Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
AMONG
AFFILIATED RESEARCH CENTERS, INC.,
ARC ACQUISITION SUB- I, INC.,
PACIFIC COAST CLINICAL COORDINATORS, INC.
AND THE
STOCKHOLDERS
OF
PACIFIC COAST CLINICAL COORDINATORS, INC.
DATED AS OF APRIL 22, 1998
TABLE OF CONTENTS
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ARTICLE I THE MERGER; EFFECTIVE TIME; CLOSING............................ 1
1.1 The Merger..................................................... 1
1.2 Effective Time................................................. 1
1.3 Closing........................................................ 2
ARTICLE II CERTIFICATE OF INCORPORATION; BY-LAWS;DIRECTORS AND
OFFICERS OF SURVIVING CORPORATION........................... 2
2.1 Certificate of Incorporation................................... 2
2.2 By-Laws........................................................ 2
2.3 Directors and Officers......................................... 2
ARTICLE III MERGER SHARE CONSIDERATION; CONVERSION OR CANCELLATION OF
SHARES IN THE MERGER; CASH ELECTIONS....................... 3
3.1 Merger Share Consideration; Conversion or Cancellation of
Shares in the Merger......................................... 3
3.2 Cash Elections................................................. 4
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PCCC AND
THE STOCKHOLDERS............................................ 5
4.1 Organization, Qualification and Corporate Power................ 5
4.2 Capitalization................................................. 5
4.3 Equity Interests............................................... 5
4.4 Authority Relative to this Agreement........................... 5
4.5 Consents and Approvals; No Violation........................... 6
4.6 Ownership of PCCC Shares....................................... 6
4.7 Title to Assets................................................ 6
4.8 Undisclosed Liabilities........................................ 6
4.9 PCCC Financial Statements...................................... 6
4.10 Brokers' Fees.................................................. 7
4.11 Real Property.................................................. 7
4.12 Leases......................................................... 7
4.13 Licenses....................................................... 7
4.14 PCCC Intellectual Property..................................... 7
4.15 Material Adverse Effect........................................ 7
4.16 Disposition of Assets.......................................... 8
4.17 Tax Matters.................................................... 8
4.18 Employee Benefit Plans......................................... 9
4.19 Labor Matters.................................................. 10
4.20 PCCC Premises and Computer Systems............................. 10
4.21 Compliance with Laws........................................... 11
4.22 Litigation..................................................... 11
4.23 Insurance...................................................... 11
4.24 Officers, Directors and Employees............................. 11
4.25 Contracts...................................................... 12
4.26 Relationships with Customers and Suppliers..................... 13
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4.27 PC3 Database................................................... 13
4.28 Environmental Matters.......................................... 13
4.29 Bank Accounts.................................................. 14
4.30 Margin Stock................................................... 14
4.31 Change in Control.............................................. 14
4.32 Disclosure..................................................... 14
4.33 Investment Intent, Etc......................................... 14
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUISITION SUB AND ARC...... 15
5.1 Organization; Qualification and Corporate Power................ 15
5.2 Capitalization................................................. 15
5.3 Equity Interests............................................... 16
5.4 Authority Relative to this Agreement........................... 16
5.5 Consents and Approvals; No Violation........................... 16
5.6 Title to Assets................................................ 17
5.7 Undisclosed Liabilities........................................ 17
5.8 ARC Financial Statements....................................... 17
5.9 Brokers' Fees.................................................. 17
5.10 Real Property.................................................. 17
5.11 Leases......................................................... 17
5.12 Licenses....................................................... 17
5.13 ARC Intellectual Property...................................... 18
5.14 Material Adverse Effect........................................ 18
5.15 Disposition of Assets.......................................... 18
5.16 Tax Returns.................................................... 18
5.17 Employee Benefit Plans......................................... 19
5.18 Labor Matters.................................................. 20
5.19 ARC Computer Systems........................................... 20
5.20 Compliance with Laws........................................... 20
5.21 Litigation..................................................... 20
5.22 Insurance...................................................... 21
5.23 Contracts...................................................... 21
5.24 Relationships with Customers and Suppliers..................... 22
5.25 Environmental Matters.......................................... 22
5.26 Change in Control.............................................. 22
5.27 Disclosure..................................................... 22
5.28 Ownership of Acquisition Sub; No Prior Activities; Assets
of Acquisition Sub........................................... 23
ARTICLE VI ADDITIONAL COVENANTS AND AGREEMENTS........................... 23
6.1 Conduct of Business by PCCC.................................... 23
6.2 ARC Covenants.................................................. 25
6.3 No Sale by Stockholders........................................ 26
6.4 Reasonable Efforts............................................. 26
6.5 Access to Information.......................................... 26
6.6 Publicity...................................................... 27
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ARTICLE VII CONDITIONS TO OBLIGATIONS OF PCCC AND THE STOCKHOLDERS....... 27
7.1 Representations, Warranties and Covenants...................... 27
7.2 No Injunction or Decree........................................ 27
7.3 Certificates................................................... 27
7.4 Opinion of Counsel............................................. 27
7.5 No Material Adverse Effect..................................... 27
7.6 Other Documents................................................ 28
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF ACQUISITION SUB AND ARC........ 28
8.1 Representations, Warranties and Covenants...................... 28
8.2 Consents and Approvals......................................... 28
8.3 No Injunction or Decree........................................ 28
8.4 Certificates................................................... 28
8.5 Employment, Confidentiality and Non-Compete Agreements......... 28
8.6 Co-Sale Agreement.............................................. 28
8.7 Opinion of Counsel; Stockholder Certificate.................... 28
8.8 No Material Adverse Effect..................................... 29
8.9 Cancellation of Options........................................ 29
8.10 PCCC Common Share Certificates................................. 29
8.11 Tax Opinion.................................................... 29
8.12 Other Documents................................................ 29
ARTICLE IX POST-CLOSING COVENANTS........................................ 29
9.1 Stockholder Lock-Up............................................ 29
9.2 Employee Benefit Plans......................................... 30
9.3 Continuity of Business Enterprise.............................. 30
9.4 Release of Guarantees.......................................... 30
9.5 Geneva Foundation.............................................. 31
ARTICLE X TERMINATION.................................................... 31
10.1 Termination by Mutual Consent.................................. 31
10.2 Termination by any of PCCC, Acquisition Sub or ARC............. 31
10.3 Termination by Acquisition Sub or ARC.......................... 31
10.4 Termination by PCCC............................................ 31
10.5 Effect of Termination.......................................... 32
ARTICLE XI INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES... 32
11.1 Indemnity Obligations of the Stockholders...................... 32
11.2 Indemnity Obligations of Acquisition Sub and ARC............... 32
11.3 Appointment of Representative.................................. 32
11.4 Notification of Claims......................................... 33
11.5 Survival....................................................... 33
11.6 Limitations; Escrow............................................ 34
11.7 Tax Indemnification............................................ 36
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ARTICLE XII EXPENSES OF THE PARTIES...................................... 36
ARTICLE XIII MISCELLANEOUS............................................... 37
13.1 Notices........................................................ 37
13.2 GOVERNING LAW; JURISDICTION.................................... 38
13.3 Confidentiality................................................ 38
13.4 Section Headings............................................... 38
13.5 Amendments..................................................... 38
13.6 Entire Agreement............................................... 38
13.7 Counterparts................................................... 38
13.8 Severability................................................... 39
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EXHIBITS
3.1(a)... Certificate of Designation, Preferences and Rights of Series B
Contingent Convertible Preferred Stock
3.2(a)... Summary of Cash Elections
8.6...... Co-Sale Agreement
11.6(b).. Escrow Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of the 22nd
day of April 1998 by and among AFFILIATED RESEARCH CENTERS, INC., a Delaware
corporation ("ARC"), ARC Acquisition Sub-I, Inc., a Delaware corporation and a
direct wholly owned subsidiary of ARC ("Acquisition Sub"), PACIFIC COAST
CLINICAL COORDINATORS, INC., a Washington corporation ("PCCC"), and each of the
stockholders of PCCC (collectively, the "Stockholders").
RECITALS
WHEREAS, in consideration of the mutual agreements of the parties as set
forth herein, the boards of directors of PCCC, Acquisition Sub and ARC deem it
in the best interests of their respective stockholders that PCCC be merged with
and into Acquisition Sub upon the terms and subject to the conditions of this
Agreement;
WHEREAS, each of the Stockholders deems it in their best interests that
PCCC be merged with and into Acquisition Sub upon the terms and subject to the
conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger
(as defined in Section 1.1) shall qualify as a reorganization within the meaning
of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986,
as amended (the "Code");
NOW THEREFORE, in consideration of the respective covenants,
representations and warranties herein contained, the parties hereby agree as
follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 The Merger. Subject to the terms and conditions of this Agreement
and the General Corporation Law of the State of Delaware (the "DGCL") and the
applicable law of the State of Washington (the "Washington GCL"), at the
Effective Time (as defined in Section 1.2), Acquisition Sub and PCCC shall
consummate a merger (the "Merger") in which (i) PCCC shall be merged with and
into Acquisition Sub and the separate corporate existence of PCCC shall
thereupon cease, (ii) Acquisition Sub shall be the successor or surviving
corporation in the Merger, shall continue to be governed by the laws of the
State of Delaware and shall simultaneously change its name to "Pacific Coast
Clinical Coordinators, Inc." and (iii) the separate corporate existence of
Acquisition Sub with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The corporation surviving
the Merger is sometimes hereinafter referred to as the "Surviving Corporation."
The Merger shall have the effects set forth in the DGCL and the Washington GCL.
1.2 Effective Time. On the date of the Closing (as defined in Section
1.3), subject to the terms and conditions of this Agreement, PCCC, Acquisition
Sub and ARC shall (i) cause to be executed (A) a Certificate of Merger in the
form required by the DGCL (the "Delaware Certificate of Merger") and (B)
Articles of Merger in the form required by the Washington GCL (the "Washington
Articles of Merger"), and (ii) cause the Delaware Certificate of Merger to be
filed with
the Secretary of State of the State of Delaware (the "Delaware Secretary of
State") as provided in the DGCL and the Washington Articles of Merger to be
filed with the Secretary of State of the State of Washington (the "Washington
Secretary of State") as provided in the Washington GCL. The Merger shall become
effective at (i) such time as the Delaware Certificate of Merger has been duly
filed with the Delaware Secretary of State and the Washington Articles of Merger
has been duly filed with the Washington Secretary of State or (ii) such other
time as is agreed upon by PCCC and ARC and specified in the Delaware Certificate
of Merger and the Washington Articles of Merger. Such time is hereinafter
referred to as the "Effective Time."
