AGREEMENT AND PLAN OF MERGER
among
BIOANALYTICAL SYSTEMS, INC.,
PI ACQUISITION CORP.,
and
PHARMAKINETICS LABORATORIES, INC.
June 20, 2002
INDEX OF DEFINED TERMS
----------------------
Term Section
---- -------
Acquisition Proposal Section 7.5(c)
Affiliate Section 5.13(e)(iii)
Agreed Courts Section 10.8
Agreement Introduction
Applicable Laws Section 5.1(d)
Articles of Incorporation Section 1.1
Articles of Merger Section 1.3
Assets Section 10.12
Break-Up Fee Section 9.2(b)
Bylaws Section 1.1
Certificates Section 3.1(b)
CERCLA Section 10.12
Claim Section 5.12
Class A Certificates Section 3.1(b)
Class A Preferred Background Information
Class B Certificates Section 3.1(b)
Class B Consideration Section 2.4(a)
Class B Preferred Background Information
Closing Section 1.2
Closing Date Section 1.2
COBRA Section 5.13(c)
Code Section 3.1(l)
Common Certificates Section 3.1(b)
Company Introduction
Company Benefit Plan Section 5.13(e)(i)
Company Board Background Information
Company Disclosure Schedule Article V, Introduction
Company Expenses Section 9.2(f)
Company Liquidated Damages Section 9.2(e)
Company Material Adverse Effect Section 5.1(a)
Company Properties Section 5.10(a)
Company SEC Reports Section 5.6
Company Stock Plans Section 2.5
Company Subsidiary Section 2.5
Computer Software Section 10.12
Confidentiality Agreement Section 7.6
Effective Time Section 1.3
Environmental Claim Section 10.12
Environmental Permit Section 5.11
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Environmental Law Section 10.12
Environmental Matters Section 10.12
Environmental Reports Section 10.12
ERISA Section 5.13(b)
Exchange Act Section 4.1(d)
Exchange Agent Section 3.1(a)
Exchange Fund Section 3.1(a)
Form 10-K Section 5.10(a)
GAAP Section 4.2(k)
Governmental Entity Section 4.1(d)
Hazardous Substance Section 10.12
Indemnified Parties Section 7.10(a)
Injunction Section 8.1(d)
Intellectual Property Section 10.12
Investment Assets Section 10.12
Investment Advisers Act Section 5.22
Investment Company Act Section 5.22
Liability Section 10.12
License Section 10.12
Liens Section 5.10(a)
Maintains (re: Company Benefit Plan) Section 5.13(e)(ii)
Maryland Secretary of State Section 1.3
Material Contracts Section 5.18
Merger Background Information
Merger Consideration Section 2.4(a)
MergerCo Introduction
MergerCo Board Section 4.1(b)
MergerCo Common Stock Section 2.1
MergerCo Expenses Section 9.2(d)
Merger Law Background Information
MergerCo Liquidated Damages Section 9.2(c)
MergerCo Material Adverse Effect Section 4.1(a)
MGCL Background Information
Multiemployer Plan Section 5.13(e)(iv)
Notes Section 2.3(a)
Option Section 2.5
Other Filings Section 7.2
Parent Introduction
Parent Common Background Information
Parent Material Adverse Effect Section 4.2(a)
Parent SEC Reports Section 4.2(k)
Parties Background Information
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Permitted Liens Section 10.12
Person Section 10.12
Plan Section 8.2(f)
PKLB Common Background Information
Proxy Statement Section 7.1(a)(ii)
Registration Statement Section 7.1(a)(ii)
Release Section 10.12
SEC Section 10.12
Securities Act Section 4.1(d)
Securities Laws Section 4.2(k)
Shareholder Representative Section 2.3(a)
Shareholders Background Information
Special Meeting Section 7.1(a)(i)
Subsidiary Section 10.2
Superior Acquisition Proposal Section 7.5(c)
Surviving Corporation Section 1.1
Taxes Section 5.9(b)
Tax Returns Section 5.9(c)
Tax Ruling Section 10.12
Transactions Background Information
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INDEX OF SCHEDULES AND EXHIBITS
-------------------------------
Exhibits
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1. Exhibit 1.1 - Amendments to the Articles of Incorporation of the Company
following the Merger
2. Exhibit 2.3 - Form of the Note
3. Exhibit 5.2(i) - Voting Securities of the Parent
4. Exhibit 4.2(m) - Certain Changes to Parent Exceptions
5. Exhibit 6.2 - Conduct of Business by Parent; Exceptions
6. Exhibit 8.2 - Form of Registration Rights Agreement
Schedules
---------
1. Company Disclosure Schedules:
a. Section 5.1: Exceptions to Existence, Good Standing, Authority and
Compliance with Law
b. Section 5.3: Capitalization; Agreements Relating to Company Stock
c. Section 5.4: Subsidiaries
d. Section 5.5: Violation of Agreements
e. Section 5.8: Exceptions to Absence of Certain Changes
f. Section 5.9: Taxes
g. Section 5.10(a): Properties - Real Property
h. Section 5.10(b): Properties - Disposal of Assets Not in Ordinary
Course
i. Section 5.11: Environmental Permits
j. Section 5.12: General Liability; Legal Proceedings
k. Section 5.13: Employee Benefit Plans
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l. Section 5.17: Material Contracts and Commitments
m. Section 5.18: Related Party Transactions
n. Section 5.19: Exceptions to Absence of Undisclosed Liabilities
o. Section 5.24: Definition of Company's Knowledge
p. Section 8.1(d): Required Consents to Merger
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made as of June 20,
2002, among Bioanalytical Systems, Inc., an Indiana corporation ("Parent"), PI
Acquisition Corp., a Maryland corporation and a wholly-owned subsidiary of
Parent ("MergerCo"), and PharmaKinetics Laboratories, Inc., a Maryland
corporation (the "Company").
Background Information
A. The respective Boards of Directors of MergerCo and the Company have
approved the merger of MergerCo with and into the Company (the "Merger") in
accordance with the Maryland General Corporation Law (the "MGCL" or the "Merger
Law"). Furthermore, upon the terms and subject to the conditions set forth in
this Agreement: (x) the holders of common shares of the Company ("PKLB Common")
issued and outstanding immediately prior to the Effective Time (as hereinafter
defined) will be entitled to the right to receive shares of the common stock of
Parent ("Parent Common"), (y) the holders of the Class A Convertible Preferred
Stock of the Company ("Class A Preferred") issued and outstanding immediately
prior to the Effective Time will be entitled to the right to receive a Note (as
hereinafter defined), and (z) the holders of the Class B Convertible Preferred
Stock of the Company ("Class B Preferred") issued and outstanding immediately
prior to the Effective Time will be entitled to the right to receive shares of
Parent Common. The holders of shares of PKLB Common, Class A Preferred and Class
B Preferred are sometimes hereinafter collectively referred to as the
"Shareholders".
B. The Board of Directors of the Company (the "Company Board") has, in
light of and subject to the terms and conditions set forth in this Agreement,
determined that the Merger Consideration (as hereinafter defined) to be paid in
the Merger is fair to the Shareholders of the Company from a financial point of
view and that the Merger is otherwise in the best interests of the Company and
the Shareholders. The Company Board has approved this Agreement and the
transactions contemplated or required by this Agreement, including the Merger
(collectively, the "Transactions"), and has recommended approval and adoption by
the Shareholders of this Agreement and the Transactions.
C. MergerCo, Parent and the Company (collectively, the "Parties") desire to
make certain representations, warranties, covenants and agreements in connection
with the Transactions and to prescribe various conditions to the Transactions.
Statement of Agreement
The Parties acknowledge the accuracy of the foregoing Background
Information and agree as follows:
ARTICLE I
THE MERGER
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Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Company and MergerCo shall consummate the
Merger pursuant to which (a) MergerCo shall be merged with and into the Company
and the separate corporate existence of MergerCo shall thereupon cease, (b) the
Company shall be the successor or surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Maryland, and (c) the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The articles of
incorporation of the Company (the "Articles of Incorporation"), as in effect
immediately prior to the Effective Time, as amended in accordance with Exhibit
1.1 hereto, shall be the Articles of Incorporation of the Surviving Corporation
from and after the Effective Time until further amended in accordance with law
and such Articles of Incorporation. The bylaws of the Company (the "Bylaws") as
in effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation from and after the Effective Time until further amended in
accordance with law, the Articles of Incorporation and such Bylaws. The Merger
shall have the effects specified in the Merger Law.
Section 1.2 Closing. Unless this Agreement shall have been terminated and
the transactions contemplated herein shall have been abandoned pursuant to
Section 9.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VIII hereof, the closing of the Merger (the "Closing") shall
take place at 10:00 a.m., Indianapolis, Indiana, time, on the second business
day after satisfaction or waiver (by the applicable party entitled to the
benefit thereof) of all of the conditions set forth in Article VIII hereof (the
"Closing Date"), at the offices of Ice ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another time, date or place is agreed to in
writing by the Parties.
Section 1.3 Effective Time. Subject to the conditions set forth in Article
VIII of this Agreement, on the Closing Date, MergerCo and the Company shall duly
execute and file articles of merger (the "Articles of Merger") with the
Secretary of State of Maryland (the "Maryland Secretary of State") all in
accordance with the Merger Law, and the Merger shall become effective (the
"Effective Time") upon the last to occur of (a) the filing of the Articles of
Merger with the Maryland Secretary of State, or (b) such later time as the
Parties may agree to designate in such filing; provided, however, that the
Effective Time shall not be more than thirty-one (31) days from the date of such
filings. Upon the terms and subject to the conditions of this Agreement, the
Parties shall use all reasonable efforts to assure that the filings contemplated
hereby are made, and the Effective Time occurs, as soon as is practicable.
Section 1.4 Directors and Officers. The directors and officers of MergerCo
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, each to hold office in accordance with
the Articles of Incorporation and Bylaws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
-----------------------------------------
Section 2.1 Effect on Capital Stock of MergerCo. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of shares
of PKLB Common or any holder of shares of capital stock of MergerCo, each common
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share of MergerCo (the "MergerCo Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of Common Stock of the Surviving Corporation,
and all certificates formerly representing shares of MergerCo shall be deemed
cancelled and of no further effect. As soon as practicable following the
Closing, a certificate representing the shares of the Surviving Corporation
described in the preceding sentence shall be issued and delivered to the Parent.
Section 2.2 Conversion of PKLB Common. At the Effective Time, by virtue of
the Merger and without any action on the part of MergerCo, the Company or the
holders of any shares of PKLB Common:
(a) Subject to the other provisions of this Section 2.2 and to Section
3.1(k) and (l), each share of PKLB Common issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive one-twelfth (1/12) of a share of Parent Common, upon surrender
of the Common Certificate (as defined below) representing such shares of
PKLB Common.
(b) All such shares of PKLB Common, when converted as provided in
Section 2.2(a), shall no longer be considered outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
Common Certificate previously evidencing such shares shall thereafter
represent only the right to receive the number of shares of Parent Common
set forth in Section 2.2(a). The holders of Common Certificates (as defined
below) previously evidencing shares of PKLB Common outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to
the PKLB Common, except as otherwise provided herein or by law, and, upon
the surrender of Common Certificates in accordance with Section 3.1, shall
only have the right to receive for their shares of PKLB Common the number
of shares of Parent Common as set forth in Section 2.2(a), without any
interest thereon.
Section 2.3 Conversion of Class A Preferred. At the Effective Time, by
virtue of the Merger and without any action on the part of MergerCo, the Company
or the holders of any shares of Class A Preferred:
(a) Subject to the other provisions of this Section 2.3 and to Section
3.1(l), each share of Class A Preferred issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive a
six percent (6%) convertible subordinated note substantially in the form
attached hereto as Exhibit 2.3 (the "Notes", and each individually a
"Note") issued by Parent in a principal amount determined in accordance
with Section 2.3(c), upon surrender of the Class A Certificate (as defined
below) representing such shares of Class A Preferred.
(b) All such shares of Class A Preferred, when converted as provided
in Section 2.3(a), shall no longer be considered outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
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Class A Certificate previously evidencing such shares shall thereafter
represent only the right to receive a Note in a principal amount determined
in accordance with Section 2.3(c). The holders of Class A Certificates (as
defined below) previously evidencing shares of Class A Preferred
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to the Class A Preferred, except as otherwise provided
herein or by law, and, upon the surrender of Class A Certificates in
accordance with Section 3.1, shall only have the right to receive for their
shares of Class A Preferred a Note in a principal amount determined in
accordance with Section 2.3(c), without any interest thereon other than
expressly stated therein.
(c) The principal amount of Notes into which each share of Class A
Preferred is to be converted shall be equal to the quotient of (i)
$5,000,000; divided by (ii) the number of shares of Class A Preferred
validly issued and outstanding as of the Effective Time.
Section 2.4 Conversion of Class B Preferred.
(a) Subject to the other provisions of this Section 2.4 and to Section
3.1(k) and (l), each share of Class B Preferred issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive that number of shares of Parent Common which is equal to the
number of shares of Parent Common into which such share would have been
converted pursuant to Section 2.2(a) of this Agreement if such share of
Class B Preferred had been converted into PKLB Common in accordance with
the terms of the Class B Preferred immediately prior to the Effective Time
(the "Class B Consideration", and, collectively with the Parent Common and
the Notes, the "Merger Consideration"), upon surrender of the Class B
Certificate (as defined below) representing such shares of Class B
Preferred.
