Prospectus)
2.03 Agreement to furnish omitted Schedules
4.01(1) Specimen Common Stock Certificate
4.02(2) Amended and Restated Articles of Incorporation
4.03(3) Amended and Restated Bylaws
5.01 Opinion of Smith, Anderson, Blount, Dorsett, Mitchell &
Jernigan, L.L.P.
23.01 Consent of Ernst & Young LLP
23.02 Consent of Arthur Andersen LLP
23.03 Consent of Smith, Anderson, Blount, Dorsett, Mitchell &
Jernigan, L.L.P. (included in Exhibit 5.01 hereto)
24.01 Powers of Attorney (see Page II-4)
</TABLE>
- ---------------
(1) Incorporated herein by reference to the identically numbered exhibit to the
Registrant's Registration Statement on Form S-1 (Registration No. 33-75766)
initially filed February 28, 1994, as amended.
(2) Incorporated herein by reference to the identically numbered exhibit to the
Registrant's Registration Statement on Form S-3 (Registration No. 333-19009)
initially filed December 30, 1996, as amended.
(3) Incorporated herein by reference to the identically numbered exhibit to
Quintiles' Annual Report on Form 10-K as filed with the Commission on March
25, 1996 and amended May 16, 1996.
<PAGE> 1
EXHIBIT 2.03
Pursuant to Regulation S-K, Item 601(b)(2), the Exhibits and Schedules to
the Merger Agreement, as identified in the table of contents thereto, included
in Appendix A to the Proxy Statement/Prospectus, have not been filed. The
registrant agrees to furnish supplementally a copy of any omitted Exhibit or
Schedule to the Commission upon request; provided, however, the Registrant may
request confidential treatment of any such omitted items.
<PAGE> 1
EXHIBIT 5.01
[SMITH ANDERSON LETTERHEAD]
May 8, 1997
(919) 821-6668
Quintiles Transnational Corp.
4709 Creekstone Drive
Riverbirch Building, Suite 300
Durham, North Carolina 27703-8411
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We are counsel for Quintiles Transnational Corp. (the "Company") in
connection with the issuance by the Company of up to 350,000 shares of the
Company's Common Stock, $0.01 par value per share to be issued in exchange for
the shares of Common Stock and Series A Preferred Stock of CerebroVascular
Advances, Inc. ("CVA") outstanding as of the effective date of the merger of CVA
with and into CVA Acquisition Corp., a North Carolina corporation which has not
engaged in any material operations since its incorporation and is a wholly owned
subsidiary of the Company (the "Merger"). These shares are described in the
Company's Registration Statement on Form S-4 to be filed with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"), with which this opinion will be filed as an exhibit (the
"Registration Statement").
We have examined the Articles of Incorporation and Bylaws of the
Company, the minutes of the meetings of the Board of Directors of the Company
relating to the authorization and the issuance of securities and such other
documents, records, and matters of law as we have deemed necessary for purposes
of this opinion. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents as originals, the conformity to
originals of all documents submitted to us as certified copies or photocopies,
and the authenticity of the originals of such latter documents. In
<PAGE> 2
Quintiles Transnational Corp.
May 8, 1997
Page 2
rendering the opinion set forth below, we have relied on a certificate of a
Company officer, whom we believe is responsible.
Based upon the foregoing, it is our opinion, as of the date hereof,
that the 350,000 shares of Common Stock of the Company which are being
registered pursuant to the Registration Statement are duly authorized and, when
issued and delivered in exchange for the shares of CVA Common Stock and Series A
Preferred Stock surrendered in the Merger, as contemplated by the Registration
Statement, such shares will be validly issued, fully paid and nonassessable.
The opinion expressed herein does not extend to compliance with state
and federal securities laws relating to the sale of these securities.
We hereby consent to the reference to our firm under the heading "Legal
Matters" in the Registration Statement and to the filing of this opinion as
Exhibit 5.01 to the Registration Statement. Such consent shall not be deemed to
be an admission that this firm is within the category of persons whose consent
is required under Section 7 of the Act, or the regulations promulgated by the
Commission pursuant to such Act.
This opinion is rendered solely for your benefit in connection with the
transactions described above. This opinion may not be used or relied upon by any
other person without our prior written consent.
Sincerely yours,
SMITH, ANDERSON, BLOUNT, DORSETT,
MITCHELL & JERNIGAN, L.L.P.
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary - Accounting
Treatment," "Summary - Federal Income Tax Considerations," "Summary - Selected
Historical Financial Data," "Risk Factors - Possible Loss of Tax-Free
Treatment," "The Merger - The Merger Agreement," "The Merger - Accounting
Treatment," "The Merger - Federal Income Tax Considerations" and "Experts" in
the Registration Statement (Form S-4) and related Prospectus of Quintiles
Transnational Corp. (the "Company") for the registration of 350,000 shares of
its common stock and to (i) the incorporation by reference therein of our report
dated January 29, 1997 with respect to the consolidated financial statements of
the Company incorporated by reference in its Annual Report (Form 10-K) for the
year ended December 31, 1996 filed with the Securities and Exchange Commission
and (ii) the inclusion herein of our report dated February 12, 1997 with respect
to the financial statements of CerebroVascular Advances, Inc. as of and for the
year ended December 31, 1996.
/s/ Ernst & Young LLP
Raleigh, North Carolina
May 7, 1997
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
San Antonio, Texas
May 7, 1997