1.3 Closing. The closing of the Merger (the "Closing") shall take place
either (i) at the offices of Xxxxx, Day, Xxxxxx & Xxxxx, 00 Xxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000-0000 on the first business day on which the last of the
conditions set forth in Article VII and Article VIII shall be fulfilled or
waived in accordance with this Agreement or (ii) at such other place, time and
date as PCCC and ARC may mutually agree. The date on which the Closing shall
occur is hereinafter referred to as the "Closing Date."
ARTICLE II
CERTIFICATE OF INCORPORATION; BY-LAWS;
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of
Acquisition Sub as in effect immediately prior to the Effective Time shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided therein and under the DGCL; provided, however, that
Acquisition Sub shall, as of the Effective Time, change its name to "Pacific
Coast Clinical Coordinators, Inc."
2.2 By-Laws. The By-Laws of Acquisition Sub in effect immediately prior
to the Effective Time shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided therein and under the DGCL.
2.3 Directors and Officers. The directors and officers of Acquisition
Sub immediately prior to the Effective Time shall be the directors and officers
of the Surviving Corporation from and after the Effective Time until their
successors have been duly elected, appointed or qualified or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and By-Laws.
ARTICLE III
MERGER SHARE CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER; CASH ELECTIONS
3.1 Merger Share Consideration; Conversion or Cancellation of Shares in
the Merger.
(a) At the Effective Time, by virtue of the Merger and without any action
by the parties, (i) each outstanding share of common stock, no par value, of
PCCC (the "PCCC Common Shares")
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shall be converted into the right to receive (x) 0.000000000 shares of Class A
Common Stock, $.001 par value, of ARC (the "ARC Common Shares") and (y)
0.919279678 of a share of Series B Contingent Convertible Preferred Stock of ARC
(which will contain the terms set forth on Exhibit 3.1(a) (the "ARC Series B
Preferred Shares"); provided, however, in lieu of the right to receive an ARC
Common Share as provided in this sentence, holders of PCCC Common Shares may
elect, in accordance with Section 3.2, to receive $9.50 in cash per ARC Common
Share (the "Cash Amount") (such elections to receive cash are hereinafter
referred to as "Cash Elections"); provided further that the maximum number of
ARC Common Shares with respect to which such election may be made cannot exceed
157,895 in the aggregate (the "Cash Election Maximum"). The ARC Common Shares
and the ARC Series B Preferred Shares to be delivered pursuant to the Merger are
referred to herein collectively as the "Merger Shares," and the Merger Shares
and the Cash Amount (if any) are referred to herein collectively as the "Per
Share Consideration." At the Effective Time, by virtue of the Merger and without
any action by the parties, (i) each PCCC Common Share shall cease to be
outstanding, shall be canceled and retired and shall cease to exist, and the
PCCC Stockholders, as the holders of the certificates (the "PCCC Common Share
Certificate") representing such PCCC Common Share shall cease to have any rights
with respect thereto, except the right to receive the applicable Per Share
Consideration therefor upon the surrender of such certificates in accordance
with Section 3.1(c); (ii) each PCCC Common Share held in treasury shall be
canceled and retired, and (iii) each outstanding option or other right to
purchase PCCC Common Shares or other capital stock of PCCC shall be canceled and
of no further force or effect without payment of any kind.
(b) If, between the date hereof and the Effective Time, the issued and
outstanding ARC Common Shares or the ARC Series B Preferred Shares shall have
been changed into a different number of shares or a different class of shares by
reason of any reclassification, recapitalization, reorganization, split-up,
combination, exchange of shares or readjustment, or a stock dividend or other
extraordinary distribution (other than a nonliquidating cash dividend) thereon
shall be declared with a record date within such period, the number of ARC
Common Shares or ARC Series B Preferred Shares, as the case may be, into which
PCCC Common Shares are to be converted shall be correspondingly adjusted and the
Delaware Certificate of Merger and the Washington Articles of Merger shall
reflect such adjustment.
(c) Subject to Section 11.6(c), at the Closing, upon surrender of the PCCC
Common Share Certificates to ARC for cancellation, the Stockholders shall be
entitled to receive in exchange therefor the applicable Per Share Consideration
to which they are entitled, including (i) checks representing the Cash Amount
(determined pursuant to Section 3.1(a)) and any cash in lieu of fractional
shares determined under Section 3.1(d) and/or (ii) certificates representing the
appropriate number of shares of ARC Common Shares and ARC Series B Preferred
Shares (determined pursuant to Section 3.1(a)), registered in the names
requested by the Stockholders prior to the Closing, and the PCCC Common Share
Certificates so surrendered shall forthwith be canceled.
(d) Notwithstanding any other provision of this Agreement, no certificates
representing fractional ARC Common Shares or ARC Series B Preferred Shares shall
be issued upon surrender of any PCCC Common Share Certificates. In lieu of any
fractional ARC Common Shares, there shall be paid to each holder of PCCC Common
Shares who otherwise would be entitled to receive a fractional ARC Common Share
an amount of cash (without interest) determined by multiplying such fraction by
$10.125. In lieu of any fractional ARC Series B Preferred Shares, there shall
be paid to each holder of PCCC Common Shares who otherwise would be entitled to
receive a
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fractional ARC Series B Preferred Share, an amount of cash (without interest)
determined by multiplying such fraction by $1.125. Cash amounts made pursuant to
this Section 3.1(d) shall be rounded to the nearest cent.
3.2 Cash Elections.
(a) Simultaneous with the approval of this Agreement by the Stockholders,
certain Stockholders have chosen to make a Cash Election with respect to all or
a portion of the PCCC Common Shares held by them by giving written notice to ARC
in a form approved by ARC and PCCC (such Cash Elections being summarized on
Exhibit 3.2(a)), and upon delivery of the PCCC Common Share Certificates at the
Closing, shall be entitled to receive, in exchange for each PCCC Common Share
subject to a Cash Election, the Cash Amount.
(b) If the number of PCCC Common Shares for which Cash Elections were
validly made pursuant to this Section 3.2 exceeds the Cash Election Maximum,
then ARC shall reduce the number of PCCC Common Shares (pro rata as nearly as
practicable in proportion to the total number of PCCC Common Shares for which
Cash Elections were validly made pursuant to this Section 3.2) by such number of
shares as may be necessary so that the number of such shares remaining which are
to be converted into the right to receive cash pursuant to Cash Elections has
been reduced to (or to the most practicable number thereof immediately below)
the Cash Election Maximum.
(c) ARC shall in its sole discretion determine whether or not Cash
Elections have been properly or timely made. Neither ARC, PCCC nor Acquisition
Sub shall be under any duty to give notification that Cash Elections have not
been properly or timely made; however, ARC shall use reasonable efforts to
notify Stockholders of any Cash Election that was not properly or timely made.
PCCC Common Shares subject to an improper or untimely Cash Election shall be
treated by ARC as PCCC Common Shares which were not subject to any Cash Election
and at the Effective Time such shares shall be converted into Merger Shares
pursuant to Section 3.1(a). ARC shall make all computations as to proration
contemplated by this Section 3.2 and any such computations shall be conclusive
and binding on the holders of Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PCCC AND THE STOCKHOLDERS
PCCC and the Stockholders jointly and severally represent and warrant to
Acquisition Sub and ARC that, except as set forth in the PCCC disclosure
schedule accompanying this Agreement (the "PCCC Disclosure Schedule"):
4.1 Organization, Qualification and Corporate Power. PCCC (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington, (ii) is duly qualified or authorized to conduct its
business and is in good standing under the laws of each jurisdiction in which
such qualification or authorization is required and (iii) has full corporate
power and authority to carry on the business in which it is engaged and to own
and use the properties owned and used by it. PCCC has furnished to Acquisition
Sub and ARC true, correct and complete
4
copies of PCCC's Articles of Incorporation and By-Laws, each as amended to date
and presently in effect. PCCC is not in violation of any term of its Articles of
Incorporation or By-Laws.
4.2 Capitalization. The entire authorized capital stock of PCCC consists
of 1,000,000 PCCC Common Shares, of which 248,500 PCCC Common Shares are issued
and outstanding. All of the issued and outstanding PCCC Common Shares have been
duly authorized and are validly issued, fully paid and nonassessable. There are
no outstanding or authorized options, warrants, calls, rights (including
preemptive rights), commitments or any other agreements of any character to
which PCCC is a party, or by which PCCC may be bound, requiring PCCC to issue,
transfer, sell, purchase or redeem any shares of capital stock or any securities
or rights convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of its capital stock. There are no stockholder
agreements, voting trusts or other agreements or understandings relating to the
voting of any shares of capital stock of PCCC.
4.3 Equity Interests. PCCC does not own of record or beneficially any
capital stock in any corporation or any equity or other ownership interest in
any partnership or other form of business enterprise.
4.4 Authority Relative to this Agreement. PCCC has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement and the
consummation by PCCC of the transactions contemplated hereby have been duly and
validly adopted by the board of directors of PCCC and duly and validly approved
by the unanimous approval of the Stockholders and no other corporate proceeding
on the part of PCCC is necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. Each of the Agreement, the Co-Sale
Agreement (as defined herein), the Escrow Agreement (as defined herein) and the
employment agreement and severance agreements contemplated hereby (the
"Transaction Documents") to which PCCC or any of the Stockholders are a party
has been duly and validly executed and delivered by PCCC and the Stockholders,
as the case may be, and, assuming each of this Agreement and the Transaction
Documents constitutes the valid and binding agreement of the other parties
thereto, constitutes the valid and binding agreement of PCCC and the
Stockholders, as the case may be, enforceable against each such party in
accordance with its terms.
4.5 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement or any of the Transaction Documents nor the
consummation by PCCC and the Stockholders of the transactions contemplated
hereby or thereby will: (i) conflict with or result in any breach of any
provision of the Articles of Incorporation or By-Laws of PCCC; (ii) require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, except in connection with the
filing of the Delaware Certificate of Merger pursuant to the DGCL and the
Washington Articles of Merger pursuant to the Washington GCL; (iii) require any
consent, waiver or approval under, 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 or lien or
other charge or encumbrance) under any of the provisions of any note, license,
agreement or other instrument or obligation to which PCCC may be bound or to
which any of the assets or property of PCCC may be subject; or (iv) violate any
order, injunction, statute, rule or regulation applicable to PCCC.