(b) All such shares of Class B Preferred, when converted as provided
in Section 2.4(a), shall no longer be considered outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
Class B Certificate previously evidencing such shares shall thereafter
represent only the right to receive the Class B Consideration set forth in
Section 2.4(a). The holders of Class B Certificates (as defined below)
previously evidencing shares of Class B Preferred outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to
the Class B Preferred, except as otherwise provided herein or by law, and,
upon the surrender of Class B Certificates in accordance with Section 3.1,
shall only have the right to receive for their shares of Class B Preferred
the Class B Consideration set forth in Section 2.4(a) as provided herein,
without any interest thereon.
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Section 2.5 Company Stock Options. As of and subject to the occurrence of
the Effective Time, each outstanding option, warrant or similar right (including
any related stock appreciation right) (an "Option") issued, awarded or granted
pursuant to any plan, agreement or arrangement of the Company or any Subsidiary
(as defined below) of the Company (a "Company Subsidiary") and entitling the
holder thereof to purchase one or more shares of PKLB Common, Class A Preferred
or Class B Preferred (the "Company Stock Plans") shall, as of the Effective
Time, be cancelled regardless of the vesting schedule contained in any Option
agreement or any of the Company Stock Plans.
ARTICLE III
EXCHANGE PROCEDURE
------------------
Section 3.1 Exchange of Shares of PKLB Common, Class A Preferred and Class
B Preferred.
(a) Prior to the Effective Time, MergerCo shall appoint a bank or
trust company reasonably acceptable to the Company to act as exchange agent
(the "Exchange Agent"). At or prior to the Effective Time, MergerCo shall
deposit, or MergerCo shall otherwise take all steps necessary to cause to
be deposited, with the Exchange Agent in an account (the "Exchange Fund")
the aggregate Merger Consideration to which holders of shares of PKLB
Common, Class A Preferred and Class B Preferred shall be entitled at the
Effective Time pursuant to Sections 2.2(a), 2.3(a) and 2.4(a).
(b) Promptly after the Effective Time, MergerCo shall cause the
Exchange Agent to mail to: (i) each record holder of certificates that
immediately prior to the Effective Time represented shares of PKLB Common
(the "Common Certificates"), (ii) each record holder of certificates that
immediately prior to the Effective Time represented shares of Class A
Preferred (the "Class A Certificates"), and (iii) each record holder of
certificates that immediately prior to the Effective Time represented
shares of Class B Preferred (the "Class B Certificates", and, collectively
with the Common Certificates and the Class A Certificates, the
"Certificates"), a form of letter of transmittal which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent.
(c) To the extent that Common Certificates are delivered by any
Shareholder to the Exchange Agent, duly endorsed, the Exchange Agent shall
promptly, and in no event later than five (5) business days, deliver to any
such holder certificates registered in the name of the holder representing
the Parent Common to which the Common Certificates entitle him or her under
the terms of this Agreement. Upon such delivery such Common Certificate
shall forthwith be canceled.
(d) To the extent that Class A Certificates are delivered by any
Shareholder to the Exchange Agent, duly endorsed, the Exchange Agent shall
promptly, and in no event later than five (5) business days, deliver to any
such holder the Note registered in the name of such holder in the amount to
which the Class A Certificates entitle such holder under this Agreement.
Upon such delivery such Class A Certificate shall forthwith be canceled.
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(e) To the extent that Class B Certificates are delivered by any
Shareholder to the Exchange Agent, duly endorsed, the Exchange Agent shall
promptly, and in no event later than five (5) business days, deliver to any
such holder the Class B Consideration to which the Class B Certificates
entitle him or her under the terms of this Agreement. Upon such delivery
such Class B Certificate shall forthwith be canceled.
(f) From and after the Effective Time until surrendered in accordance
with paragraphs (c), (d) and (e) above, each Certificate shall represent
solely the right to receive the Merger Consideration relating thereto.
Except for interest paid or accured on the Notes pursuant to the terms
thereof, no interest or dividends shall be paid or accrued on the Merger
Consideration. If the Merger Consideration (or any portion thereof) is to
be delivered to any person other than the person in whose name the
Certificate surrendered therefor is registered, it shall be a condition to
the right to receive such Merger Consideration that the Certificate so
surrendered be properly endorsed or otherwise be in proper form for
transfer and that the person surrendering such Certificate shall pay to the
Exchange Agent any transfer or other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered
holder of the Certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
(g) Promptly following the date which is 180 days after the Effective
Time, the Exchange Agent shall deliver to the Surviving Corporation all
cash, certificates representing Parent Common, Notes, Class B
Consideration, surrendered Certificates and other documents in its
possession relating to the Transactions, and the Exchange Agent's duties
shall terminate. Thereafter, each holder of any Certificate may surrender
such Certificate to the Surviving Corporation and (subject to applicable
abandoned property, escheat and similar laws) receive in consideration
therefor the Merger Consideration relating thereto without any interest or
dividends thereon.
(h) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any shares of PKLB Common,
Class A Preferred or Class B Preferred which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates
formerly representing shares of PKLB Common, Class A Preferred or Class B
Preferred are presented to the Surviving Corporation or the Exchange Agent,
they shall be surrendered and canceled in return for the payment of the
Merger Consideration relating thereto, as provided in this Article III.
(i) None of MergerCo, the Company or the Exchange Agent shall be
liable to any person in respect of any cash from the Exchange Fund
delivered to a public official in good faith pursuant to any applicable
abandoned property, escheat or similar law.
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(j) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the provision of reasonable and customary indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration payable to such
person pursuant to this Agreement.
(k) No certificates or scrip representing fractional shares of Parent
Common shall be issued in the Merger and no holder of any such fractional
share interest shall be entitled to vote, to receive any dividends or other
distributions paid or declared on Parent Common, or to exercise any other
rights as a shareholder of Parent with respect to such fractional share
interest. Each holder of PKLB Common or Class B Preferred who would
otherwise be entitled to receive a fractional share of Parent Common in
exchange for such holders' PKLB Common or Class B Preferred in the Merger
shall be entitled, upon surrender of Certificates representing PKLB Common
or Class B Preferred in accordance with this Section 3.1, to receive in
lieu of ----------- such fractional share an amount in cash equal to the
amount of such fraction multiplied by the average of the closing prices for
Parent Common as reported by Nasdaq for the ten (10) trading days ending on
the last trading day immediately prior to the Effective Time.
(l) The Surviving Corporation shall be entitled to deduct and withhold
from the Merger Consideration otherwise payable pursuant to this Agreement
to any holder of shares of PKLB Common, Class A Preferred, or Class B
Preferred such amounts as the Surviving Corporation is required to deduct
and withhold with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended (the "Code"), or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by the
Surviving Corporation, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares
of PKLB Common, Class A Preferred, or Class B Preferred with respect to
which such deduction and withholding was made by the Surviving Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGERCO AND PARENT
-----------------------------------------------------
Section 4.1 Representations and Warranties of MergerCo. MergerCo and
Parent, jointly and severally, hereby represent and warrant to the Company as
follows:
(a) Organization. MergerCo is a corporation duly organized validly
existing and in good standing under the laws of the State of Maryland.
MergerCo has all requisite corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to
carry on its business as now being and proposed to be conducted, except
where the failure to be so organized, existing and in good standing or to
have such power, authority, and governmental approvals would not reasonably
be expected to have a material adverse effect on the business, results of
operations or condition (financial or otherwise) of MergerCo (a "MergerCo
Material Adverse Effect").
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(b) Authorization, Validity of Agreement; Necessary Action. MergerCo
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the Transactions. The execution, delivery and
performance by MergerCo of this Agreement and the consummation of the
Transactions have been duly authorized by the Board of Directors of
MergerCo (the "MergerCo Board") and by the shareholders of MergerCo, and no
other corporate action on the part of MergerCo is necessary to authorize
the execution and delivery by MergerCo of this Agreement and the
consummation of the Transactions. This Agreement has been duly executed and
delivered by MergerCo and, assuming the due and valid authorization,
execution and delivery hereof by the Company, is a valid and binding
obligation of MergerCo enforceable against MergerCo in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights generally and to general
principles of equity.
(c) Ownership. MergerCo is a wholly owned Subsidiary of Parent.
(d) Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under,
and other applicable requirements of, the Securities Act of 1933, (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and state securities or state "Blue Sky" laws, none of the
execution, delivery or performance of this Agreement by MergerCo, the
consummation by MergerCo of the Transactions or compliance by MergerCo with
any of the provisions hereof will (i) conflict with or result in any breach
of any provision of the articles of incorporation or bylaws of MergerCo,
(ii) require any filing with, or permit, authorization, consent or approval
of, any Governmental Entity (as hereinafter defined), (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which MergerCo is
a party or by which it or any of its properties or assets may be bound, or
(iv) violate any order, writ, injunction, decree, statute, rule, regulation
or other law applicable to MergerCo or any of its properties or assets,
excluding from the foregoing clauses (ii), (iii) and (iv) such violations,
breaches or defaults which would not, individually or in the aggregate,
reasonably be expected to have a MergerCo Material Adverse Effect. For
purposes of this Agreement, "Governmental Entity" means any governmental or
quasi-governmental authority including, without limitation, any federal,
state, territorial, county, municipal or other governmental or
quasi-governmental agency, board, branch, bureau, commission, court,
department or other instrumentality or political unit or subdivision,
whether domestic or foreign.
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(e) Formation of MergerCo, No Prior Activities. MergerCo was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement. As of the date hereof and as of the Effective Time, except for
(i) obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement and (ii) this Agreement and any other agreements or arrangements
contemplated by this Agreement or in furtherance of the transactions
contemplated hereby, MergerCo has not incurred, directly or indirectly,
through any subsidiary or affiliate, any obligations or liabilities or
engaged in any business activities of any type or kind whatsoever or
entered into any agreements or arrangements with any person.
Section 4.2 Representations and Warranties of Parent. Parent hereby
represents and warrants to the Company as follows:
(a) Organization. Parent is a corporation duly organized and validly
existing under the laws of the State of Indiana, for which the most recent
required biennial report has been filed in the office of the Indiana
Secretary of State and no articles of dissolution have been filed in such
office, and has all requisite corporate power and authority and all
necessary governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such
power, authority, and governmental approvals would not reasonably be
expected to have a material adverse effect on the business, results of
operations or condition (financial or otherwise) of Parent (a "Parent
Material Adverse Effect").
(b) Authorization, Validity of Agreement; Necessary Action. Upon the
approval by the Board of Directors of Parent of this Agreement and the
Transactions, Parent has all requisite power and authority to execute and
deliver this Agreement and to consummate the Transactions (subject to the
authorizations, consents, and approvals described in Section 4.2(c),
below), the execution, delivery and performance by Parent of this Agreement
and the consummation of the Transactions have been duly authorized by all
necessary action on the part of Parent, and no other action on the part of
Parent is necessary to authorize the execution and delivery by Parent of
this Agreement and the consummation of the Transactions. This Agreement has
been duly executed and delivered by Parent and, assuming due and valid
authorization, execution and delivery hereof by the Company, is a valid and
binding obligation of Parent enforceable against Parent in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights generally and to general
principles of equity.
(c) Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under,
and other applicable requirements of, the Securities Act, the Exchange Act,
and state securities or state "Blue Sky" laws, none of the execution,
- 9 -
delivery or performance of this Agreement by Parent, the consummation by
Parent of the Transactions or compliance by Parent with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the organizational documents of Parent, (ii) require any
filing with, or permit, authorization, consent or approval of, any
Governmental Entity, (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which Parent is a party or by which it or any
of its properties or assets may be bound, or (iv) violate any order, writ,
injunction, decree, statute, rule, regulation or other law applicable to
Parent or any of its properties or assets, excluding from the foregoing
clauses (ii), (iii) and (iv) such violations, breaches or defaults which
would not, individually or in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect.
(d) Litigation. There are no actions, suits, proceedings,
investigations or claims pending against MergerCo or Parent, at law or in
equity, or before or by any court, commission, governmental department,
board, bureau, agency, administrative officer or executive, or
instrumentality, whether federal, state, local or foreign, or before any
arbitrator, that would, individually or in the aggregate, reasonably be
expected to prevent or delay the consummation of the Transactions or to
have a MergerCo Material Adverse Effect or a Parent Material Adverse
Effect, as the case may be.
(e) No Brokers. Neither MergerCo nor Parent has entered into any
contract, arrangement or understanding with any person or firm, which may
result in the obligation of such entity or the Company to pay any finder's
fees, brokerage or agent's commissions or other like payments in connection
with the negotiations leading to this Agreement or consummation of the
Transactions.
(f) Compliance with Laws. MergerCo and Parent are in compliance with
all Applicable Laws (as hereinafter defined), except where the failure to
comply would not, individually or in the aggregate, reasonably be expected
to have a MergerCo Material Adverse Effect or a Parent Material Adverse
Effect, as the case may be.
(g) Contracts; Debt Instruments. Neither Parent nor any of its
Subsidiaries has received a written notice that Parent or any of its
Subsidiaries is in violation of or in default under any material loan or
credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other material contract, agreement,
arrangement or understanding, to which it is a party or by which it or any
of its properties or assets is bound, nor does any violation or default
exist, except to the extent such violation or default would not,
individually or in the aggregate, have a Parent Material Adverse Effect or
a MergerCo Material Adverse Effect, as the case may be.
- 10 -
(h) Investment Company Act of 1940. Neither Parent nor any of its
Subsidiaries is, or at the Effective Time will be, required to be
registered under the Investment Company Act (as defined below).
(i) Capitalization; Parent Common. As of March 31, 2002, the
authorized Capital Stock of Parent consists of (i) 19,000,000 shares of
common stock, no par value, of which 4,569,416 shares were, as of March 31,
2002, outstanding, (ii) 1,000,000 shares of preferred stock, no par value,
of which no shares were, as of March 31, 2002, outstanding. As of March 31,
2002, there were 124,964 outstanding options. As of March 31, 2002, all of
the outstanding shares of Parent were validly issued, fully paid and
nonassessable, and were not issued in violation of any preemptive or
similar rights of any shareholder of Parent. The shares of Parent Common to
be issued as a result of the Merger will be validly issued, fully paid and
nonassessable, and will not have been issued in violation of any preemptive
or similar rights of any shareholder of Parent. Except as set forth on
Exhibit 5.2(i), there are no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote)
with the shareholders of Parent on any matter and there are no outstanding
options, warrants, calls, subscriptions, convertible securities, or other
rights, agreements or commitments which obligate Parent to issue, transfer
or sell any shares of capital stock of Parent.
(j) Complete Disclosure. No representation or warranty by Parent or
MergerCo in this Agreement contains, or will contain as of the Effective
Time, any untrue statement of a material fact or omits, or will omit as of
the Effective Time, a material fact necessary to make the statements
contained herein or therein not misleading.
(k) SEC Documents, Financial Matters. Parent has filed all forms,
reports and documents required to be filed by it with the SEC
(collectively, the "Parent SEC Reports"), in accordance with the Exchange
Act, the Securities Act and the rules and regulations promulgated
thereunder (the "Securities Laws"). Each of the consolidated balance sheets
of Parent included in or incorporated by reference into the Parent SEC
Reports (including the related notes and schedules) fairly presents in all
material respects the consolidated financial position of Parent and its
subsidiaries as of its date, and each of the consolidated statements of
income, retained earnings and cash flows of Parent included in or
incorporated by reference into the Parent SEC Reports (including any
related notes and schedules) fairly presents in all material respects the
results of operations, retained earnings or cash flows, as applicable, of
Parent and its subsidiaries for the periods set forth therein (subject, in
the case of unaudited statements, to normal year-end audit adjustments
which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as may be noted
therein and except, in the case of the unaudited statements, as permitted
by Form 10-Q pursuant to Section 13 or 15(d) of the Exchange Act.
- 11 -
(l) Litigation. Except as disclosed in the Parent SEC Reports or as
would not, individually or in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect, there are no actions, suits, proceedings,
investigations or claims pending or, to the knowledge of Parent, threatened
against Parent, at law or in equity, or before or by any court, commission,
governmental department, board, bureau, agency, administrative officer or
executive, or instrumentality (including, without limitation any actions,
suits, proceedings or investigations with respect to the transactions
contemplated by this Agreement), whether federal, state, local or foreign,
or before any arbitrator.
(m) Absence of Certain Changes. Except as set forth in Exhibit 4.2(m)
and except as disclosed in the Parent SEC Reports filed after June 30,
2001, since July 1, 2001, Parent and its subsidiaries have conducted their
businesses in the ordinary course of business and there has not been any
event or events that have taken place that would, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect.
(n) Limitation on the Company's Representations. Parent acknowledges
that in entering into this Agreement it has not relied on any
representations or warranties of the Company or on any materials given to
or made available to Parent or any of its subsidiaries, or any of their
respective agents or representatives by the Company or any of its agents or
representatives other than the representations and warranties of the
Company set forth in this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Except as set forth in the disclosure schedules delivered at or prior to
the execution hereof to MergerCo (the "Company Disclosure Schedule"), the
Company represents and warrants to Parent and MergerCo as follows:
Section 5.1 Existence; Good Standing; Authority Compliance With Law.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of its state of formation and has all
requisite corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to have such
power, authority, and governmental approvals would not reasonably be
expected to have a Company Material Adverse Effect (as hereinafter
defined). The Company is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of any other
state of the United States in which the ownership of its property or the
conduct of its business makes such qualification necessary, except where
the failure to be so licensed or qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect (as hereinafter defined). For purposes of this
Agreement, an event shall be deemed to have a "Company Material Adverse
Effect" if such event has a material adverse effect on the business,
results of operations or condition (financial or otherwise) of the Company.
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(b) Except as set forth in Section 5.1 of the Company Disclosure
Schedule, each of the Company Subsidiaries is an entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, has the power and authority to own its properties and to
carry on its business as it is now being conducted, and is duly qualified
to do business and is in good standing in each jurisdiction in which the
ownership of its property or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so
qualified or to be in good standing would not reasonably be expected to
have a Company Material Adverse Effect.
(c) Except as set forth in Section 5.1 of the Company Disclosure
Schedule, to the knowledge of the Company, the Company and the Company
Subsidiaries possess all licenses, permits and other authorizations
required to conduct their businesses as now conducted by them, except where
the failure to possess such licenses, permits and other authorizations
would not, individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect.
(d) Except as set forth in Section 5.1 of the Company Disclosure
Schedule, the Company and the Company Subsidiaries are in compliance with
all applicable laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered, by any
federal, state or local court or Governmental Entity applicable to the
Company or to any of the Company Subsidiaries or to their respective
businesses or properties (collectively, the "Applicable Laws"), except
where the failure to comply would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
Section 5.2 Authorization, Validity and Effect of Agreements. Each of the
Company and the Company Subsidiaries, as applicable, has the requisite power and
authority to enter into the Transactions and to execute and deliver this
Agreement. The Company Board has approved this Agreement and the Transactions.
Subject only to the approval of this Agreement by the Shareholders, the
execution by the Company of this Agreement and the consummation of the
Transactions have been duly authorized by all requisite corporate action on the
part of the Company. This Agreement has been duly executed and delivered by the
Company and, subject to approval by Shareholders, and assuming due and valid
authorization, execution and delivery thereof by MergerCo and Parent,
constitutes a valid and legally binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights generally and to general principles of equity.
- 13 -
Section 5.3 Capitalization. The authorized capital stock of the Company
consists of 10,000,000 shares, $.005 par value, of PKLB Common, and 1,500,000
preferred shares, no par value, of the Company (including the shares of both the
Class A Preferred and the Class B Preferred). As of the date of this Agreement,
(a) 2,496,129 shares of PKLB Common were issued and outstanding; (b) 833,300
shares of Class A Preferred were issued and outstanding; (c) 250,000 shares of
Class B Preferred were issued and outstanding; and (d) there are 7,503,871
shares of PKLB Common and 416,700 preferred shares authorized but unissued. All
such issued and outstanding shares of PKLB Common, Class A Preferred and Class B
Preferred have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. Except as set forth in Section 5.3
of the Company Disclosure Schedule, (i) there are no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the shareholders of the Company on any matter, (ii) there
are no outstanding options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate the
Company to issue, transfer or sell any shares of capital stock of the Company,
(iii) there are no outstanding contractual obligations of the Company or any
Company Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock, partnership interests or any other securities of the Company or
any Company Subsidiary, and (iv) neither the Company nor any Company Subsidiary
is under any obligation, contingent or otherwise, by reason of any agreement to
register the offer and sale or resale of any of its securities under the
Securities Act. As of the date hereof, there are no declared but unpaid
dividends outstanding with respect to the PKLB Common, the Class A Preferred or
the Class B Preferred.
Section 5.4 Subsidiaries. Section 5.4 of the Company Disclosure Schedule
sets forth a list of the Company Subsidiaries. Except as set forth in Section
5.4 of the Company Disclosure Schedule, the Company owns directly or indirectly
each of the outstanding shares of capital stock or other equity interests of
each of the Company Subsidiaries free and clear of all liens, pledges, security
interests, claims or other encumbrances. Each of the outstanding shares of
capital stock of each of the Company Subsidiaries that is a corporation has been
duly authorized and validly issued and is fully paid and nonassessable. Except
as set forth in Section 5.4 of the Company Disclosure Schedule, neither the
Company nor any Company Subsidiary owns directly or indirectly any interest or
investment (whether equity or debt) in any corporation, partnership, limited
liability company, joint venture, business, trust or other entity (other than
investments in short-term investment securities and trade receivables).
Section 5.5 No Violation; Consents. Neither the execution and delivery by
the Company of this Agreement nor the consummation by the Company of the
Transactions in accordance with the terms hereof will conflict with or result in
a breach of any provisions of the Articles of Incorporation, Bylaws, or other
organizational documents of the Company or of any Company Subsidiary. Except as
set forth in Section 5.5 of the Company Disclosure Schedule, to the knowledge of
the Company, the execution and delivery by the Company of this Agreement and
consummation by the Company of the Transactions in accordance with the terms
hereof will not violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
- 14 -
of time or both, would constitute a default) under, or result in the termination
or in a right of termination or cancellation of, or accelerate the performance
required by, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties of the Company or the Company
Subsidiaries under, or result in being declared void, voidable or without
further binding effect, any of the terms, conditions or provisions of (a) any
note, bond, mortgage, indenture, deed of trust or (b) any license, permit,
contract, agreement or obligation to which the Company or any of the Company
Subsidiaries is a party, or by which the Company or any of the Company
Subsidiaries or any of their properties is bound, except as would not (i)
prevent or delay consummation of the Merger in any material respect or otherwise
prevent the Company from performing its obligations under this Agreement in any
material respect, or (ii) individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. Other than the filings
provided for in the Exchange Act, the Securities Act or applicable state
securities and "Blue Sky" laws, the execution and delivery of this Agreement by
the Company does not, and the performance of this Agreement by the Company and
consummation of the Transactions do not, require any consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority, except as would not (A) prevent or delay consummation
of the Merger in any material respect or otherwise prevent the Company from
performing its obligations under this Agreement in any material respect or (B)
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
Section 5.6 SEC Documents, Financial Matters. The Company has filed all
forms, reports and documents required to be filed by it with the SEC
(collectively, the "Company SEC Reports"), in accordance with the Securities
Laws. Each of the consolidated balance sheets of the Company included in or
incorporated by reference into the Company SEC Reports (including the related
notes and schedules) fairly presents in all material respects the consolidated
financial position of the Company and the Company Subsidiaries as of its date,
and each of the consolidated statements of income, retained earnings and cash
flows of the Company included in or incorporated by reference into the Company
SEC Reports (including any related notes and schedules) fairly presents in all
material respects the results of operations, retained earnings or cash flows, as
applicable, of the Company and the Company Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to normal year-end
audit adjustments which would not be material in amount or effect), in each case
in accordance with GAAP consistently applied during the periods involved, except
as may be noted therein and except, in the case of the unaudited statements, as
permitted by Form 10-Q pursuant to Section 13 or 15(d) of the Exchange Act.
Section 5.7 Litigation. Except as disclosed in the Company SEC Reports or
as would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect, there are no actions, suits, proceedings,
investigations or claims pending or, to the knowledge of the Company, threatened
against the Company, at law or in equity, or before or by any court, commission,
governmental department, board, bureau, agency, administrative officer or
executive, or instrumentality (including, without limitation any actions, suits,
proceedings or investigations with respect to the transactions contemplated by
this Agreement), whether federal, state, local or foreign, or before any
arbitrator.
- 15 -
Section 5.8 Absence of Certain Changes. Except as set forth in Section 5.8
of the Company Disclosure Schedule and except as disclosed in the Company SEC
Reports filed after June 30, 2001, since July 1, 2001, the Company and the
Company Subsidiaries have conducted their businesses in the ordinary course of
business and there has not been: (a) any event or events that have taken place
that would, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect or (b) except as required by any Applicable Law,
any action taken by the Company that would require the consent of MergerCo under
Section 6.1 if taken after the execution of this Agreement.
Section 5.9 Taxes.
(a) Except as set forth in Section 5.9 of the Company Disclosure
Schedule, each of the Company and the Company Subsidiaries has filed all
Tax Returns (as hereinafter defined) which the Company or the Company
Subsidiaries were required to file (after giving effect to any filing
extension granted by a Governmental Entity), and has paid all Taxes (as
hereinafter defined) required to be paid by it, except, in each case, where
the failure to file such Tax Returns or pay such Taxes would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. To the knowledge of the Company, no deficiencies
for any Taxes have been proposed, asserted or assessed against the Company
or any of the Company Subsidiaries, and no requests for waivers of the time
to assess any such Taxes are pending. Except as set forth in Section 5.9 of
the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary is a party to any Tax sharing ----------- agreement, or
agreement for an exemption with any Governmental Entity.
(b) For purposes of this Agreement, "Taxes" means all federal, state,
local and foreign income, property, sales, franchise, employment, payroll,
withholding, estimated minimum, excise and other taxes, tariffs and
governmental charges of any nature whatsoever, together with any interest,
penalties or additions to tax with respect thereto.