5
4.6 Ownership of PCCC Shares. Each of the Stockholders (i) owns the
number of outstanding PCCC Common Shares set forth opposite the name of such
Stockholder in the PCCC Disclosure Schedule and (ii) owns such outstanding PCCC
Common Shares free and clear of all claims, security interests, mortgages,
pledges, liens and other encumbrances of every nature whatsoever (collectively,
"Liens"). The Stockholders constitute all of the record and beneficial holders
of the outstanding PCCC Common Shares. Notwithstanding anything in this
Agreement to the contrary, the representations and warranties in this Section
4.6 are made by the Stockholders severally and not jointly.
4.7 Title to Assets. PCCC has good and marketable title to all of its
assets, free and clear of all Liens or other restrictions, except for (i) Liens
for taxes not yet due and payable and (ii) Liens reflected on the PCCC
unaudited balance sheet at December 31, 1997 (the "PCCC Balance Sheet") or
disclosed in the notes thereto.
4.8 Undisclosed Liabilities. PCCC has no liabilities (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for taxes and liabilities owed to
Investigators (as defined herein), except for (i) liabilities reflected on the
PCCC Balance Sheet or disclosed in the notes thereto and (ii) liabilities which
have arisen after December 31, 1997 (the "PCCC Balance Sheet Date") in the
ordinary course of business (none of which results from, arises out of, relates
to, is in the nature of or was caused by any breach of contract, indemnification
obligation, tort, infringement or violation of law).
4.9 PCCC Financial Statements. The unaudited balance sheets and the
related statements of operations, stockholders' equity (deficit) and cash flows,
including the related notes thereto, of PCCC at December 31, 1997, 1996 and 1995
and for the years then ended (the "PCCC Financial Statements") have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a basis consistent with prior periods, and present fairly in all
material respects the financial position of PCCC as of their respective dates
and the results of operations and cash flows for the periods presented therein.
All material assets and liabilities of PCCC have been reflected on the PCCC
Balance Sheet or in the notes to the PCCC Financial Statements. Since the PCCC
Balance Sheet Date, there has not been any change in PCCC's accounting methods,
principles or practices, other than immaterial changes consistent with GAAP or
changes made at ARC's request.
4.10 Brokers' Fees. The PCCC Disclosure Schedule sets forth all
liabilities or obligations of PCCC to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this Agreement.
4.11 Real Property. PCCC does not own and has never owned any real
property.
4.12 Leases. All leases pursuant to which PCCC leases to or from others
any real or personal property which have aggregate remaining lease payments due
of $5,000 or more or have a duration in excess of 180 days from the Closing Date
are listed in the PCCC Disclosure Schedule. All such leases are valid and
subsisting, effective and enforceable. There is not under any of such leases
any existing default or any event of default or event which, with notice or
lapse of time or both, would constitute such a default by PCCC or, to the
knowledge of PCCC or the Stockholders, by any other party thereto. The PCCC
Disclosure Schedule sets forth, with respect to each such
6
lease, the parties thereto, the term, any renewal or purchase options and the
payment terms. To the best knowledge of PCCC and the Stockholders, all leased
real or personal property and the uses being made thereof by PCCC comply with
all applicable laws.
4.13 Licenses. PCCC has all licenses, franchises, permits and other
similar authority necessary for the conduct of its business and is not in
default under any such licenses, franchises, permits or other similar authority.
All related taxes have been paid if due or, if not yet due, accrued in
accordance with GAAP. All material licenses, contracts or commitments relating
to patents, trademarks, trade names, copyrights, trade secrets or other
proprietary know-how used by PCCC in the conduct of its business are listed in
the PCCC Disclosure Schedule. PCCC has not received any notice of conflict
with or infringement upon the asserted rights of others in connection with such
licenses, contracts or commitments, and PCCC is not infringing such rights of
others. PCCC is not aware of any such conflict or claim of such infringement or
any basis therefor.
4.14 PCCC Intellectual Property. The PCCC Disclosure Schedule sets forth
a complete and accurate list of all material patents, patent applications,
unpatented inventions set forth or described in writing, registered trademarks
and service marks, trademark and service xxxx applications, trade names and
copyrights (the "PCCC Intellectual Property") owned by, registered in the name
of or used in the businesses of PCCC. All of the rights of PCCC in the PCCC
Intellectual Property are valid and subsisting. PCCC is the sole and exclusive
owner of, and has good and marketable title to, all of the PCCC Intellectual
Property, free and clear of all Liens. There are no licenses, agreements or
commitments outstanding or effective granting any other person any right to use,
operate under, license or sublicense, or otherwise concerning the PCCC
Intellectual Property. PCCC has not received any notice or claim that any PCCC
Intellectual Property infringes upon or conflicts with the rights of any other
person, nor is PCCC aware of any basis for any such claim.
4.15 Material Adverse Effect. Since the PCCC Balance Sheet Date, no
event has occurred and, to the knowledge of PCCC and the Stockholders, no
circumstance exists that has or could have a material adverse effect on the
condition (financial or otherwise), business, assets, liabilities or prospects
of PCCC. Since the PCCC Balance Sheet Date, there has not been any damage,
destruction or loss, whether or not covered by insurance, affecting any of the
properties or the business of PCCC, any increase in the compensation payable by
PCCC to any officer, director, employee or stockholder, or any increase in any
bonus, insurance, pension or other employee benefit plan, payment or arrangement
made to, for or with any such officer, director, employee or stockholder.
4.16 Disposition of Assets. Since the PCCC Balance Sheet Date, PCCC has
not sold or otherwise disposed of, or committed to dispose of, any assets other
than in the ordinary course of business and in an aggregate amount not exceeding
$10,000. Since the PCCC Balance Sheet Date, PCCC has not paid or declared any
dividends, redeemed or repurchased any capital stock, made or committed to make
any distribution of assets, or made or committed to make any loan.
4.17 Tax Matters. (a) All federal, state, local and foreign tax returns
and reports (including any schedules or attachments thereto) of PCCC, including,
without limitation, returns of income, sales, social security, withholding and
unemployment taxes that are required to have been filed by PCCC, have been duly
prepared, timely filed and are complete and correct in all respects, and all
taxes, interest, penalties and additions thereto (whether or not shown thereon
or due in connection
7
therewith) of PCCC have been paid, if due, or accrued according to GAAP and
fully reflected in the PCCC Financial Statements, if not yet due or if being
contested in good faith by appropriate proceedings. The returns of PCCC with
respect to federal and state income tax, sales tax, business and occupation tax,
unemployment tax and use tax are not currently being audited, PCCC has not been
contacted by any federal or state official regarding any future audit and, to
the best knowledge of PCCC and the Stockholders, no such audit is threatened and
no facts exist that would constitute grounds for the assessment of any
additional taxes with respect to PCCC. The PCCC Disclosure Schedule sets forth,
for each of the foregoing categories of tax, the latest taxable year for which
the returns of PCCC have been audited. PCCC has not waived or otherwise agreed
to extend the statutes of limitations for the assessment or collection of any
taxes for federal or state tax purposes with respect to any matter. No
deficiency in the payment of taxes by PCCC has been proposed since the PCCC
Balance Sheet Date, and no other such deficiency has been proposed and not paid
with respect to any tax return filed by PCCC prior to the date hereof. All taxes
that PCCC is required by law to withhold or collect have been withheld or
collected and, to the extent required, have been paid over to the proper
governmental authority or properly deposited or segregated as required by
applicable law. PCCC has not made any payments, is not obligated to make any
payments, and is not a party to any agreement that could obligate it to make any
payments, the deductibility of which would be disallowed (in whole or in part)
under Section 280G of the Code. PCCC is not and has not been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. None of the Stockholders are foreign persons within the meaning of, and no
tax is required to be withheld as a result of any the transactions contemplated
by this Agreement pursuant to, Section 1445 or any other provision of the Code
or of any other state, local or foreign laws. PCCC has never been a member of an
affiliated group filing a consolidated federal income tax return, and has no
liability for the taxes of any other person under Treasury Regulation
(S) 1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract or otherwise. PCCC is neither a party to
nor bound by any agreements for the filing of tax returns or for the allocation
or sharing of, or indemnification with respect to, any taxes.
(b) At the Effective Time, PCCC will hold at least 90 percent of the fair
market value of its net assets and at least 70 percent of the fair market value
of its gross assets held immediately prior to the Effective Time. For purposes
of this representation, any amounts paid by PCCC to the Stockholders (including
dissenters, if any) in the form of cash or other property, assets used by PCCC
to pay reorganization expenses, and all redemptions of and distributions with
respect to the stock of PCCC (except for regular, normal dividends) made by PCCC
immediately preceding the Merger or in connection with the overall Merger plan
will be included as assets of PCCC held immediately prior to the Effective Time.
The fair market value of the assets of PCCC transferred to Acquisition Sub
pursuant to the Merger will equal or exceed the liabilities assumed by
Acquisition Sub plus the amount of any liabilities to which the transferred
assets are subject. The liabilities of PCCC assumed by Acquisition Sub and any
liabilities to which the transferred assets of PCCC are subject were incurred by
PCCC in the ordinary course of its business. PCCC is not an investment company
as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(c) PCCC has not taken or agreed to take any action that would prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
4.18 Employee Benefit Plans. (a) PCCC neither is nor was a party to,
maintains or has maintained, or contributes or has contributed to, any severance
agreement, program or policy or any
8
employment agreement with any current or former director, officer or employee,
or employee pension or welfare plans, (as defined in the Employee Retirement
Income Security Act of 1974, as amended, "ERISA"), or any bonus, pension, profit
sharing, retirement, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, supplemental unemployment, disability, death benefit,
hospitalization, medical, workers compensation or other plan or arrangement
(collectively, the "PCCC Benefit Plans"), whether written or unwritten, nor has
PCCC or any officers or directors of PCCC, taken any action directly or
indirectly which obligates PCCC to institute or modify or change any such PCCC
Benefit Plan. Complete and correct copies of the PCCC Benefit Plans and the
summary plan descriptions, the most recent annual reports on Internal Revenue
Service Form 5500 and actuarial reports, if applicable, and if not applicable,
statement of trust assets, have been made available and delivered to ARC.