(c) For purposes of this Agreement, "Tax Returns" means all reports,
returns, declarations, statements and other information required to be
supplied to a taxing authority in connection with Taxes, including any
amendments thereof.
Section 5.10 Properties
(a) All of the real estate properties owned or leased by the Company
or any of the Company Subsidiaries are set forth in Section 5.10 of the
Company Disclosure Schedule. Except as set forth in Section 5.10 of the
Company Disclosure Schedule, the Company or a Company Subsidiary owns good
and marketable title to each of the owned real properties identified in
Section 5.10 of the Company Disclosure Schedule (the "Company Properties")
free and clear of all liens, mortgages, hypothecations, deeds of trust,
- 16 -
deeds to secure debt, pledges, security interests, charges, claims, levies
or other encumbrances of any kind (collectively, "Liens"), other than Liens
which secure indebtedness which is properly reflected in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 2001 (the
"Form 10-K"), or in a Company SEC Report filed subsequent to the filing of
the Form 10-K.
(b) The Company and the Company Subsidiaries own or lease all
machinery, equipment and other tangible personal property and assets
necessary for the conduct of their business as presently conducted. The
Company and the Company Subsidiaries own good title, free and clear of all
Liens, to all of the personal property and assets reflected in the Form
10-K or in a Company SEC Report filed subsequent to the filing of the Form
10-K, except for (i) assets which have been disposed of to nonaffiliated
third parties in the ordinary course of business (except as set forth in
Section 5.10 of the Company Disclosure Schedule) or (ii) Liens which secure
indebtedness which is properly reflected in the Form 10-K or in a Company
SEC Report filed subsequent to the filing of the Form 10-K.
Section 5.11 Environmental Matters.
(a) The Company and each Company Subsidiary have, and at all times
have had, all permits, licenses, consents, approvals, directions,
registrations and authorizations ("Environmental Permits") which are
required under applicable Environmental Laws, and all Environmental Permits
of the Company and the Company Subsidiaries are listed in Section 5.11 of
the Company Disclosure Schedule. The Company and each Company Subsidiary
are, and to the knowledge of the Company, at all times have been, in
material compliance with the terms and conditions of all such Environmental
Permits and with all such Environmental Laws; all real property and all
buildings, equipment and assets of the Company and the Subsidiaries are in
material compliance with all Environmental Laws and have been in material
compliance with all Environmental Laws since the Company and the
Subsidiaries have been in control of any such real property, buildings,
equipment and assets.
(b) There has been no Release of any Hazardous Substance by the
Company or any Subsidiary which requires investigation, notification of
applicable Governmental Entity or remediation pursuant to any Environmental
Law and no notification of a Release of Hazardous Substances has been filed
by or on behalf of the Company or any Company Subsidiary. No site or
facility now or previously owned, operated or leased by the Company or any
Company Subsidiary is listed or, to the knowledge of the Company, proposed
for listing on the National Priorities List, CERCLIS, or any other similar
federal, state, or local lists of sites requiring investigation or cleanup.
- 17 -
(c) There are no civil, criminal, or administrative actions, suits,
claims, legal proceedings, investigations or any other proceedings,
including citizen suits, pending, or to the knowledge of the Company,
threatened, against the Company or any Company Subsidiary based on
Environmental Laws, or otherwise arising from the Company's or any Company
Subsidiary's activities involving Hazardous Substances, including
proceedings under Environmental Laws based on the generation,
transportation, treatment, storage, recycling or disposal of Hazardous
Substances or the failure to have any required Environmental Permit.
(d) To the knowledge of the Company, there are no underground or
aboveground storage tanks, or piping associated with such tanks located on
any property owned, occupied or used by the Company or any Company
Subsidiary. All underground storage tanks which have been removed from the
real property have been removed pursuant to a permit validly issued by a
Governmental Entity where such permit was required.
(e) True and complete copies of all Environmental Reports in
possession of the Company, the Subsidiaries and the Selling Shareholders
have been provided to Parent.
(f) Neither the Company nor any Company Subsidiary have received any
written notice that it is a potentially responsible person or otherwise
liable in connection with any waste disposal site or location allegedly
containing any Hazardous Substance.
(g) Neither the Company nor any Company Subsidiaries has manufactured,
imported, used, generated, refined, treated, handled, transported, stored
or disposed of any Hazardous Substance other than in compliance with
Environmental Laws.
(h) No Hazardous Substance has been buried on the real property and no
Hazardous Substance has been otherwise disposed of on the real property
other than in the ordinary course of business in accordance with and
pursuant to an Environmental Permit.
Section 5.12 General Liability. Except as set forth in Section 5.12 of the
Company Disclosure Schedule, there has been no litigation, action, suit, claim
or proceeding against the Company or any Company Subsidiary involving claims
commenced, or to the knowledge of the Company, threatened or anticipated against
the Company or the Company Subsidiaries relating to any products sold or
services performed by the Company or the Company Subsidiaries (each a "Claim")
in the past ten (10) years. Based on the Company's and the Company Subsidiaries'
past loss experience, the Company and the Company Subsidiaries have no reason to
believe that their insurance coverage for claims (including insurance relating
to the manufacture and design of its products) is inadequate. There are no other
actions, suits, claims or proceedings, or to the knowledge of the Company, are
any threatened or anticipated, against the Company or the Company Subsidiaries
before any Governmental Entity involving the products sold or service performed
in the past ten (10) years by the Company or any Company Subsidiary.
- 18 -
Section 5.13 Employee Benefit Plans.
(a) Section 5.13 of the Company Disclosure Schedule sets forth a list
of each Company Benefit Plan (as hereinafter defined) that is maintained by
the Company or an Affiliate (as hereinafter defined) on the date hereof.
(b) Except as set forth in Section 5.13 of the Company Disclosure
Schedule, (i) each Company Benefit Plan (and any related trust, insurance
contract or fund) complies in form and in operation in all material
respects with all Applicable Laws, including, but not limited to, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
the Code; and (ii) all contributions to, payments to be made from, or
premiums owing with respect to, any Company Benefit Plan for all periods
ending on or prior to the Closing Date have been paid or accrued in
accordance with GAAP and are reflected in the Form 10-K or in the Company
SEC Reports filed subsequent to the filing of the Form 10-K. No litigation
or governmental administrative proceeding (or investigation) or other
proceeding (other than those relating to routine claims for benefits) is
pending, to the knowledge of the Company, or threatened with respect to any
such Company Benefit Plan.
(c) Neither the Company nor any Affiliate has ever maintained a
Multiemployer Plan (as hereinafter defined). Except as set forth in Section
5.13 of the Company Disclosure Schedule, the Company has complied with the
health care coverage continuation requirements of Part 6 of Subtitle B of
Title I of ERISA and Code Section 4980B ("COBRA"), and the Company has no
obligation under any Company Benefit Plan or otherwise to provide life or
health insurance benefits to current or future terminated or retired
employees of the Company, except as specifically provided by COBRA.
(d) With respect to each Company Benefit Plan, complete and correct
copies of the following documents (if applicable to such Company Benefit
Plan) have previously been delivered or made available to MergerCo: (i) all
documents embodying or governing such Company Benefit Plan, and any funding
medium for such Company Benefit Plan, trust agreement or insurance
contract, as they may have been amended to the date hereof; (ii) the most
recent IRS determination or approval letter with respect to such Company
Benefit Plan under Code Section 401(a), and any applications for
determination or approval subsequently filed with the IRS; (iii) if
applicable, the three most recently filed IRS Forms 5500, with all
applicable schedules and accountants' opinions attached thereto; (iv) the
current summary plan description for such Company Benefit Plan (or other
descriptions of such Company Benefit Plan provided to employees) and all
modifications thereto; and (v) any insurance policy (including any
fiduciary liability insurance policy or fidelity bond) related to such
Company Benefit Plan.
- 19 -
(e) For purposes of this Section:
(i) "Company Benefit Plan" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3) maintained by the Company or
any Affiliate, including without limitation multiple employer welfare
arrangements (within the meaning of ERISA Section 3(40)), plans to
which more than one unaffiliated employer contributes, and employee
benefit plans (such as foreign or excess benefit plans) which are not
subject to ERISA; (B) all stock option plans, stock purchase plans,
bonus or incentive award plans, severance pay policies or agreements,
deferred compensation agreements, supplemental income arrangements,
vacation plans, and all other employee benefit plans, agreements, and
arrangements not described in (A), above, maintained by the Company or
any Affiliate, including without limitation any arrangement intended
to comply with Code Section 120, 125, 127, 129 or 137; and (C) all
plans or arrangements providing compensation to employee and
non-employee directors maintained by the Company or any Affiliate. In
the case of a Company Benefit Plan funded through a trust or any other
insurance contract each reference to such Company Benefit Plan shall
include a reference to such trust, organization or insurance contract;
(ii) An entity "maintains" a Company Benefit Plan if such entity
contributes to or provides benefits under or through such Company
Benefit Plan or has any obligation (by agreement or under applicable
law) to contribute to, or provide benefits under, or through such
Company Benefit Plan, or if such Company Benefit Plan provides
benefits to, or otherwise covers, employees of such entity (or their
spouses, dependents, or beneficiaries);
(iii) An entity is an "Affiliate" of the Company for purposes of
this Section 5.12 if it would have ever been considered a single
employer with the Company under ERISA Section 4001(b) or part of the
same "controlled group" as the Company for purposes of ERISA Section
302(d)(8)(C); and
(iv) "Multiemployer Plan" means an employee pension or welfare
benefit plan to which more than one unaffiliated employer contributes
and which is maintained pursuant to one or more collective bargaining
agreements as defined in ERISA Section 3(37).
Section 5.14 Labor Matters. Neither the Company nor any Company Subsidiary
is a party to, or is bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor union organization.
There is no unfair labor practice or labor arbitration proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of the
- 20 -
Company Subsidiaries, except for any such proceeding which would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. To the knowledge of the Company, there are no
organizational efforts with respect to the formation of a collective bargaining
unit presently being made or threatened involving employees of the Company or of
any of the Company Subsidiaries.
Section 5.15 No Brokers. Neither the Company nor any of the Company
Subsidiaries has entered into any contract, arrangement or understanding with
any person or firm which may result in the obligation of such entity or MergerCo
to pay any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or
consummation of the Transactions.
Section 5.16 Insurance. The Company and the Company Subsidiaries are
insured by financially sound and reputable insurers with respect to their
properties and the conduct of their businesses in such amounts and against such
risks as are sufficient for compliance with law and as are in accordance with
normal industry practice.
Section 5.17 Contracts and Commitments. Section 5.17 of the Company
Disclosure Schedule lists each written and, to the knowledge of the Company,
each oral contract, agreement, instrument, arrangement and understanding to
which either the Company or any Company Subsidiary is a party, including all
amendments and supplements thereto, which is not included in the Company SEC
Reports, and which is material to the business operations, assets, properties,
or condition (financial or otherwise) of the Company or any Company Subsidiary
(collectively, the "Material Contracts" and each a "Material Contract"),
including without limitation the following:
(a) All employment, consultation, retirement, termination, sign-on,
buy-out or other contracts with any present or former officer, director,
trustee, employee, agent, broker or independent contractor of the Company
or any Company Subsidiary (including, but not limited to, loans or advances
to any such Person (as defined below) or any Affiliate of such Person)
providing for annual compensation of $75,000 or more or for compensation
over the term of the contract, and any renewal thereof, of $150,000 or more
(including, but not limited to, base salary, bonus and incentive payments
and other payments or fees, whether or not any portion thereof is
deferred);
(b) All contracts with any Person including, but not limited to, any
Governmental Entity, containing any provision or covenant (i) limiting the
ability of the Company or any Company Subsidiary to engage in any line of
business, to compete with any Person, to do business with any Person or in
any location or to employ any Person or (ii) limiting the ability of any
Person to compete with or obtain products or services from the Company or
any Company Subsidiary, which, in the case of any such contract described
in clauses (i) and (ii) is, individually or together with other such
contracts, reasonably likely to have a Company Material Adverse Effect;
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(c) All contracts relating to the borrowing of money in excess of
$100,000 by the Company or any Company Subsidiary or the direct or indirect
guarantee by the Company or any Company Subsidiary of any obligation of any
Person for borrowed money or other financial obligation of any Person in
excess of $100,000, or any other Liability of the Company or any Company
Subsidiary in respect of indebtedness for borrowed money or other financial
obligation of any Person in excess of $100,000, including, but not limited
to, any Contract relating to or containing provisions with respect to (i)
the maintenance of compensating balances that are not terminable by the
Company or any Company Subsidiary without penalty upon not more than ninety
(90) days' notice, (ii) any lines of credit or similar facilities, (iii)
the payment for property, products or services of any other Person even if
such property, products or services are not conveyed, delivered or
rendered, or (iv) any obligation to satisfy any financial obligation or
covenants, including, but not limited to, take-or-pay, keep-well,
make-whole or maintenance of working capital, capital or earnings levels or
financial ratios or to satisfy similar requirements;
(d) All contracts (other than contracts entered into in the ordinary
course of business) with any Person containing any provision or covenant
relating to the indemnification or holding harmless by the Company or any
Company Subsidiary of any Person which is reasonably likely to result in a
Liability to the Company or any of the Company Subsidiaries of $100,000 or
more;
(e) All leases or subleases of real property used in the conduct of
the business of the Company or any Company Subsidiary and all other leases,
subleases or rental or use contracts providing for annual rental payments
to be paid by or on behalf of the Company or any Company Subsidiary,
involving, in the case of each of the foregoing, annual payments in excess
of $50,000;
(f) All contracts relating to the future disposition (including, but
not limited to, restrictions on transfer or rights of fast refusal) or
future acquisition of any interest in any business enterprise, and all
contracts relating to the future disposition of a material portion of the
Assets of the Company or any Company Subsidiary, other than in each case
Assets to be acquired or disposed of in the ordinary course of business;
(g) All other contracts (other than (i) employment contracts that are
not otherwise required to be set forth in the Company Disclosure Schedule,
(ii) contracts solely between the Company or any Company Subsidiary, on the
one hand, and any Company Subsidiary, on the other hand, and (iii) other
contracts which are expressly excluded under any other subsection of this
Section 5.17) that involve or are reasonably likely to involve the payment
pursuant to the terms of such contracts by or to the Company or any Company
Subsidiary of $50,000 or more or the termination of which is reasonably
likely to have a Company Material Adverse Effect;
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(h) All contracts or arrangements (including, but not limited to,
those relating to allocations of expenses, personnel, services or
facilities) between or among the Company and any Subsidiary or Affiliate of
the Company, other than those contracts disclosed in the Company SEC
Reports;
(i) All outstanding proxies (other than routine proxies in connection
with annual meetings), powers of attorney or similar delegations of
authority of the Company or any Company Subsidiary to an unrelated Person;
and
(j) All contracts the terms of which provide that the Merger will give
rise to a severance Liability for the Company, any Company Subsidiary or
the Surviving Company.
Each of the Material Contracts is in full force and effect and constitutes
a valid and binding obligation of each of the Company and the Company
Subsidiaries to the extent that it is a party thereto. Neither the Company nor
any Company Subsidiary is in breach or default of any Material Contract except
where such breach or default would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
Section 5.18 Related Party Transactions. Except as set forth in Section
5.18 of the Company Disclosure Schedule, the Company SEC Reports set forth a
list of all arrangements, agreements and contracts entered into by the Company
or any of the Company Subsidiaries (which are or will be in effect as of or
after the date of this Agreement) involving payments in excess of $60,000 with
any person who is an officer, director or affiliate of the Company or any of the
Company Subsidiaries, any relative of any of the foregoing, or any entity of
which any of the foregoing is an affiliate.
Section 5.19 Absence of Undisclosed Liabilities. Except as set forth in
Section 5.19 of the Company Disclosure Schedule, and except as and to the extent
reflected in the Form 10-K or in a Company SEC Report filed subsequent to the
filing of the Form 10-K, neither the Company nor any Company Subsidiary has, or
is subject to, any liability or obligation of any nature required to be
reflected in a balance sheet prepared in accordance with GAAP, whether accrued,
absolute, contingent or otherwise, other than liabilities or obligations arising
in the ordinary course since the date of the last such filing.
Section 5.20 [Reserved]
Section 5.21 Investment Company. None of the Company Subsidiaries maintains
any separate accounts. Neither the Company nor any Company Subsidiary conducts
activities of or is otherwise deemed under applicable law to control an
"investment adviser" as such tern is defined in Section 2(a)(20) of the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
whether or not registered under the Investment Advisers Act of 1940, as amended
(the "Investment Advisers Act"). Neither the Company nor any Company Subsidiary
is an "investment company" as defined under the Investment Company Act, and
neither the Company nor any Company Subsidiary sponsors any Person that is such
an investment company.
- 23 -
Section 5.22 No Other Representations or Warranties. Except for the
representations and warranties contained in this Agreement, neither the Company
nor any other Person makes any other express or implied representation or
warranty on behalf of the Company, including without limitation any financial
information, whether historical or projected, delivered or made available to
Parent or MergerCo or their respective agents and representatives.
Section 5.23 Limitation on Parent's and MergerCo's Representations. The
Company acknowledges that in entering into this Agreement it has not relied on
any representations or warranties of Parent or MergerCo or on any materials
given to or made available to the Company or any Company Subsidiary or any of
their respective agents or representatives by Parent or MergerCo or any of their
respective agents or representatives other than the representations and
warranties of Parent and MergerCo, respectively, set forth in this Agreement.
Section 5.24 Definition of the Company's Knowledge. As used in this
Agreement, the phrase "to the knowledge of the Company" or any similar phrase
means the knowledge of those individuals identified in Section 5.24 of the
Company Disclosure Schedule.
Section 5.25 Complete Disclosure. No representation or warranty by the
Company in this Agreement or the Company Disclosure Schedule contains, or will
contain as of the Effective Time, any untrue statement of a material fact or
omits, or will omit as of the Effective Time, a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
--------------------------------------
Section 6.1 Conduct of Business by the Company. The Company covenants and
agrees as to itself and the Company Subsidiaries that, at all times up to and
including the Effective Time, unless Parent shall otherwise consent in writing,
or as otherwise expressly permitted or contemplated by this Agreement or as set
forth on the Company Disclosure Schedule:
(a) The Company shall, and shall cause each Company Subsidiary to,
conduct its business only in the ordinary course and in substantially the
same manner as heretofore conducted since June 30, 2001, and the Company
and each Company Subsidiary shall use all reasonable efforts to preserve
intact its present business organization and preserve its regular services
to, and maintain its relationships with, customers, suppliers and all
others having business dealings with it;
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(b) Except as contemplated by this Agreement, the Company shall not,
and shall not permit any Company Subsidiary to, make or propose to make any
change in its dividend practices or policies or in its pricing or
investments, in any material respect; and the Company agrees that it will
notify Parent and provide Parent with information in reasonable detail
regarding any material transactions, whether involving a purchase or sale,
that it or any Company Subsidiary is seriously considering;
(c) The Company shall not make any material change in accounting
methods or practices, except as required by Applicable Law or GAAP;
(d) The Company shall not, and shall not permit any Company Subsidiary
to, (i) amend its charter or by-laws (unless contemplated hereby), (ii)
incur any individual Liability or series of related Liabilities in excess
of $50,000 other than in the ordinary course of business consistent with
past practice, (iii) incur any indebtedness for money borrowed in the
aggregate for the Company and the Company Subsidiaries in excess of
$100,000, (iv) agree to any merger, consolidation, acquisition,
redomestication, sale of all or a substantial portion of its Assets, or
other similar reorganization, arrangement or business combination, (v)
enter into any partnership, joint venture or profit sharing contract, (vi)
enter into any contract limiting the ability of the Company or of any
Company Subsidiary to engage in any business, to compete with any Person,
to do business with any Person or in any location or to employ any Person,
(vii) enter into any contract relating to the direct or indirect guarantee
of any obligation of any Person in respect of indebtedness for borrowed
money or other financial obligation of any Person, (viii) enter into any
contract that is reasonably likely to materially and adversely affect the
consummation of the transactions contemplated hereby, or (ix) modify any
contract with respect to the subject of any of the foregoing clauses;
(e) The Company shall not, nor shall it permit any Company Subsidiary
to, issue or sell any shares of or interests in, or rights of any kind to
acquire any shares of or interests in, or to receive any payment based on
the value of, the capital stock of or other equity interests in or any
securities convertible into shares of any capital stock of or other equity
interests in the Company or any Company Subsidiary;
(f) Except (x) as set forth in the Company Disclosure Schedule, (y) in
the ordinary course of business consistent with past practice, or (z) as
required by the terms of agreements or plans already in effect or
Applicable Law, the Company shall not, and shall not permit any Company
Subsidiary to (i) adopt or implement, or commit to adopt or implement, or
materially amend, any collective bargaining, compensation, employment,
consulting, pension, profit sharing, bonus, incentive, group insurance,
termination, retirement or other employee benefit contract, plan or policy,
(ii) enter into or materially amend any severance contract, (iii) increase
in any manner the compensation of, or enter into any contract relating to
the borrowing of money by, its directors, officers or other employees,
except pursuant to the terms of agreements or plans as currently in effect,
(iv) increase by more than 5% the aggregate number of its employees, (v)
pay or agree to pay any pension, retirement allowance or other employee
benefit not required by the current terms of any existing plan, agreement
- 25 -
or arrangement to any director, officer or other employee, whether past or
present, (vi) voluntarily recognize, or involuntarily become subject to,
any labor organization or any other Person as a collective bargaining
representative of one or more bargaining units comprising a material number
of employees, or (vii) other than obligations that arise by operation of
law or under the by-laws of a party as they exist on the date of this
Agreement, or as contemplated by this Agreement, enter into, adopt or
increase any indemnification or hold harmless arrangements with any
directors, officers or other employees or agents of such party or any of
its Subsidiaries or any other Person;
(g) Other than in the ordinary course of business consistent with past
practice, the Company shall not, and shall not permit any Company
Subsidiary to, make any capital expenditures or expenditures or commitments
for expenditures for the purchase or lease of any products or services or
group of products or services which in one or a series of related
transactions exceed $50,000 or which in the aggregate for the Company and
the Company Subsidiaries taken as a whole exceed $100,000, except for
expenditures relating to this Agreement and the consummation of the
transactions contemplated hereby, and expenditures required to be made
pursuant to existing contracts to which the Company or any Company
Subsidiary is a party;
(h) Other than in the ordinary course of business consistent with past
practice, the Company shall not, and shall not permit any Company
Subsidiary to, waive any rights with a value in excess of $50,000 or any
other rights which are material to any contract or make any payment, direct
or indirect, of any Liability in excess of $50,000 before the same comes
due in accordance with its terms, in each case;
(i) The Company shall not, and shall not permit any Company Subsidiary
to, other than in the ordinary course of business, consistent with past
practice, sell, lease, mortgage, encumber or otherwise grant any interest
in or dispose of any of its Assets which, individually or in the aggregate,
are material to the financial condition of the Company, any Company
Subsidiary, or the Company and the Company Subsidiaries taken as a whole,
and, in addition, in the case of Liens, for Permitted Liens (as defined
below);
(j) Other than in the ordinary course of business consistent with past
practice, the Company shall not, and shall not permit any Company
Subsidiary to, enter into any material contract or amend or waive any
material provision of any material contract which would involve the payment
by the Company or any Company Subsidiary of $50,000 or more;
- 26 -
(k) Other than in the ordinary course of business consistent with past
practice, the Company shall not, and shall not permit any Company
Subsidiary to, settle or compromise any claim in any action, proceeding or
investigation which could result in an expenditure for the Company and the
Company Subsidiaries in excess of $25,000;
(l) The Company shall not, and shall not permit any Company Subsidiary
to, purchase or otherwise acquire, except pursuant to a contract in effect
on the date of this Agreement, (i) any controlling equity interest in any
Person, (ii) any non-publicly traded securities in excess of $1,000,000 per
transaction or $1,000,000 per issuer or credit, or (iii) any real property
or mortgage investments except in the ordinary course of managing the
existing portfolio of real property and mortgage investments, including
foreclosing purchase money mortgages, extensions and refinancings;
(m) The Company shall, and shall cause each Company Subsidiary to,
maintain uninterrupted its existing insurance coverage of all types in
effect or procure substantially similar substitute insurance policies with
financially sound and reputable insurance companies in at least such
amounts and against such risks as are currently covered by such policies if
such coverage is available, except for insurance coverage the failure to so
keep would not have a Company Material Adverse Effect;
(n) Neither the Company nor any Company Subsidiary shall (i) make or
rescind any material express or deemed election relating to Taxes, (ii)
make a request for a tax ruling or enter into a Tax Ruling (as defined
below), settlement or compromise with respect to any material Tax matter,
or (iii) with respect to any material Tax matter, change any of its methods
of reporting income or deductions for federal income tax purposes from
those employed in the preparation of its federal income Tax Return for the
taxable year ending June 30, 2001, except as may be required by Applicable
Law;
(o) Neither the Company nor any Company Subsidiary shall declare, set
aside or pay any dividends or distributions (whether in cash, stock or
property) in respect of any capital stock of the Company or any Company
Subsidiary or redeem, purchase or otherwise acquire any of the capital
stock of the Company or any Company Subsidiary; and
(p) Neither the Company nor any Company Subsidiary shall agree, in
writing or otherwise, to take any of the actions prohibited by the
foregoing clauses (a) through (o).
Section 6.2 Conduct of Business by Parent. Parent covenants and agrees as
to itself and its subsidiaries that, at all times up to and including the
Effective Time, unless the Company shall otherwise consent in writing, or as
otherwise expressly permitted or contemplated by this Agreement or except as set
forth in Exhibit 6.2 hereto:
- 27 -
(a) Parent and MergerCo shall conduct their respective business in all
material respects in the ordinary course consistent with past practice and
shall use all reasonable efforts to substantially preserve intact their
business organizations and relationships with third parties and to keep
available the services of their present officers and key employees, subject
to the terms of this Agreement; and
(b) Except to the extent necessary to comply with the requirements of
applicable laws and regulations, Parent shall not, and shall not permit any
of its subsidiaries to, (i) take, or agree or commit to take, any action
that would make any representations and warranty of Parent hereunder
inaccurate, in any material respect, at, or as of any time prior to, the
Effective Time, (ii) omit, or agree or commit to omit, to take any action
necessary to prevent any such representation or warranty from being
inaccurate, in any material respect, at any such time; provided, however
that Parent shall be permitted to take or omit to take any such action
which (without any uncertainty) can be cured, and is in fact cured, at or
prior to the Effective Time, or (iii) take or agree or commit to take, any
action that would result in, or is reasonably likely to result in, any of
the conditions of the Merger set forth in Article VIII not being satisfied,
or (iv) declare, set aside or pay any dividend or other distribution with
respect to any shares of capital stock of Parent.
ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
Section 7.1 Shareholders Meeting.
(a) The Company, acting through the Company Board, shall, in
accordance with applicable law:
(i) Duly call, give notice of, convene and hold a special meeting
of the Shareholders (the "Special Meeting") as soon as practicable
following the execution of this Agreement for the purpose of
considering and taking action upon this Agreement and the
Transactions; and
(ii) Together with Parent and MergerCo prepare and file with the
SEC a registration statement (the "Registration Statement") relating
to the Parent Common and Notes to be issued in connection with this
Agreement and the Transactions, including the proxy
statement/prospectus to be included as part thereof (the "Proxy
Statement"), and use its reasonable efforts to (1) obtain and furnish
the information required to be included by the SEC in the Registration
Statement and, after consultation with Parent and MergerCo, assist
Parent and MergerCo in responding promptly to any comments made by the
SEC with respect to the Registration Statement and cause the Proxy
Statement to be mailed to the Shareholders; (2) obtain the necessary
approval of this Agreement and the Transactions by the Shareholders;
and (3) include in the Proxy Statement the recommendation of the
Company Board that shareholders of the Company vote in favor of the
approval of this Agreement and the Transaction.
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(b) The Company shall furnish all information about itself, its
business and operations and its owners and all financial information to
Parent and MergerCo as may be reasonably necessary in connection with the
preparation of the Registration Statement. Parent and MergerCo shall give
the Company and its counsel the opportunity to review, prior to their being
filed with, or sent to the SEC, (i) the Registration Statement and (ii) all
amendments and supplements to the Registration Statement and all responses
to requests for additional information and replies to comments. Each of the
Company, on the one hand, and Parent and MergerCo, on the other hand,
agrees to correct promptly any information provided by it for use in the
Registration Statement if and to the extent that such information shall
have become false or misleading in any material respect, and the Company
further agrees to take all necessary steps to cause the Proxy Statement as
so corrected to be disseminated to the Shareholders to the extent required
by applicable Securities Laws. Parent and MergerCo shall notify the Company
of the receipt of any comments of the SEC with respect to the Registration
Statement.
(c) None of the information supplied by the Company specifically for
inclusion or incorporation by reference in (i) the Registration Statement,
or (ii) the Other Filings (as hereinafter defined) will, at the respective
times filed with the SEC or other Governmental Entity and, in addition, in
the case of the Proxy Statement, as of the date it or any amendment or
supplement thereto is mailed to shareholders and at the time of any meeting
of shareholders to be held in connection with the Merger, contains any
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement, insofar as it relates to the
Company or other information supplied by the Company for inclusion therein,
will comply as to form in all material respects with the requirements of
the Exchange Act and the rules and regulations promulgated thereunder. The
Company makes no representation, warranty or covenant with respect to
information concerning MergerCo or Parent or their affiliates included in
the Registration Statement or information supplied by MergerCo or Parent or
their affiliates for inclusion in the Registration Statement.
(d) None of the information supplied by MergerCo or Parent or their
affiliates specifically for inclusion or incorporation by reference in (i)
the Registration Statement, or (ii) the Other Filings, will, at the
respective times filed with the SEC or other Governmental Entity and, in
addition, in the case of the Proxy Statement, as of the date it or any
amendment or supplement thereto is mailed to shareholders and at the time
of any meeting of shareholders to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any
- 29 -
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement, insofar as it relates to
MergerCo or Parent or their affiliates or other information supplied by
MergerCo or Parent or their affiliates for inclusion therein, will comply
as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder. MergerCo and
Parent make no representations, warranties or covenants with respect to
information concerning the Company included in the Registration Statement
or information supplied by the Company for inclusion in the Registration
Statement.
Section 7.2 Other Filings. As promptly as practicable, each of the Company
and MergerCo shall prepare and file any other filings required under the
Securities Act, the Exchange Act or any other federal or state law relating to
the Merger and the Transactions (collectively, the "Other Filings"). Each of the
Company and MergerCo shall promptly notify the other of the receipt of any
comments on, or any request for amendments or supplements to, any of the Other
Filings by the SEC or any other Governmental Entity or official, and each of the
Company and MergerCo shall supply the other with copies of all correspondence
between it and each of its Subsidiaries and representatives, on the one hand,
and the SEC or the members of its staff or any other appropriate governmental
official, on the other hand, with respect to any of the Other Filings. Each of
the Company and MergerCo shall use its reasonable best efforts to obtain and
furnish the information required to be included in any of the Other Filings.
Section 7.3 Additional Agreements. Subject to the terms and conditions of
this Agreement, each of the parties agrees to use its commercially reasonable
best efforts (a) to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the Transactions and to cooperate with each
other in connection with the foregoing, including the taking of such actions as
are necessary to obtain any necessary consents, approvals, orders, exemptions or
authorizations by or from any public or private third party, including without
limitation any that are required to be obtained under any federal, state or
local law or regulation or any contract, agreement or instrument to which
MergerCo, the Company or any Company Subsidiary is a party or by which any of
their respective properties or assets are bound, (b) to defend all lawsuits or
other legal proceedings challenging this Agreement or the consummation of the
Transactions, (c) to cause to be lifted or rescinded any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the Transactions, (d) to effect all necessary registrations and
Other Filings, and (e) to execute and deliver any additional instruments
necessary to consummate the Transactions and to carry out fully the purposes of
this Agreement. The Company will use its commercially reasonable best efforts to
ensure that the conditions set forth in Sections 8.1 and 8.3 hereof are
satisfied, insofar as such matters are within the control of the Company, and
MergerCo and Parent will use their commercially reasonable best efforts to
ensure that the conditions set forth in Sections 8.1 and 8.2 hereof are
satisfied, insofar as such matters are within the control of MergerCo and
Parent.
- 30 -
Section 7.4 Fees and Expenses. Except as set forth in Section 9.2 hereof,
whether or not the Merger is consummated, all fees, costs and expenses incurred
in connection with this Agreement and the Transactions shall be paid by the
party incurring such costs or expenses.
Section 7.5 No Solicitations.
(a) The Company represents and warrants that it has terminated any
discussions or negotiations relating to, or that could reasonably be
expected to lead to, an Acquisition Proposal (as hereinafter defined).
Except as explicitly permitted hereunder, the Company shall not, and shall
not authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it, directly or indirectly, to (i) solicit,
initiate or encourage (including by way of furnishing non-public
information), or take any other action to facilitate, any inquiries or the
making of any proposal that constitutes an Acquisition Proposal, (ii)
participate in any discussions or negotiations regarding an Acquisition
Proposal or (iii) enter into any agreements, definitive or otherwise,
regarding an Acquisition Proposal; provided, however, that, at any time
prior to the approval of this Agreement by the shareholders of the Company,
if the Company receives an Acquisition Proposal that was unsolicited or
that did not otherwise result from a breach of this Section 7.5(a), the
Company may furnish non-public information with respect to the Company and
the Company Subsidiaries to the person who made such Acquisition Proposal
and may participate in discussions and negotiations regarding such
Acquisition Proposal if the Company Board determines (A) based on the
advice of legal counsel, that the failure to do so would be inconsistent
with its fiduciary duties to the Company's shareholders under applicable
law, and (B) that such Acquisition Proposal is reasonably likely to lead to
a Superior Acquisition Proposal (as defined below).
(b) At any time prior to the approval of this Agreement by the
shareholders of the Company, the Company Board shall not (i) withdraw or
modify in a manner adverse to MergerCo its approval or recommendation of
this Agreement or the Merger, (ii) approve or recommend an Acquisition
Proposal to its shareholders or (iii) cause the Company to enter into any
agreement with respect to an Acquisition Proposal, unless in any such case
the Company Board shall have determined in good faith, based on the advice
of legal counsel, that failure to do so would be inconsistent with its
fiduciary duties to the Company's shareholders under applicable law and, in
the case of clause (iii) above, the Company shall have complied with the
provisions of Section 9.1(c)(i) hereof.
(c) As used in this Agreement, the term "Acquisition Proposal" shall
mean any proposed or actual (i) merger, consolidation or similar
transaction involving the Company, (ii) sale, lease or other disposition,
directly or indirectly, by merger, consolidation, share exchange or
otherwise, of any assets of the Company or the Company Subsidiaries
representing 25% or more of the consolidated assets of the Company and the
Company Subsidiaries, (iii) issue, sale or other disposition by the Company
of (including by way of merger, consolidation, share exchange or any
- 31 -
similar transaction) securities (or options, rights or warrants to
purchase, or securities convertible into, such securities) representing 25%
or more of the votes associated with the outstanding securities of the
Company, (iv) tender or exchange offer in which (A) any person shall
acquire beneficial ownership (as such term is defined in Rule l3d-3 under
the Exchange Act) or the right to acquire beneficial ownership of or (B)
any "group" (as such term is defined under the Exchange Act) shall have
been formed which beneficially owns, or has the right to acquire beneficial
ownership of, 25% or more of the outstanding shares of PKLB Common, (v)
recapitalization, restructuring, liquidation, dissolution, or other similar
type of transaction with respect to the Company, or (vi) transaction which
is similar in form, substance or purpose to any of the foregoing
transactions; provided, however, that the term "Acquisition Proposal" shall
not include the Merger and the Transactions. The term "Superior Acquisition
Proposal" shall mean an Acquisition Proposal that the Company Board
determines based on the advice of its financial advisors is more favorable
to the Shareholders of the Company than the Transactions (taking into
account all the terms and conditions of such Acquisition Proposal and the
Transactions, including without limitation the price, any conditions to
consummation, and the likelihood of such Superior Acquisition Proposal and
the Transactions being consummated).
(d) The Company shall advise MergerCo promptly (but in any event
within 48 hours) in writing of (i) the receipt of any inquiry, indication
of interest or proposal relating to an Acquisition Proposal, (ii) the
status of any material developments in the negotiations with respect
thereto and (iii) the taking of any action referred to in Section 7.5(a) or
(b).
(e) Nothing in this Section 7.5 shall (i) permit the Company to
terminate this Agreement other than pursuant to Article IX hereof or (ii)
affect any other obligation of the Company under this Agreement.
Section 7.6 Access to Information; Confidentiality. From the date hereof
until the Effective Time, the Company shall, and shall cause each of the Company
Subsidiaries and each of the Company's and Company Subsidiaries' officers,
employees and agents to, afford to Parent and MergerCo and to the officers,
employees and agents of Parent and MergerCo, respectively, complete access at
all reasonable times and upon reasonable advance notice (which notice shall not
be required to be in writing) to such officers, employees, agents, properties,
books, records and contracts, and shall furnish Parent and MergerCo such
financial, operating and other data and information as Parent and MergerCo may
reasonably request. Parent and MergerCo shall hold in confidence all such
information on the terms and subject to the conditions contained in that certain
agreement between the Company and Parent dated November 27, 2001 (the
"Confidentiality Agreement"). MergerCo hereby agrees to be bound by the terms
and conditions of the Confidentiality Agreement with the same force and effect
as if it had executed the Confidentiality Agreement as Parent, and the Company
is an intended third party beneficiary of the obligations of MergerCo arising
thereunder. At the Effective Time, the Confidentiality Agreement shall
terminate.
- 32 -
Section 7.7 Public Announcements. The Company and MergerCo shall consult
with each other before issuing any press release or otherwise making any public
statement with respect to this Agreement or any of the Transactions and shall
not issue any such press release or make any such public statement without the
prior consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of the
other party, issue such press release or make such public statement as may be
required by law if it has (i) used its reasonable best efforts to consult with
the other party and to obtain such party's consent but has been unable to do so
in a timely manner and (ii) faxed a copy of such press release or public
statement to such other party at a reasonable time prior to issuing such release
or making such statement. In this regard, the parties agree that the initial
press release to be issued with respect to the Merger will be in a form agreed
to by the parties hereto prior to the execution of this Agreement.
Section 7.8 Notification of Certain Matters. Each party shall give prompt
written notice to the other of the receipt of any notice or other communication
from any Governmental Entity in connection with the Transactions.
Section 7.9 Additional Director of Parent. Parent shall take, or cause to
be taken, all actions necessary to cause ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to be appointed to
the Board of Directors of Parent immediately prior to the Effective Time.
Section 7.10 Company Indemnification Provisions.