(b) With respect to any PCCC Benefit Plan, and to any other employee
benefit plan, program, agreement or arrangement to which PCCC or any other trade
or business, whether or not incorporated (a "PCCC ERISA Affiliate"), that
together with PCCC would be deemed a "single employer" within the meaning of
Section 414(b), (c), (m) or (o) of the Code, there exists no condition or set of
circumstances in connection with which PCCC could be subject to any liability
under ERISA, the Code or any other applicable Law.
(c) Each PCCC Benefit Plan has been administered in accordance with its
terms, and each PCCC Benefit Plan has been operated, and is and has been in
compliance with the applicable provisions of ERISA, the Code and all other
applicable laws. Each PCCC Benefit Plan that is intended to be qualified under
Section 401(a) or 401(k) of the Code has received a favorable determination
letter from the IRS covering the Tax Reform Act of 1986, that it is so qualified
and no fact or event has occurred since the date of any determination letter
from the IRS which would affect adversely the qualified status of any such PCCC
Benefit Plan. There are no pending or threatened claims with respect to any
PCCC Benefit Plan by or on behalf of any current or former director, officer or
employee, or dependent on beneficiary thereof, or otherwise (other than routine
claims for benefits) or any investigation or audit by any governmental agency.
All contributions required to be made by PCCC under applicable law or the terms
of any PCCC Benefit Plan or collective bargaining agreement have been made, and
all premiums required to be paid or accrued with respect to any PCCC Benefit
Plan which provides benefits through insurance have been paid or accrued. No
PCCC Benefit Plan holds any interest or investment in, or any warrant or option
with respect to, any employer security of PCCC.
(d) No PCCC Benefit Plan is (i) a "defined benefit" plan (as defined in
Section 3(35) of ERISA), (ii) a "multiemployer plan" within the meaning of
Section 3(37) of ERISA, (iii) a "multiple employer or a multiple employer
welfare arrangement" within the meaning of Section 514(b)(6) of ERISA, (iv) a
"welfare benefit fund" as defined in Section 419(e) of the Code, or (v) subject
to Title IV of ERISA. No PCCC Benefit Plan provides or is intended to provide
medical, life or other welfare benefits (whether or not insured), with respect
to current or former employees after retirement or other termination of service
(other than coverage mandated by applicable law). Each PCCC Benefit Plan that
is a "group health plan," as defined in Section 5000 of the Code has been
operated in compliance with Section 4980B of the Code.
(e) Neither PCCC nor any of its current or former directors, officers,
employees or any other "fiduciary," as such term is defined in Section 3 of
ERISA, has committed any breach of
9
fiduciary responsibility imposed by ERISA or engaged in any "prohibited
transaction" as defined under Section 406 of ERISA.
4.19 Labor Matters. There are no agreements with, or pending petitions
for recognition of, a labor union or association as the exclusive bargaining
agent for any of the employees of PCCC; no such petitions have been pending at
any time within two years of the date of this Agreement and, to the best
knowledge of PCCC, there has not been any organizing effort by any union or
other group seeking to represent any employees of PCCC as their exclusive
bargaining agent at any time within two years of the date of this Agreement.
There are no labor strikes, work stoppages or other labor troubles, other than
routine grievance matters, now pending, or, to PCCC's knowledge, threatened,
against PCCC nor have there been any such labor strikes, work stoppages or other
labor troubles, other than routine grievance matters, with respect to PCCC at
any time within two years of the date of this Agreement.
4.20 PCCC Premises and Computer Systems. Except for ordinary wear and
tear attributable to the routine and ordinary day-to-day conduct of the business
of PCCC, all of the offices and other equipment of PCCC which are necessary for
its business operations are in good operating condition and repair, and all
software utilized by PCCC is properly licensed and all fees in connection
therewith have been paid or accrued. There are no structural defects or
infestations by wood damaging pests in any of the premises in which PCCC
conducts its business (the "PCCC Premises"). PCCC has properly maintained and
repaired all heating, air conditioning, refrigeration, plumbing and electrical
systems in all of the PCCC Premises, and all such systems and related equipment,
whether owned or leased, are operating satisfactorily. The computer systems used
in PCCC's business are capable of the following before, during and/or after
January 1, 2000: (a) handling date information involving all and any dates
before, during and/or after January 1, 2000, including accepting input,
providing output and performing date calculations in whole or in part; (b)
operating, accurately without interruption on and in respect of any and all
dates before, during and/or after January 1, 2000 and without any change in
performance; (c) responding to and processing two digit year input without
creating any ambiguity as to the century; and (d) storing and providing date
input information without creating any ambiguity as to the century.
4.21 Compliance with Laws. The conduct by PCCC of its business does not
violate or infringe in any material respect any domestic (federal, state or
local) or foreign laws, statutes, ordinances, regulations, decrees or orders now
in effect, including, without limitation, the Americans with Disabilities Act of
1990, and the Occupational Safety and Health Act of 1970, and PCCC has not
received a notice of violation of any such laws, statutes, ordinances,
regulations, decrees or orders other than violations which have been cured. To
the knowledge of PCCC and the Stockholders, no law, statute, ordinance,
regulation, decree or order is proposed to be adopted, the enforcement of which
would adversely affect the business or the value of the properties or assets of
PCCC.
4.22 Litigation. PCCC is not involved in any pending or, to the
knowledge of PCCC or the Stockholders, threatened litigation or any
investigation by any governmental body or any legal, administrative or
arbitration proceeding, including, without limitation, any workers' compensation
proceeding. PCCC and the Stockholders do not know of, and have no reason to
know of, any action, claim, suit, proceeding or investigation threatened against
or affecting PCCC or any of its properties or assets. None of PCCC or any
officer or director of PCCC has been investigated by, or is currently being
investigated by, any other state or local regulatory authority. PCCC is not
subject to any
10
judgment, order, writ, injunction or decree of any court, governmental authority
or arbitration panel other than a judgment or order for monetary damages which
was satisfied in full prior to the PCCC Balance Sheet Date.
4.23 Insurance. The PCCC Disclosure Schedule contains a complete and
correct list and summary description (including name of insurer, amount of
coverage, type of policy and policy number) of all policies of insurance or
binders of insurance which were owned by PCCC as of March 31, 1998, including,
without limitation, all general liability, workers' compensation, automobile,
property, and directors and officers liability insurance policies. All such
policies are in full force and effect, and no notice of disallowance of any
claim under any such policy or binder has been received by PCCC. There has been
no default in the payment of premiums on any such policy, and to the knowledge
of PCCC and the Stockholders, there is no ground for cancellation or avoidance
of any such policy, for reduction of the coverage provided thereby or for an
increase in the premiums paid therefor.
4.24 Officers, Directors and Employees. All officers, directors and
employees of PCCC are listed by title or position in the PCCC Disclosure
Schedule. No current or former officer, director, employee or stockholder of
PCCC is entitled to any indemnification from PCCC, has any substantial financial
interest, direct or indirect, in any supplier, customer, lessor or lessee of
PCCC, is indebted to PCCC on account of loans or advances of any kind, or has in
his possession or under his control any property or assets belonging to PCCC.
All transactions, commitments, contracts and agreements between PCCC and any
supplier, Investigator (as defined herein), Sponsor (as defined herein) or any
other business entity in which any officer, director, employee or stockholder of
PCCC has a financial interest are on arm's-length terms and at reasonable market
prices. The PCCC Disclosure Schedule sets forth all compensation payments made
to, or for the benefit of, the Stockholders since January 1, 1993.
4.25 Contracts. The PCCC Disclosure Schedule sets forth a description of
every contract, obligation, agreement, plan, arrangement, commitment or the like
(written or oral), of the following type to which PCCC was a party as of March
31, 1998:
(a) Employment, bonus or consulting agreements;
(b) Loan or other agreements, notes, indentures, or instruments
relating to or evidencing indebtedness for borrowed money, or mortgaging,
pledging or granting or creating a lien or security interest or other
encumbrance on any of PCCC's property or any agreement or instrument
evidencing any guaranty by PCCC of payment or performance by any other
person;
(c) Any agreement with physicians ("Investigators") conducting studies
for pharmaceutical companies, device manufacturers, biotechnology companies
or contract research organizations ("Sponsors") in connection with the
performance of human clinical research trials, or with clinical research
organizations ("CROs") for the purpose of providing assistance in
connection with the conduct of such research trials and any agreement
between an Investigator and a Sponsor which provides for payments to be
made to PCCC and that involve future payments or the performance of
services with an aggregate value in excess of $5,000 or that have a
duration in excess of 180 days from the Closing Date;
11
(d) Any contract or series of contracts with the same person for the
furnishing or purchase of equipment, goods or services, including, without
limitation, agreements with subcontractors, involving amounts in excess of
$5,000;
(e) Any private placement memoranda, forms of any subscription
agreements or similar documents relating to the sale or repurchase of
shares;
(f) Any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses to which PCCC is a party;
(g) Agreements limiting the freedom of PCCC to compete in any line of
business or in any geographic area or with any person; and
(h) Agreements providing for disposition of the business, assets or
shares of PCCC, agreements of merger or consolidation to which PCCC is a
party or letters of intent with respect to the foregoing.
PCCC has received from each Sponsor of a research trial with which PCCC is
or has been associated or connected either (i) an executed "Clinical Study
Indemnification Agreement" included in the PCCC Disclosure Schedule or (ii)
another agreement executed by such Sponsor and providing to PCCC indemnification
of PCCC by the Sponsor on terms substantially similar to such "Clinical Study
Indemnification Agreement."
All of such agreements listed on the PCCC Disclosure Schedule are valid,
binding and in full force and effect in all material respects and PCCC (and, to
PCCC's knowledge, each other party thereto) has complied in all material
respects with the provisions of said contracts, obligations, agreements, plans,
arrangements, and commitments and is not in default of any provision thereunder.
No event has occurred which, with the passage of time or the giving of notice or
both would constitute a default under any agreement listed in the PCCC
Disclosure Schedule.
4.26 Relationships with Customers and Suppliers. PCCC does not know of
any written or oral communication, fact, event or action which exists or has
occurred prior to the date of this Agreement which would indicate that any of
the following shall terminate or materially reduce its business with PCCC:
(i) any current Investigator whose studies accounted for over 1% of
sales of PCCC for its most recently completed fiscal year; or
(ii) any Sponsor or CRO the studies of which accounted for over 1% of
sales of PCCC for its most recently completed fiscal year; or
(iii) any current supplier to PCCC of items essential to the conduct
of the businesses of PCCC, which items cannot be replaced at comparable
cost and the loss of which would have an adverse effect on PCCC.
4.27 PC3 Database. The budgets for each of the clinical research studies
selected (the "Selected Studies") for inclusion in the "ARC3 database" produced
in connection with ARC's due diligence activities accurately and completely set
forth in all material respects the agreed allocation
12
of the budgeted amounts reflected thereon, including the allocation of amounts
between PCCC and the applicable investigator or site and the allocation of
"pass-through" costs. The information provided by PCCC related to the Selected
Studies accurately and completely reflected in all material respects the visits
by patients for each such Selected Study, the cash disbursement for each such
Selected Study, and the cash receipts for each such Selected Study, including
the disbursement amounts related to payments to the applicable investigator or
site and payments made to third parties for "pass-through" costs.
4.28 Environmental Matters. PCCC is currently in compliance, and has
complied in all material respects with, all laws, ordinances, regulations and
orders, including, without limitation, all zoning, safety and environmental
laws, ordinances, regulations and orders (collectively, "Environmental Laws"),
applicable to its business or properties, and the present uses by PCCC of its
properties, whether leased or owned, do not violate any such Environmental Laws.
To the knowledge of PCCC and the Stockholders, there is not currently and in the
past there has not been (i) any use, treatment, storage or disposal of any
Hazardous Substance on any of the properties of PCCC, whether leased or owned,
except in full compliance with all Environmental Laws, (ii) any spill, leakage,
discharge or release of any Hazardous Substance thereon or therefrom, (iii) any
off-site disposal by PCCC of any Hazardous Substance in any location, except in
full compliance with all Environmental Laws or (iv) any hazardous condition in
existence on any of the properties of PCCC, whether leased or owned. PCCC has
furnished to ARC or Acquisition Sub the test results for all tests conducted on
any underground storage tanks located on the PCCC Premises. PCCC has not
purchased or sold asbestos, or any other Hazardous Substance, except in full
compliance with all Environmental Laws. PCCC is not subject, nor shall they be
subject, to any liability or claim in connection with any Environmental Law or
any use, treatment, storage or disposal of any Hazardous Substance or any spill,
leakage, discharge or release of any Hazardous Substance as a result of having
owned or operated any business prior to the Closing Date. As used herein, the
term "Hazardous Substance" shall mean any medical waste, petroleum or petroleum
product, asbestos, polychlorinated biphenyls, underground storage tank and the
contents thereof, flammable explosive, radioactive material, pollutant,
contaminant, toxic substance, hazardous waste, hazardous material or hazardous
substance, including, without limitation, any such materials defined in or
regulated by any Environmental Law.
4.29 Bank Accounts. The PCCC Disclosure Schedule sets forth all bank
accounts and marketable securities (both debt and equity) of PCCC.
4.30 Margin Stock. None of the Per Share Consideration issued in
connection with the Merger shall be used for the purpose of purchasing or
carrying any "margin stock" as defined in Regulation U, Regulation X or
Regulation G promulgated by the Board of Governors of the Federal Reserve
System, 12 C.F.R. Parts 221, 224 and 207, respectively, or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry a "margin stock" or for any other purpose which might constitute this
transaction as a "purpose credit" within the meaning of any of such Regulations.
4.31 Change in Control. PCCC is not a party to any contract or
arrangement which contains a "change in control," "potential change in control"
or similar provision, and the consummation of the Merger shall not (either alone
or upon the occurrence of additional acts or events) result in any payment or
payments becoming due from PCCC to any person or give any person the right to
terminate or alter the provisions of any agreement to which PCCC is a party.
13
4.32 Disclosure. This Agreement, including, without limitation, the PCCC
Disclosure Schedule and the attachments hereto furnished by PCCC to ARC, does
not contain and shall not contain any untrue statement of a material fact and
does not omit and shall not omit to state a material fact necessary in order to
make the statements contained herein or therein, in light of the circumstances
in which they were made, not misleading.
4.33 Investment Intent, Etc. Each Stockholder represents and warrants to
the Company, severally and not jointly, as follows:
(a) Such Stockholder is acquiring the Merger Shares solely for
investment for his or her own account and not with the view to, or for
resale in connection with, any distribution thereof. Such Stockholder
understands that such Stockholder's Merger Shares have not been registered
under the Securities Act of 1933 (the "Securities Act") by reason of a
specific exemption from the registration provisions of the Securities Act,
the availability of which depends upon, among other things, the bona fide
nature of each Stockholder's investment intent as expressed herein.
(b) Such Stockholder understands that the Merger Shares are
"restricted securities" under the federal securities laws inasmuch as they
are being acquired in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act only in certain
limited circumstances. Such Stockholder is familiar with Rule 144, as
amended, promulgated under the Securities Act and understands the resale
limitations imposed thereby and by the Securities Act. Such Stockholder
understands that there is no public market for ARC's securities, that there
may never be a public market for such securities and that even if a market
develops for such securities such Stockholder may never be able to sell or
dispose of the securities and may thus have to bear the risk of his or her
investment for an indefinite period of time.
(c) Such Stockholder is familiar with the business of ARC and has had
an opportunity to discuss ARC's business, management and financial affairs
with its management and has had the opportunity to review ARC's facilities
and has had the opportunity to obtain (and has obtained to his or her
satisfaction) such information about the business, management and financial
affairs as it has requested.
(d) Such Stockholder has knowledge and experience in financial and
business matters relating to an investment in the Merger Shares and is
capable of evaluating the merits and risks of such investment and
protecting his or her investment in connection with this transaction, and
is able to bear the economic risk of such investment for an indefinite
period of time. Such Stockholder qualifies as an "accredited investor"
under Rule 501(a) of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act.
14
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF ACQUISITION SUB AND ARC
Acquisition Sub and ARC jointly and severally represent and warrant to PCCC
and the Stockholders that, except as set forth in the ARC disclosure schedule
accompanying this Agreement (the "ARC Disclosure Schedule"):
5.1 Organization; Qualification and Corporate Power. Each of Acquisition
Sub and ARC (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, (ii) is duly qualified or
authorized to transact its business and is in good standing under the laws of
each jurisdiction in which such qualification or authorization is required and
(iii) has full corporate power and authority to carry on the business in which
it is engaged and to own and use the properties owned and used by it. Each of
ARC and Acquisition Sub has furnished to PCCC and the Stockholders true, correct
and complete copies of their respective Certificate of Incorporation and By-
Laws, each as amended to date and presently in effect. ARC is not in violation
of any term of its Certificate of Incorporation or By-Laws.
5.2 Capitalization. The authorized capital of ARC consists of: (a)
10,000,000 shares of ARC Common Shares, of which 950,211 shares are issued and
outstanding on the date of this Agreement, (b) 685,324 shares of Class B Common
Stock, $.001 par value, of which 685,324 shares are issued and outstanding, (c)
2,000,000 shares of Preferred Stock, par value $.001 per share, of which 888,889
shares of Series A Preferred Stock have been designated and are outstanding and
228,436 Series B Preferred Shares have been designated. All of the issued and
outstanding shares of ARC capital stock have been duly authorized and are
validly issued, fully paid and nonassessable. All of the Merger Shares have been
duly authorized and, upon consummation of the Merger, shall be validly issued,
fully paid and nonassessable. The shares of Class A Common Stock issuable
pursuant to conversion of the ARC Series B Preferred Shares have been duly
authorized and when issued and delivered in accordance with the terms of the
Series B Preferred Shares will be validly issued, fully paid and nonassessable.
There are no outstanding or authorized options, warrants, calls, rights
(including preemptive rights), commitments or any other agreements of any
character to which ARC is a party or by which ARC may be bound, requiring ARC to
issue, transfer, sell, purchase or redeem any shares of capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the right
to subscribe for, any shares of its capital stock. There are no stockholder
agreements, voting trusts or other agreements or understandings to which ARC is
a party or by which it is bound relating to the voting of any shares of its
capital stock.
5.3 Equity Interests. ARC does not own of record or beneficially any
capital stock in any corporation or any equity or other ownership interest in
any partnership or other form of business enterprise.
5.4 Authority Relative to this Agreement. Each of Acquisition Sub and ARC
has the requisite corporate power and authority to execute and deliver this
Agreement and each of the Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby. This Agreement,
each of the Transaction Documents and the consummation by Acquisition Sub and
ARC of the transactions contemplated hereby and thereby have been duly and
validly authorized by the boards of directors of Acquisition Sub and ARC and no
other corporate
15
proceedings on the part of Acquisition Sub or ARC are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby and
thereby. This Agreement and each of the Transaction Documents to which it is a
party has been duly and validly executed and delivered by Acquisition Sub and
ARC, as the case may be, and, assuming this Agreement constitutes the valid and
binding agreement of the other parties thereto, constitutes the valid and
binding agreement of Acquisition Sub and ARC, as the case may be, enforceable
against each such party in accordance with its terms.
5.5 Consents and Approvals; No Violation. Neither the execution and the
delivery of this Agreement or any of the Transaction Documents nor the
consummation by Acquisition Sub and ARC of the transactions contemplated hereby
or thereby will: (i) conflict with or result in any breach of any provision of
the Certificate of Incorporation or By-Laws of Acquisition Sub or ARC; (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except in connection
with the filing of the Delaware Certificate of Merger pursuant to the DGCL and
the Washington Articles of Merger pursuant to the Washington GCL; (iii) require
any consent, waiver or approval under, 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 or lien or
other charge or encumbrance) under any of the provisions of any note, license,
agreement or other instrument or obligation to which Acquisition Sub or ARC may
be bound or to which any of the assets or property of Acquisition Sub or ARC may
be subject; or (iv) violate any order, injunction, statute, rule or regulation
applicable to Acquisition Sub or ARC.
5.6 Title to Assets. ARC has good and marketable title to all of its
assets, free and clear of all Liens or other restrictions, except for (i) Liens
for taxes not yet due and payable and (ii) Liens reflected on the ARC balance
sheet at December 31, 1997 (the "ARC Balance Sheet") or disclosed in the notes
thereto.