(a) Parent agrees that all rights to indemnification (and rights to
advancement of expenses) existing in favor of the present or former
directors, officers, employees, fiduciaries and agents of the Company or
any of the Company Subsidiaries (collectively, the "Indemnified Parties")
as provided in the Articles of Incorporation or Bylaws or the certificate
or articles of incorporation, bylaws or similar organizational documents of
any of the Company Subsidiaries as in effect as of the date hereof or
pursuant to the terms of any indemnification agreements entered into
between the Company and any of the Indemnified Parties with respect to
matters occurring on or prior to the Effective Time including, without
limitation, the Transactions, shall survive the Merger and shall continue
in full force and effect (without modification or amendment, except as
required by applicable law or except to make changes permitted by law that
would enlarge the Indemnified Parties' right of indemnification), to the
fullest extent and for the maximum term permitted b law, and shall be
enforceable by the Indemnified Parties against the Surviving Corporation
and Parent.
(b) To the extent that Section 7.10(a) shall not serve to indemnify
and hold harmless an Indemnified Party, for a period of three (3) years
after the Effective Time, the Surviving Corporation shall, subject to the
terms set forth herein, indemnify and hold harmless, to the fullest extent
- 33 -
permitted under applicable law (and the Surviving Corporation shall also
advance expenses as incurred to the fullest extent permitted under
applicable law provide the person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
person in not entitled to indemnification), each Indemnified Party against
any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising our or of pertaining to
the Transactions. In the event any claim or claims are asserted or made
within such three (3) year period, all rights to indemnification in respect
of any such claim or claims shall continue until final disposition of any
and all such claims.
ARTICLE VIII
CONDITIONS TO THE MERGER
------------------------
Section 8.1 Conditions to the Obligations of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment or waiver, where permissible, at or prior to the
Closing Date, of each of the following conditions:
(a) Shareholder Approval. This Agreement and the Transactions,
including the Merger, shall have been approved and adopted by the
affirmative vote of the Shareholders of the Company to the extent required
by the MGCL and the Company's Articles of Incorporation.
(b) Regulatory Approvals. Any consent, authorization, order or
approval of (or filing or registration with) any Governmental Entity
required to be made or obtained by the Company or any of the Company
Subsidiaries or MergerCo, as the case may be, or their respective
affiliates, in connection with the execution, delivery and performance of
the Agreement shall have been obtained or made, except where the failure to
have obtained or made any such consent, authorization, order, approval,
filing or registration would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect or a
MergerCo Material Adverse Effect, as the case may be, or would not,
individually or in the aggregate, materially impair or significantly delay
the ability of the Company and MergerCo to consummate the Merger.
(c) Registration Statement Effective. The Registration Statement shall
have been declared effective by the SEC and no stop order with respect
thereto shall be in effect.
(d) Other Consents. All consents and approvals by third parties (other
than Governmental Entities) (i) that are identified as conditions to
closing in Section 8.1(d) of the Company Disclosure Schedule, (ii) that are
required in order to prevent a breach of, a default under, or a
termination, change in the terms or conditions or modification of, any
instrument, contract, lease, license or other agreement, or (iii) that are
required by MergerCo will have been obtained on terms and conditions
reasonably satisfactory to MergerCo.
- 34 -
(e) No Injunctions, Orders or Restraints, Illegality. No actions,
suits, proceedings, investigations or claims shall be, to the knowledge of
the Company, pending or threatened, at law or in equity, or before or by
any court, commission, governmental department, board, bureau, agency,
administrative officer or executive, or instrumentality with respect to the
transactions contemplated by this Agreement, whether federal, state, local
or foreign, or before any arbitrator and no preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a Governmental Entity (an "Injunction"), nor any
statute, rule, regulation or executive order promulgated or enacted by any
Governmental Entity, shall be in effect which would (i) make the
consummation of the Merger illegal, or (ii) otherwise prevent or prohibit
the consummation of any of the Transactions, including the Merger,
provided, however, that prior to invoking this condition, each party shall
use its reasonable best efforts to have any such Injunction vacated.
(f) Approval of Parent Board of Directors. This Agreement and the
Transactions, including the Merger, shall have been approved by the Board
of Directors of Parent.
Section 8.2 Conditions to Obligations of MergerCo and Parent. The
obligations of MergerCo and Parent to effect the Merger are further subject to
the following conditions:
(a) Representations and Warranties. Those representations and
warranties of the Company set forth in this Agreement which are qualified
by materiality or a Company Material Adverse Effect or words of similar
effect shall be true and correct as of the Closing Date as though made on
and as of the Closing Date (except as contemplated by this Agreement and
except to the extent such representations and warranties expressly relate
to a specific date, in which case such representations and warranties shall
be true and correct as of such date), and those representations and
warranties of the Company set forth in this Agreement which are not so
qualified shall be true and correct in all material respects as of the
Closing Date as though made on and as of the Closing Date (except as
contemplated by this Agreement and except to the extent such
representations and warranties expressly relate to a specific date, in
which case such representations and warranties shall be true and correct in
all material respects as of such date). (b) Performance and Obligations of
the Company. The Company shall have performed all obligations required to
be performed by it under this Agreement, including without limitation the
covenants contained in Articles 6 and 7 hereof, in all material respects.
- 35 -
(c) Material Adverse Change. There shall not have occurred any change
or changes concerning the Company and the Company Subsidiaries taken as a
whole which would, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect.
(d) Registration Rights Agreement. The holders of the Class A
Preferred shall have executed and delivered the Registration Rights
Agreement substantially in the form attached hereto as Exhibit 8.2.
(e) Company Secretary's Certificate. The Secretary of the Company
shall have executed and delivered a closing certificate to Parent and
MergerCo in form and substance reasonably acceptable to Parent and
MergerCo.
(f) Consent of Holders of Options. Each holder of options issued
pursuant to the PharmaKinetics Laboratories, Inc. 1996 Non-Employee
Directors Stock Option Plan (the "Plan") consent in writing to the
termination of the Plan and to the cancellation of all options issued
thereunder.
Section 8.3 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. Those representations and
warranties of MergerCo and Parent set forth in this Agreement which are
qualified by materiality or a MergerCo Material Adverse Effect or a Parent
Material Adverse Effect, as the case may be, or words of similar effect
shall be true and correct as of the Closing Date as though made on and as
of the Closing Date (except as contemplated by this Agreement and except to
the extent such representations and warranties expressly relate to a
specific date, in which case such representations shall be true and correct
as of such date), and those representations and warranties of MergerCo and
Parent set forth in this Agreement which are not so qualified shall be true
and correct in all material respects as of the Closing Date as though made
on the Closing Date (except as contemplated by this Agreement and except to
the extent such representations and warranties expressly relate to a
specific date, in which case such representations and warranties shall be
true and correct in all material respects as of such date).
(b) Performance of Obligations of MergerCo and Parent. MergerCo and
Parent shall have performed all obligations required to be performed by
them under this Agreement, including without limitation the covenants
contained in Articles 6 and 7 hereof, in all material respects.
(c) Material Adverse Change. There shall not have occurred any change
or changes concerning MergerCo and Parent taken as a whole which would,
individually or in the aggregate, reasonably be expected to have a MergerCo
Material Adverse Effect or a Parent Material Adverse Effect, as the case
may be.
- 36 -
(d) Registration Rights Agreement. Parent shall have executed and
delivered the Registration Rights Agreement substantially in the form
attached hereto as Exhibit 8.2.
(e) Parent Secretary's Certificate. The Secretary of Parent shall have
executed and delivered a closing certificate to the Company in form and
substance reasonably acceptable to the Company.
(f) MergerCo. The Secretary of MergerCo shall have executed and
delivered a closing certificate to the Company in form and substance
reasonably acceptable to the Company.
Section 8.4 Frustration of Closing Conditions. Neither the Company, on one
hand, nor Parent and MergerCo, on the other, may rely on the failure of any
condition set forth in Section 8.1, 8.2 or 8.3, as the case may be, to be
satisfied if such failure was caused by such Party's failure to use commercially
reasonable efforts to consummate the Merger and the other transactions
contemplated by this Agreement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 9.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after shareholder approval thereof:
(a) by the mutual written consent of MergerCo and the Company;
(b) by either of the Company or MergerCo:
(i) if the Shareholders of the Company shall have voted on this
Agreement and the Merger and the votes shall not have been sufficient
to satisfy the condition set forth in Section 8.1(a); or
(ii) if any Governmental Entity shall have issued an Injunction
or taken any other action (which Injunction or other action the
parties shall use their best efforts to lift), which permanently
restrains, enjoins or otherwise prohibits the Merger, and such
Injunction shall have become final and non-appealable; or
(iii) if, without any material breach by the terminating party of
its obligations under this Agreement, the Merger shall not have
occurred on or before December 31, 2002; or
- 37 -
(c) by the Company:
(i) in connection with entering into a definitive agreement to
effect a Superior Acquisition Proposal in accordance with Section 7.5
hereof; provided, however, that prior to terminating this Agreement
pursuant to this Section 9.1(c)(i), (A) the Company shall have paid
the Break-Up Fee and MergerCo Expenses (as those terms are hereinafter
defined) as set forth in Section 9.2(b), and (B) the Company shall
have provided MergerCo with five days' prior written notice of the
Company's decision so to terminate. Such notice shall indicate in
reasonable detail the terms and conditions of such Superior
Acquisition Proposal, including without limitation the amount and form
of the proposed consideration and whether such Superior Acquisition
Proposal is subject to any material conditions; or
(ii) if MergerCo or Parent shall have breached in any material
respect any of their respective representations, warranties, covenants
or other agreements contained in this Agreement (except where such
representations, warranties, covenants or other agreements are
qualified by materiality or MergerCo Material Adverse Effect or Parent
Material Adverse Effect, in which case MergerCo's or Parent's breach,
as the case may be, shall not be qualified as to materiality), which
breach cannot be or has not been cured within 15 days after the giving
of written notice to MergerCo or Parent; or
(d) by MergerCo:
(i) if the Company shall have breached in any material respect
any of its representations, warranties, covenants or other agreements
contained in this Agreement (except where such representations,
warranties, covenants or other agreements are qualified by materiality
or Company Material Adverse Effect, in which case the Company's breach
shall not be qualified as to materiality), which breach cannot be or
has not been cured within 15 days after the giving of written notice
to the Company; or
(ii) if (A) the Company enters into a definitive agreement to
effect a Superior Acquisition Proposal, or (B) the Company Board
withdraws or modifies in a manner adverse to MergerCo its approval or
recommendation of this Agreement or the Merger to the Shareholders of
the Company.
Section 9.2 Effect of Termination.
(a) Subject to the provisions of this Section 9.2, in the event of the
termination of this Agreement pursuant to Section 9.1, this Agreement shall
forthwith become null and void and have no effect, without any liability on
the part of any party or its affiliates, trustees, directors, officers or
shareholders and all rights and obligations of any party shall cease except
for the agreements contained in Section 7.4 and Article IX.
- 38 -
(b) If the Company terminates this Agreement pursuant to Section
9.1(c)(i) or if MergerCo terminates this Agreement pursuant to Section
9.1(d)(ii), then the Company shall pay to MergerCo an amount in cash equal
to the Break-Up Fee and MergerCo Expenses (as defined below), payable fifty
percent (50%) on the date on which this Agreement is so terminated and
fifty percent (50%) within ninety (90) days from the date thereof. For
purposes of this Agreement, the "Break-Up Fee" shall be an amount equal to
$200,000.
(c) If MergerCo terminates this Agreement pursuant to Section
9.1(d)(i), and the breach by the Company was willful, then the Company
shall pay to MergerCo an amount in cash equal to $200,000 (the "MergerCo
Liquidated Damages"), plus MergerCo Expenses (as defined below).
(d) If MergerCo terminates this Agreement pursuant to Section
9.1(d)(i), but the breach by the Company was not willful, then the Company
shall pay to MergerCo an amount in cash equal to the MergerCo Expenses. For
purposes of this Agreement, "MergerCo Expenses" shall mean an amount equal
to Parent's and MergerCo's out-of-pocket costs and expenses incurred in
connection with this Agreement and the Transactions, including without
limitation reasonable fees and disbursements of its outside legal counsel,
accountants and other consultants retained by or on behalf of Parent and
MergerCo together with the other out-of-pocket costs incurred by Parent or
MergerCo in connection with analyzing and structuring the Transactions,
negotiating the terms and conditions of this Agreement and any other
agreements or other documents relating to the Transactions, arranging
financing (including without limitation commitment fees), and conducting
due diligence and other activities related to this Agreement and the
Transactions.
(e) If the Company terminates this Agreement pursuant to Section
9.1(c)(ii), and the breach by MergerCo or Parent was willful, then Parent
shall pay to the Company an amount in cash equal to $200,000 (the "Company
Liquidated Damages"), plus Company Expenses (as defined below).
(f) If the Company terminates this Agreement pursuant to Section
9.1(c)(ii), but the breach by MergerCo or Parent was not willful, then
Parent shall pay to the Company an amount in cash equal to the Company
Expenses. For purposes of this Agreement, the "Company Expenses" shall mean
an amount equal to the Company's out-of-pocket costs and expenses incurred
in connection with this Agreement and the Transactions, including without
limitation fees and disbursements of its outside legal counsel, accountants
and other consultants retained by or on behalf of the Company together with
- 39 -
the other out-of-pocket costs incurred by the Company in connection with
analyzing and structuring the Transactions, negotiating the terms and
conditions of this Agreement and any other agreements or other documents
relating to the Transactions, arranging financing (including without
limitation commitment fees), and conducting due diligence and other
activities related to this Agreement and the Transactions.