5.7 Undisclosed Liabilities. ARC has no liabilities (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for taxes and liabilities owed to
Investigators, except for (i) liabilities reflected on the ARC Balance Sheet or
disclosed in the notes thereto and (ii) liabilities which have arisen after
December 31, 1997 (the "ARC Balance Sheet Date") in the ordinary course of
business (none of which results from, arises out of, relates to, is in the
nature of or was caused by any breach of contract, indemnification obligation,
tort, infringement or violation of law).
5.8 ARC Financial Statements. The balance sheets and the related
statements of operations, stockholders' equity (deficit) and cash flows,
including the related notes thereto, of ARC at December 31, 1997, 1996 and 1995
and for the years then ended (the "ARC Financial Statements") have been prepared
in accordance with GAAP applied on a basis consistent with prior periods, and
present fairly in all material respects the financial position of ARC as of
their respective dates and the results of operations and cash flows for the
periods presented therein. All material assets and liabilities of ARC have been
reflected on the ARC Balance Sheet or in the notes to the ARC Financial
Statements. Since the ARC Balance Sheet Date, there has not been any change in
ARC's accounting methods, principles or practices, other than immaterial changes
consistent with GAAP.
16
5.9 Brokers' Fees. The ARC Disclosure Schedule sets forth all liabilities
or obligations of Acquisition Sub or ARC to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this
Agreement.
5.10 Real Property. ARC does not own and has never owned any real
property.
5.11 Leases. All leases pursuant to which ARC leases to or from others
any real or personal property which have aggregate remaining lease payments due
of $20,000 or more or have a duration in excess of 180 days from the Closing
Date are listed in the ARC Disclosure Schedule. All such leases are valid and
subsisting, effective and enforceable. There is not under any of such leases
any existing default or any event of default or event which, with notice or
lapse of time or both, would constitute such a default by ARC or, to the
knowledge of ARC, by any other party thereto. The ARC Disclosure Schedule sets
forth, with respect to each such lease, the parties thereto, the term, any
renewal or purchase options and the payment terms. To the best knowledge of
ARC, all leased real or personal property and the uses being made thereof by ARC
comply with all applicable laws.
5.12 Licenses. ARC has all licenses, franchises, permits and other
similar authority necessary for the conduct of its business and is not in
default under any such licenses, franchises, permits or other similar authority.
All related taxes have been paid if due or, if not yet due, accrued in
accordance with GAAP. All material licenses, contracts or commitments relating
to patents, trademarks, trade names, copyrights, trade secrets or other
proprietary know-how used by ARC in the conduct of its business are listed in
the ARC Disclosure Schedule. ARC has not received any notice of conflict with
or infringement upon the asserted rights of others in connection with such
licenses, contracts or commitments, and ARC is not infringing such rights of
others. ARC is not aware of any such conflict or claim of such infringement or
any basis therefor.
5.13 ARC Intellectual Property. The ARC Disclosure Schedule sets forth a
complete and accurate list of all material patents, patent applications,
unpatented inventions set forth or described in writing, registered trademarks
and service marks, trademark and service xxxx applications, trade names and
copyrights (the "ARC Intellectual Property") owned by, registered in the name of
or used in the businesses of ARC. All of the rights of ARC in the ARC
Intellectual Property are valid and subsisting. ARC is the sole and exclusive
owner of, and has good and marketable title to, all of the ARC Intellectual
Property, free and clear of all Liens. There are no licenses, agreements or
commitments outstanding or effective granting any other person any right to use,
operate under, license or sublicense, or otherwise concerning the ARC
Intellectual Property. ARC has not received any notice or claim that any ARC
Intellectual Property infringes upon or conflicts with the rights of any other
person, nor is ARC aware of any basis for any such claim.
5.14 Material Adverse Effect. Since the ARC Balance Sheet Date, no event
has occurred and, to the knowledge of ARC, no circumstance exists that has or
could have a material adverse effect on the condition (financial or otherwise),
business, assets, liabilities or prospects of ARC. Since the ARC Balance Sheet
Date, there has not been any damage, destruction or loss, whether or not covered
by insurance, affecting any of the properties or the business of ARC.
5.15 Disposition of Assets. Since the ARC Balance Sheet Date, ARC has
not sold or otherwise disposed of, or committed to dispose of, any assets other
than in the ordinary course of business and in an aggregate amount not exceeding
$40,000. Since the ARC Balance Sheet Date,
17
ARC has not paid or declared any dividends, redeemed or repurchased any capital
stock, made or committed to make any distribution of assets, or made or
committed to make any loan.
5.16 Tax Returns. All federal, state, local and foreign tax returns and
reports (including any schedules or attachments thereto) of ARC, including,
without limitation, returns of income, sales, social security, withholding and
unemployment taxes that are required to have been filed by ARC, have been duly
prepared, timely filed and are complete and correct in all respects, and all
taxes, interest, penalties and additions thereto (whether or not shown thereon
or due in connection therewith) of ARC have been paid, if due, or accrued
according to GAAP and fully reflected in the ARC Financial Statements, if not
yet due or if being contested in good faith by appropriate proceedings. The
returns of ARC with respect to federal and state income tax, sales tax, business
and occupation tax, unemployment tax and use tax are not currently being
audited, ARC has not been contacted by any federal or state official regarding
any future audit and, to the best knowledge of ARC, no such audit is threatened
and no facts exist that would constitute grounds for the assessment of any
additional taxes with respect to ARC. The ARC Disclosure Schedule sets forth,
for each of the foregoing categories of tax, the latest taxable year for which
the returns of ARC have been audited. ARC has not waived or otherwise agreed to
extend the statutes of limitations for the assessment or collection of any taxes
for federal or state tax purposes with respect to any matter. No deficiency in
the payment of taxes by ARC has been proposed since the ARC Balance Sheet Date,
and no other such deficiency has been proposed and not paid with respect to any
tax return filed by ARC prior to the date hereof. All taxes that ARC is
required by law to withhold or collect have been withheld or collected and, to
the extent required, have been paid over to the proper governmental authority or
properly deposited or segregated as required by applicable law.
5.17 Employee Benefit Plans. (a) ARC neither is nor was a party to,
maintains or has maintained, or contributes or has contributed to, any severance
agreement, program or policy or any employment agreement with any current or
former director, officer or employee, or employee pension or welfare plans, (as
defined in ERISA), or any bonus, pension, profit sharing, retirement, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, supplemental
unemployment, disability, death benefit, hospitalization, medical, workers
compensation or other plan or arrangement (collectively, the "ARC Benefit
Plans"), whether written or unwritten, nor has ARC or any officers or directors
of ARC, taken any action directly or indirectly which obligates ARC to institute
or modify or change any such ARC Benefit Plan. True, complete and correct
copies of the ARC Benefit Plans and the summary plan descriptions, the most
recent annual reports on Internal Revenue Service Form 5500 and actuarial
reports, if applicable, and if not applicable, statement of trust assets, have
been made available and delivered to PCCC.
(b) With respect to any ARC Benefit Plan, and to any other employee benefit
plan, program, agreement or arrangement to which ARC or any other trade or
business, whether or not incorporated (an "ARC ERISA Affiliate"), that together
with ARC would be deemed a "single employer" within the meaning of Section
414(b), (c), (m) or (o) of the Code, there exists no condition or set of
circumstances in connection with which ARC could be subject to any liability
under ERISA, the Code or any other applicable Law.
(c) Each ARC Benefit Plan has been administered in accordance with its
terms, and each ARC Benefit Plan has been operated, and is and has been in
compliance with the applicable provisions of ERISA, the Code and all other
applicable laws. Each ARC Benefit Plan that is
18
intended to be qualified under Section 401(a) or 401(k) of the Code has received
a favorable determination letter from the IRS covering the Tax Reform Act of
1986, that it is so qualified and no fact or event has occurred since the date
of any determination letter from the IRS which would affect adversely the
qualified status of any such ARC Benefit Plan. There are no pending or
threatened claims with respect to any ARC Benefit Plan by or on behalf of any
current or former director, officer or employee, or dependent on beneficiary
thereof, or otherwise (other than routine claims for benefits) or any
investigation or audit by any governmental agency. All contributions required to
be made by ARC under applicable law or the terms of any ARC Benefit Plan or
collective bargaining agreement have been made, and all premiums required to be
paid or accrued with respect to any ARC Benefit Plan which provides benefits
through insurance have been paid or accrued. No ARC Benefit Plan holds any
interest or investment in, or any warrant or option with respect to, any
employer security of ARC.
(d) No ARC Benefit Plan is (i) a "defined benefit" plan (as defined in
Section 3(35) of ERISA), (ii) a "multiemployer plan" within the meaning of
Section 3(37) of ERISA, (iii) a "multiple employer or a multiple employer
welfare arrangement" within the meaning of Section 514(1,)(6) of ERISA, (iv) a
"welfare benefit fund" as defined in Section 419(e) of the Code, or (v) subject
to Title IV of ERISA. No ARC Benefit Plan provides or is intended to provide
medical, life or other welfare benefits (whether or not insured), with respect
to current or former Employees after retirement or other termination of service
(other than coverage mandated by applicable law). Each ARC Benefit Plan that is
a "group health plan," as defined in Section 5000 of the Code has been operated
in compliance with Section 4980B of the Code.
(e) Neither ARC nor any of its current or former directors, officers,
employees or any other "fiduciary," as such term is defined in Section 3 of
ERISA, has committed any breach of fiduciary responsibility imposed by ERISA or
engaged in any "prohibited transaction" as defined in Section 406 of ERISA.
5.18 Labor Matters. There are no agreements with, or pending petitions
for recognition of, a labor union or association as the exclusive bargaining
agent for any of the employees of ARC; no such petitions have been pending at
any time within two years of the date of this Agreement and, to the best
knowledge of ARC, there has not been any organizing effort by any union or other
group seeking to represent any employees of ARC as their exclusive bargaining
agent at any time within two years of the date of this Agreement. There are no
labor strikes, work stoppages or other labor troubles, other than routine
grievance matters, now pending, or, to ARC's knowledge, threatened, against ARC
nor have there been any such labor strikes, work stoppages or other labor
troubles, other than routine grievance matters, with respect to ARC at any time
within two years of the date of this Agreement.