(g) Except as provided in Section 9.1(c)(i) hereof, any payment
required by this Section 9.2 shall be due and payable within five business
days after the date of termination by wire transfer of immediately
available funds to an account designated by the payee. In the event that
either the Company fails to pay the Break-Up Fee (if payable), the MergerCo
Liquidated Damages (if payable), or the MergerCo Expenses (if payable) when
due or Parent fails to pay the Company Liquidated Damages (if payable) or
the Company Expenses (if payable) when due, the terms "Break-Up Fee" or
"MergerCo Liquidated Damages" or "Company Liquidated Damages" or "MergerCo
Expenses" or "Company Expenses," as applicable, shall be deemed to include
(i) interest on such unpaid amount commencing on the date such amount
becomes due, at a rate per annum equal to the rate of interest publicly
announced by Bank One, N.A. from time to time, in Chicago, Illinois, as
such bank's Prime Rate, and (ii) any and all costs and expenses (including
without limitation, attorneys' fees and disbursements) incurred by MergerCo
or the Company, as applicable, in enforcing its rights under this Section
9.2(i). The payments made by the Company to MergerCo, or by Parent to the
Company, as set forth in Section 9.2 shall represent the sole and exclusive
remedy at law or in equity to which MergerCo or the Company, as applicable,
and their respective officers, directors, representatives and affiliates
shall be entitled in the event this Agreement is terminated. Such payments
shall be made without duplication, and, accordingly, neither MergerCo nor
the Company shall be entitled to payments under Section 9.2 in more than
one instance.
ARTICLE X
GENERAL PROVISIONS
------------------
Section 10.1 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or sent if delivered personally or sent by
telecopier or by prepaid overnight carrier to the parties at the following
addresses (or at such other addresses as shall be specified by the parties by
like notice):
(a) if to Parent or MergerCo:
Bioanalytical Systems, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Purdue Research Park
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Ph.D.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
- 40 -
with a copy to:
Ice ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company:
PharmaKinetics Laboratories, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III, Ph.D.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇ & Price, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.2 Interpretation. When a reference is made in this Agreement to
a subsidiary or subsidiaries of MergerCo or the Company, the word "subsidiary"
means any corporation more than 50% of whose outstanding voting securities, or
any partnership, joint venture or other entity more than 50% of whose total
equity interest, is directly or indirectly owned by MergerCo or the Company, as
the case may be. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 10.3 Non-Survival of Representations and Warranties. None of the
representations, and warranties contained in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time, and
thereafter there shall be no liability on the part of either MergerCo, Parent,
or the Company or any of their respective officers, directors or shareholders in
respect thereof. Except as expressly set forth in this Agreement, there are no
representations or warranties of any party, express or implied.
- 41 -
Section 10.4 No Personal Liability. None of the directors, officers,
representatives, agents or legal counsel of any party shall have any liability
in damages, rescission or otherwise to any other party under or on account of
this Agreement or any of the Transactions.
Section 10.5 Miscellaneous. This Agreement (a) constitutes, together with
the Confidentiality Agreement, the Company Disclosure Schedule, and the Exhibits
hereto, the entire agreement and supersedes all of the prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof, (b) subject to Section 10.5, shall be
binding upon and inure to the benefits of the parties and their respective
successors and assigns and is not intended to confer upon any other person
(except as set forth below) any rights or remedies hereunder, and (c) may be
executed in two or more counterparts which together shall constitute a single
agreement. The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any Agreed Court (as hereinafter defined), this being in addition to
any other remedy to which they are entitled at law or in equity. Any
requirements for the securing or posting of any bond with respect to such remedy
are hereby waived by each of the parties.
Section 10.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties.
Section 10.7 Severability. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
Section 10.8 Choice of Law/Consent to Jurisdiction. All disputes, claims or
controversies arising out of or relating to this Agreement or the negotiation,
validity or performance of this Agreement or the Transactions shall be governed
by and construed in accordance with the laws of the State of Indiana without
regard to its rules of conflict of laws. Each of the parties hereby irrevocably
and unconditionally consents to submit to the non-exclusive jurisdiction of the
courts of the State of Indiana and of the United States located in the State of
Indiana (the "Agreed Courts") for any litigation arising out of or relating to
this Agreement, or the negotiation, validity or performance of this Agreement,
or the Transactions (and agrees not to commence any litigation relating thereto
except in such courts), waives any objection to the laying of venue of any such
litigation in the Agreed Courts and agrees not to plead or claim in any Agreed
Court that such litigation brought therein has been brought in any inconvenient
forum. Each of the parties hereto agrees, that service of process may be made on
such party by prepaid certified mail with a proof of mailing receipt validated
by the United States Postal Service constituting evidence of valid service.
Service made pursuant to the preceding sentence shall have the same legal force
and effect as if served upon such party personally within the State of Indiana.
- 42 -
Section 10.9 No Agreement Until Executed. Irrespective of negotiations
among the parties or the exchanging of drafts of this Agreement, this Agreement
shall not constitute or be deemed to evidence a contract, agreement, arrangement
or understanding among the parties hereto unless and until (a) the Board of
Directors of the Company has approved, for purposes of Section 3-105 of the MGCL
and any applicable provision of the Articles of Incorporation, the terms of this
Agreement, and (b) this Agreement is executed by the parties.
Section 10.10 Extension; Waiver. At any time prior to the Effective Time,
the parties, by action taken or authorized by their respective Boards of
Directors, or committees thereof, as the case may be, may, to the extent legally
allowed: (a) extend the time for the performance of any of the obligations or
other acts of the other parties; (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document delivered pursuant; and (c) waive compliance by the other parties with
any of the agreements or conditions contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in a written instrument signed on behalf of such party. The failure of any
party hereto to assert any of its rights hereunder shall not constitute a waiver
of such rights.
Section 10.11 Amendment. This Agreement may be amended by the parties by an
instrument in writing signed on behalf of each of the parties at any time before
the Effective Time; provided, however, that after this Agreement is approved by
the Company's Shareholders, no such amendment or modification shall reduce the
amount or change the form of consideration to be delivered to the Shareholders
of the Company.
Section 10.12 Additional Definitions. When used in this Agreement, the
following words or phrases have the following meanings:
(a) "Assets" shall mean, as to a Person, all rights, titles,
franchises and interests in and to every species of property, real,
personal and mixed, and choses in action thereunto belonging, including,
but not limited to, Environmental Permits (as defined below), Investment
Assets, Intellectual Property (as defined below), Licenses, privileges and
all other assets whatsoever, tangible or intangible, of such Person.
(b) "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act.
(c) "Computer Software" shall mean any and all computer software
consisting of sets of statements or instructions to be used, directly or
indirectly, in a computer, including, but not limited to, the following:
(i) all source code, object code and natural language code therefor and all
component modules thereof, (ii) all versions thereof, (iii) all screen
displays and designs thereof and (iv) all user, technical, training and
other documentation relating to any of the foregoing.
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(d) "Environmental Claim" shall mean any investigation, notice of
violation, demand, allegation, action, suit, injunction, judgment, order,
consent decree, penalty, fine, lien, proceeding, or claim (whether
administrative, judicial or private in nature) arising: (i) pursuant to, or
in connection with, an actual or alleged violation of any Environmental Law
(as defined below); (ii) in connection with any Hazardous Substances (as
defined below) or actual or alleged activity associated with any Hazardous
Substances; (iii) from any abatement, removal, remedial, corrective or
other response action in connection with any Hazardous Substances,
Environmental Law or other order or directive of any federal, state or
local Governmental Entity; or (iv) from any actual or alleged damage,
injury, threat or harm to health, safety, natural resources or the
environment. Environmental Claim shall not include claims for coverage by
an insured.
(e) "Environmental Law" shall mean any applicable local, state or
federal statute, rule, regulation, order, code, directive or ordinance and
any binding judicial or administrative interpretation thereof or
requirements thereunder pertaining to: (i) the regulation and protection of
human health and safety and the outdoor environment; (ii) the protection or
use of surface water and ground water; (iii) the management, manufacture,
possession, presence, use, generation, transportation, treatment, storage,
disposal, release, threatened release, abatement, removal, remediation or
handling of, or exposure to, any Hazardous Substances; or (iv) pollution
(including any release into air, land, surface water and ground water); and
includes without limitation the following federal statutes (and their
implementing regulations and the analogous state statutes and regulations):
CERCLA, the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and
Solid Waste Amendments of 1984; and the Federal Water Pollution Control Act
of 1972, as amended by the Clean Water Act of 1977.
(f) "Environmental Matters" shall mean with respect to the Company or
the Company Subsidiaries any matter arising out of, relating to, or
resulting from, and one or more of pollution, contamination, protection of
the natural environment, and emissions, discharges or releases of Hazardous
Substances into the air, surface water, groundwater, soil, land surface or
subsurface, or otherwise arising out of, relating to, or resulting from the
processing, distribution, use, treatment, storage, disposal, transport,
handling or release of Hazardous Substances.
(g) "Environmental Reports" means the environmental reports,
assessments, studies, and investigations (including, without limitation,
the results of any soil or groundwater sampling relating thereto) in the
possession of the Company or the Subsidiaries, in each case relating to
Environmental Matters with respect to the Company or the Subsidiaries
(including without limitation, any Hazardous Substances at, on, about,
under or within any real property of the Company or the Subsidiaries.)
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(h) "Hazardous Substance" shall mean chemicals, products, compounds,
byproducts, pollutants, contaminants, hazardous wastes or toxic or
hazardous substances regulated under any Environmental Law, including, but
not limited to, asbestos or asbestos-containing materials, pesticides and
oils, petroleum and petroleum products, as well as any constituents,
compounds or chemicals, any form of natural gas, lease, building
construction materials and debris, polychlorinated biphenyls ("PCBs") and
PCB-containing equipment, radon and other radioactive elements, ionizing
radiation, electromagnetic field radiation and other non-ionizing
radiation, defoliants, explosives, flammables, corrosives and urea
formaldehyde foam insulation that are regulated by, or may form the basis
of liability under, any Environmental Law and includes the meaning of all
such terms in any Environmental Law.
(i) "Intellectual Property" shall mean: trademarks, service marks,
brand names, certification marks, trade dress, assumed names, trade names
and other indications of origin, good will associated with the foregoing
and registrations of the foregoing and any extension, modification or
renewal of any such registrations or applications; inventions, discoveries
and ideas, whether patentable or not in any jurisdiction; patents,
applications for patents (including but not limited to divisions,
continuations, continuations in part and renewal applications), and any
renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any Person; writings
and other works, whether copyrightable or not in any jurisdiction, and any
renewals or extensions thereof; and any similar intellectual property or
proprietary rights; provided, that Intellectual Property shall include
Computer Software.
(j) "Liability" shall mean a liability, obligation, claim or cause of
action (of any kind or nature whatsoever, whether absolute, accrued,
contingent or other, and whether known or unknown), including, but not
limited to, any liability, obligation, claim or cause of action arising
pursuant to or pursuant to any Environmental Claim.
(k) "License" shall mean a license, certificate of authority,
franchise, permit or other authorization to transact an activity or
business, whether granted by a Governmental Entity or by any other Person.
(l) "Permitted Liens" shall mean (i) those Liens set forth in the
Company Disclosure Schedule, or otherwise approved in writing by Parent,
(ii) any Lien that is set forth in the public records or in title reports
or title insurance binders that have been made available to Parent relating
to any interest in the real property set forth in the Company Disclosure
Schedule, (iii) Liens for water and sewer charges and current Taxes not yet
due and payable or being contested in good faith, (iv) Liens arising from
securities lending activities undertaken in the ordinary course of business
of a Person, (v) mortgages or security interests shown in any of the
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Company SEC Reports as securing specified liabilities or obligations, (vi)
mortgages or security interests incurred in connection with the purchase of
property or assets in the ordinary course of business after the date of any
of the Company SEC Reports (such mortgages and security interests being
limited to the property or assets so acquired), (vii) minor imperfections
of title, if any, none of which is substantial in amount or materially
detracts from the value or impairs the use of the property subject thereto,
(viii) zoning laws and other land use restrictions that do not materially
impair the present or anticipated use of the property subject thereto, (ix)
other Liens (including, but not limited to, mechanic's, courier's,
worker's, repairer's, materialman's, warehouseman's and other similar
Liens) arising or incurred in the ordinary course of business as would not,
individually or in the aggregate, materially adversely affect the value of,
or materially adversely interfere with the use of, the property subject
thereto, and (x) Liens arising or resulting from any action taken by Parent
or any of its Subsidiaries (but not including the execution, delivery or
performance of this Agreement or the Merger).
(m) "Person" shall mean an individual, corporation, partnership,
association, joint stock company, limited liability company, Governmental
Entity, trust, joint venture, labor union, estate, unincorporated
organization or other entity.
(n) "Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment of a Hazardous Substance.
(o) "SEC" shall mean the United States Securities and Exchange
Commission or any successor entity.
(p) "Tax Ruling" shall mean a written ruling of a taxing authority
relating to Taxes.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
BIOANALYTICAL SYSTEMS, INC.
By
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Ph.D.
Chief Executive Officer
PI ACQUISITION CORP.
By
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Ph.D.
Director
PHARMAKINETICS LABORATORIES, INC.
By
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇, Ph.D.
President and Chief Executive Officer
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