5.19 ARC Computer Systems. The computer systems used in ARC's business
are capable of the following before, during and/or after January 1, 2000: (a)
handling date information involving all and any dates before, during and/or
after January 1, 2000, including accepting input, providing output and
performing date calculations in whole or in part; (b) operating, accurately
without interruption on and in respect of any and all dates before, during
and/or after January 1, 2000 and without any change in performance; (c)
responding to and processing two digit year input without creating any ambiguity
as to the century; and (d) storing and providing date input information without
creating any ambiguity as to the century.
19
5.20 Compliance with Laws. The conduct by ARC of its business does not
violate or infringe in any material respect any domestic (federal, state or
local) or foreign laws, statutes, ordinances, regulations, decrees or orders now
in effect, including, without limitation, the Americans with Disabilities Act of
1990, and the Occupational Safety and Health Act of 1970, and ARC has not
received a notice of violation of any such laws, statutes, ordinances,
regulations, decrees or orders other than violations which have been cured. To
the knowledge of ARC, no law, statute, ordinance, regulation, decree or order is
proposed to be adopted, the enforcement of which would adversely affect the
business or the value of the properties or assets of ARC.
5.21 Litigation. ARC is not involved in any pending or, to the knowledge
of ARC, threatened litigation or any investigation by any governmental body or
any legal, administrative or arbitration proceeding, including, without
limitation, any workers' compensation proceeding. ARC does not know of, and has
no reason to know of, any action, claim, suit, proceeding or investigation
threatened against or affecting ARC or any of its properties or assets. None of
ARC or any officer or director of ARC has been investigated by, or is currently
being investigated by, any other state or local regulatory authority. ARC is
not subject to any judgment, order, writ, injunction or decree of any court,
governmental authority or arbitration panel other than a judgment or order for
monetary damages which was satisfied in full prior to the ARC Balance Sheet
Date.
5.22 Insurance. The ARC Disclosure Schedule contains a complete and
correct list and summary description (including name of insurer, amount of
coverage, type of policy and policy number) of all policies of insurance or
binders of insurance which were owned by ARC as of March 31, 1998, including,
without limitation, all general liability, workers' compensation, automobile,
property, and directors and officers liability insurance policies. All such
policies are in full force and effect, and no notice of disallowance of any
claim under any such policy or binder has been received by ARC. There has been
no default in the payment of premiums on any such policy, and to the knowledge
of ARC, there is no ground for cancellation or avoidance of any such policy, for
reduction of the coverage provided thereby or for an increase in the premiums
paid therefor.
5.23 Contracts. The ARC Disclosure Schedule sets forth a description of
every contract, obligation, agreement, plan, arrangement, commitment or the like
(written or oral), of the following type to which ARC was a party as of March
31, 1998:
(a) Employment, bonus or consulting agreements;
(b) Loan or other agreements, notes, indentures, or instruments
relating to or evidencing indebtedness for borrowed money, or mortgaging,
pledging or granting or creating a lien or security interest or other
encumbrance on any of ARC's property or any agreement or instrument
evidencing any guaranty by ARC of payment or performance by any other
person;
(c) Any clinical research services agreement with an Investigator or
such Investigator's research organization and any agreement relating to the
conduct of human clinical research trials with Sponsors for the purpose of
providing assistance in connection with the conduct of such research trials
and any agreement between an Investigator and a Sponsor which provides for
payments to be made to ARC and that involve future payments or the
performance of services with an aggregate value in excess of $20,000 or
that have a duration in excess of 180 days from the Closing Date;
20
(d) Any contract or series of contracts with the same person for the
furnishing or purchase of equipment, goods or services, including, without
limitation, agreements with subcontractors, involving amounts in excess of
$20,000;
(e) Any private placement memoranda, forms of any subscription
agreements or similar documents relating to the sale or repurchase of
shares;
(f) Any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses to which ARC is a party;
(g) Agreements limiting the freedom of ARC to compete in any line of
business or in any geographic area or with any person; and
(h) Agreements providing for disposition of the business or
substantially all of the assets or shares of ARC, agreements of merger or
consolidation to which ARC is a party or letters of intent with respect to
the foregoing.
All of such agreements listed on the ARC Disclosure Schedule are valid,
binding and in full force and effect in all material respects and ARC (and, to
ARC's knowledge, each other party thereto) has complied in all material respects
with the provisions of said contracts, obligations, agreements, plans,
arrangements, and commitments and is not in default of any provision thereunder.
No event has occurred which, with the passage of time or the giving of notice or
both would constitute a default under any agreement listed in the ARC Disclosure
Schedule.
5.24 Relationships with Customers and Suppliers. ARC does not know of
any written or oral communication, fact, event or action which exists or has
occurred prior to the date of this Agreement which would indicate that any of
the following shall terminate or materially reduce its business with ARC:
(i) any current Investigator whose studies accounted for over 1% of
sales of ARC for its most recently completed fiscal year; or
(ii) any Sponsor or CRO the studies of which accounted for over 1% of
sales of ARC for its most recently completed fiscal year; or
(iii) any current supplier to ARC of items essential to the conduct
of the businesses of ARC, which items cannot be replaced at comparable cost
and the loss of which would have an adverse effect on ARC.
5.25 Environmental Matters. ARC is currently in compliance, and has
complied in all material respects with all Environmental Laws applicable to its
business or properties, and the present uses by ARC of its properties, whether
leased or owned, do not violate in any material respect any such Environmental
Laws. To the knowledge of ARC, there is not currently and in the past there has
not been (i) any use, treatment, storage or disposal of any Hazardous Substance
on any of the properties of ARC, whether leased or owned, except in full
compliance with all Environmental Laws, (ii) any spill, leakage, discharge or
release of any Hazardous Substance thereon or therefrom, (iii) any off-site
disposal by ARC of any Hazardous Substance in any location, except in full
compliance with all Environmental Laws or (iv) any hazardous condition in
existence on any of the
21
properties of ARC, whether leased or owned. ARC has furnished to PCCC the test
results for all tests conducted on any underground storage tanks located on the
ARC Premises. ARC has not purchased or sold asbestos, or any other Hazardous
Substance. ARC is not subject, nor shall they be subject, to any liability or
claim in connection with any Environmental Law or any use, treatment, storage or
disposal of any Hazardous Substance or any spill, leakage, discharge or release
of any Hazardous Substance as a result of having owned or operated any business
prior to the Closing Date.
5.26 Change in Control. The consummation of the Merger shall not (either
alone or upon the occurrence of additional acts or events) result in any payment
or payments becoming due from ARC to any person or give any person the right to
terminate or alter the provisions of any agreement to which ARC is a party.
5.27 Disclosure. This Agreement, including, without limitation, the ARC
Disclosure Schedule and the attachments hereto furnished by ARC to PCCC, does
not contain and shall not contain any untrue statement of a material fact and
does not omit and shall not omit to state a material fact necessary in order to
make the statements contained herein or therein, in light of the circumstances
in which they were made, not misleading.
5.28 Ownership of Acquisition Sub; No Prior Activities; Assets of
Acquisition Sub.
(a) Acquisition Sub was formed by ARC solely for the purpose of engaging in
the transactions contemplated hereby.
(b) As of the date hereof and the Effective Time, the capital stock of
Acquisition Sub is and will be owned 100% by ARC directly. Further, there are
not as of the date hereof and there will not be at the Effective Time any
outstanding or authorized options, warrants, calls, rights, commitments or any
other agreements of any character which Acquisition Sub is a party to, or may be
bound by, requiring it to issue, transfer, sell, purchase, redeem or acquire any
shares of capital stock or any securities or right convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire, any
shares of capital stock of Acquisition Sub.
(c) As of the date hereof and the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated hereby and in the Transaction Documents,
Acquisition Sub has not and will not have incurred, directly or indirectly
through any subsidiary or affiliate, any obligations or liabilities or engaged
in any business or activities of any type or kind whatsoever or entered into any
arrangements or arrangements with any person.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 Conduct of Business by PCCC. (a) During the period from the date of
this Agreement to the Effective Time (the "Standstill Period"), PCCC shall
conduct its operations according to its ordinary and usual course of business
consistent with past practice and with no less diligence and effort than would
be applied in the absence of this Agreement, shall seek to preserve intact its
current business organization and shall use all reasonable efforts to keep
available the services of its current
22
officers and employees and to preserve its relationships with Investigators,
CROs and others having business dealings with it.
(b) Without limiting the generality of Section 6.1(a), during the
Standstill Period, except as otherwise provided in this Agreement, as described
on Schedule 6.1 hereto or as authorized in writing in advance by ARC, PCCC shall
not:
(i) except for the issuance of an aggregate of 8,500 PCCC Common
Shares pursuant to the exercise of options outstanding on the date of this
Agreement and held by any of the Stockholders on the terms set forth in the
PCCC Disclosure Schedule, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or pledge
or other encumbrance of, (A) any PCCC Common Shares, or any securities or
rights convertible into, exchangeable for, or evidencing the right to
subscribe for any shares of capital stock of PCCC of any class, or any
rights, warrants, options, calls, commitments or any other agreements of
any character to purchase or acquire any shares of capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of capital stock of PCCC of any class,
or (B) any other securities of any other class in respect of, in lieu of,
or in substitution for, PCCC Common Shares outstanding on the date hereof;
(ii) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any PCCC Common Shares;
(iii) split, combine, subdivide or reclassify any PCCC Common Shares,
or declare, set aside for payment or pay any dividend, or make any other
actual, constructive or deemed distribution in respect of any shares of its
capital stock or otherwise make any payments to stockholders in their
capacity as such;
(iv) adopt any amendments to its Articles of Incorporation or By-Laws
or alter its corporate structure through merger, liquidation,
reorganization, restructuring or in any other fashion;
(v) make any acquisition by means of merger, consolidation or
otherwise, or disposition, of assets or securities;
(vi) incur any indebtedness for borrowed money, or guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
investments in, any other person, except that PCCC may borrow amounts not
to exceed $500,000 under its existing line of credit from Columbia State
Bank of Washington ("Columbia Bank") to meet working capital requirements;
(vii) grant or modify or amend compensation to any of its directors,
officers, key employees or stockholders;
(viii) pay any bonuses to directors, officers, key employees or
stockholders;
(ix) enter into any transaction not in the ordinary course of
business consistent with past practice;
23
(x) fail to maintain any or all insurance policies, including,
without limitation, general liability, workers' compensation, automobile
and property insurance policies;
(xi) pay or agree to pay any pension, retirement allowance or other
employee benefit not required or contemplated by any of the existing
benefit, severance, termination, pension, welfare or employment plans,
agreements or arrangements as in effect on the date hereof to any director,
officer, key employee or stockholder whether past or present;
(xii) except for the employment agreements described in Section 8.6
herein, enter into any new, or amend any existing, employment or severance
or termination agreement with any director, officer, key employee or
stockholder or enter into any new or amend any existing consulting
agreement;
(xiii) become obligated under any new pension plan, welfare plan,
multiemployer plan, employee benefit plan, severance plan, benefit
arrangement, or similar plan or arrangement, which was not in existence on
the date hereof, or modify or amend any such plan or arrangement in
existence on the date hereof;
(xiv) make any payment to any person or entity that is not in the
ordinary course of business or that is not for a valid business purpose;
(xv) offer, negotiate, consummate or solicit (by furnishing any
information concerning the business, properties or assets of PCCC or
otherwise) any offer or proposal for a merger or other business combination
involving the assets or securities of PCCC;
(xvi) enter into any new agreement which would require disclosure in
the PCCC Disclosure Schedule or amend any agreement disclosed in the PCCC
Disclosure Schedule; or
(xvii) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
(c) All indebtedness of PCCC to any current or former officer, director,
employee or stockholder of PCCC and all indebtedness of any current or former
officer, director, employee or stockholder of PCCC to PCCC shall be repaid prior
to the Closing. All credit cards issued for the account of PCCC shall be
canceled prior to the Closing and, upon cancellation, paid in full.
6.2 ARC Covenants. During the Standstill Period, except as otherwise
provided in this Agreement or authorized in writing in advance by PCCC, ARC
shall not:
(i) except for the issuance of ARC securities pursuant to (A) the
exercise of options outstanding on the date of this Agreement or granted
pursuant to stock option plans existing on the date of this Agreement, (B)
ARC's Confidential Private Placement Memorandum dated December 1997 or any
amendment or replacement thereof or supplement thereto not exceeding
200,000 ARC Common Shares, (C) the conversion pursuant to their terms of
currently outstanding ARC securities, or (D) any delivery, issuance, sale
or disposition not exceeding 75,000 ARC Common Shares in the aggregate,
deliver, sell, dispose of, pledge
24
or otherwise encumber, or authorize or propose the issuance, sale,
disposition or pledge or other encumbrance of, (Y) any ARC Common Shares,
or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for any shares of capital stock of ARC of
any class, or any rights, warrants, options, calls, commitments or any
other agreements of any character to purchase or acquire any shares of
capital stock or any securities or rights convertible into, exchangeable
for, or evidencing the right to subscribe for, any shares of capital stock
of ARC of any class, or (Z) any other securities of any other class in
respect of, in lieu of, or in substitution for, ARC Common Shares
outstanding on the date hereof;
(ii) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any ARC securities other than pursuant to
the terms of clinical research services agreements to which ARC is or
becomes a party;
(iii) split, combine, subdivide or reclassify any ARC securities or
declare, set aside for payment or pay any dividend, or make any other
actual, constructive or deemed distribution in respect of any shares of its
capital stock;
(iv) except as contemplated by this Agreement or any Transaction
Document, adopt any amendments to its Certificate of Incorporation or By-
Laws or alter its corporate structure through Merger, liquidation,
reorganization, restructuring or in any other fashion;
(v) enter into any transaction not in the ordinary course of business
consistent with past practice pursuant to which ARC or Acquisition Sub
would incur any material liability;
(vi) consummate, or execute a binding agreement to consummate, any
merger or other business combination involving the assets or securities of
ARC; or
(vii) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
6.3 No Sale by Stockholders. During the Standstill Period, none of the
Stockholders shall sell, transfer, hypothecate or otherwise encumber any PCCC
Common Shares held by them.
6.4 Reasonable Efforts. PCCC and ARC shall and shall use reasonable best
efforts to cause their respective subsidiaries to: (i) promptly make all
filings and seek to obtain all governmental authorizations required under all
applicable laws with respect the Merger and the other transactions contemplated
hereby and will cooperate with each other with respect thereto; and (ii)
promptly take, or cause to be taken, all other actions and do, or cause to be
done, all other things necessary, proper or appropriate to satisfy the
conditions set forth in Articles VII and VIII and to consummate and make
effective the transactions contemplated by this Agreement on the terms and
conditions set forth herein as soon as practicable.
6.5 Access to Information. Upon reasonable notice, PCCC shall afford to
officers, employees, counsel, accountants and other authorized representatives
of Acquisition Sub and ARC (the "ARC Representatives") reasonable access during
normal business hours throughout the Standstill Period to any properties, books
and records of PCCC and, during such period, shall furnish
25
promptly to the ARC Representatives all information concerning the business,
properties and personnel of PCCC, as may reasonably be requested (except to the
extent PCCC shall be prohibited from furnishing any such information by any
written agreement with a third party). Upon reasonable notice, ARC shall afford
to officers, employees, counsel, accountants and other authorized
Representatives of PCCC and the Stockholders (the "PCCC Representatives")
reasonable access during normal business hours throughout the Standstill Period
to any properties, books and records of ARC and, during such period, shall
furnish promptly to ARC, as may reasonably be requested (except to the extent
ARC shall be prohibited from furnishing any such information by any written
agreement with a third party).
6.6 Publicity. PCCC and ARC shall mutually agree upon any public
announcements relating to the Acquisition and shall not issue any such public
announcement prior to such agreement, except as may be required by applicable
law, in which case the party proposing to issue such public announcement shall
use all reasonable efforts to consult in good faith with the other party before
issuing any such public announcement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF
PCCC AND THE STOCKHOLDERS
The obligations of PCCC and the Stockholders to effect the Merger are
subject to the satisfaction or waiver at or prior to the Effective Time of the
following conditions:
7.1 Representations, Warranties and Covenants. All representations and
warranties of Acquisition Sub and ARC contained in Article V shall be true and
correct in all material respects at and as of the Effective Time as if such
representations and warranties were made at and as of the Effective Time, and
Acquisition Sub and ARC shall have performed all material agreements and
covenants required hereby to be performed by them prior to or at the Effective
Time. At the Closing, there shall be delivered to PCCC a certificate signed by
an authorized officer of each of Acquisition Sub and ARC to the foregoing
effect.
7.2 No Injunction or Decree. There shall not be in effect any statute,
rule, regulation, decree, injunction or other order of a court or governmental
agency of competent jurisdiction directing that the transactions contemplated
hereby not be consummated; provided, however, that prior to invoking this
condition each party shall use all reasonable efforts to have such decree,
injunction or order vacated.
7.3 Certificates. Acquisition Sub and ARC shall have furnished PCCC with
such certificates of the respective officers of Acquisition Sub and ARC and
others to evidence compliance with the conditions set forth in this Article VII
as may be reasonably requested by PCCC.
7.4 Opinion of Counsel. PCCC and the Stockholders shall have received an
opinion, dated as of the Closing Date, from counsel to Acquisition Sub and ARC,
addressed and in form reasonably satisfactory to PCCC and the Stockholders.
26
7.5 No Material Adverse Effect. As of the Closing Date, no event shall
have occurred and no circumstance shall exist that has or could have a material
adverse effect on the financial condition, businesses, assets or prospects of
ARC. There will be no material contracts or relationships of ARC or PCCC with
any customer, Investigator, research site, pharmaceutical company, clinical
research organization or similar entity that will be adversely affected by
consummation of the Merger.
7.6 Other Documents. Acquisition Sub and ARC shall have executed and
delivered to PCCC such other certificates, documents and instruments as PCCC may
reasonably request.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS
OF ACQUISITION SUB AND ARC
The obligations of Acquisition Sub and ARC to effect the Merger are subject
to the satisfaction or waiver at or prior to the Effective Time of the following
conditions:
8.1 Representations, Warranties and Covenants. All representations and
warranties of PCCC and the Stockholders contained in Article IV shall be true
and correct in all material respects at and as of the Effective Time as if such
representations and warranties were made at and as of the Effective Time, and
PCCC and the Stockholders shall have performed all material agreements and
covenants required hereby to be performed by them prior to or at the Effective
Time. At the Closing, there shall be delivered to Acquisition Sub and ARC a
certificate signed by an authorized officer of PCCC and by each Stockholder to
the foregoing effect.
8.2 Consents and Approvals. PCCC shall have delivered or caused to be
delivered to Acquisition Sub and ARC any consents, waivers, approvals, permits,
licenses or authorizations which, if not obtained on or prior to the Closing
Date, would have a material adverse effect on the Surviving Corporation's
ability to conduct business as conducted by PCCC at the Closing Date.
8.3 No Injunction or Decree. There shall not be in effect any statute,
rule, regulation, decree, injunction or other order of a court or governmental
agency of competent jurisdiction directing that the transaction contemplated
hereby not be consummated; provided, however, that prior to invoking this
condition each party shall use all reasonable efforts to have such decree,
injunction or order vacated.
8.4 Certificates. PCCC shall have furnished to Acquisition Sub and ARC
such certificates of the respective officers of PCCC and others to evidence
compliance with the conditions set forth in this Article VIII as may be
reasonably requested by Acquisition Sub and ARC.
8.5 Employment, Confidentiality and Non-Compete Agreements. Employment,
Confidentiality and Non-Compete Agreements for Xxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxxx
Xxxxxxx and Xxxxx Xxxxxx in form satisfactory to ARC and Acquisition Sub shall
have been executed and delivered to ARC or Acquisition Sub.
27
8.6 Co-Sale Agreement. The Stockholders named therein shall have
executed and delivered to ARC the Co-Sale Agreement attached hereto as Exhibit
8.6 (the "Co-Sale Agreement").
8.7 Opinion of Counsel; Stockholder Certificate. Acquisition Sub and ARC
shall have received an opinion, dated as of the Closing Date, from counsel to
PCCC addressed and in form reasonably satisfactory to Acquisition Sub and ARC.
Acquisition Sub and ARC shall have received a certificate, dated as of the
Closing Date, from each Stockholder that is not a natural person, evidencing the
authority of the person signing on behalf of such Stockholder, addressed and in
form reasonably satisfactory to Acquisition Sub and ARC.
8.8 No Material Adverse Effect. As of the Closing Date, no event shall
have occurred and no circumstance shall exist that has or could have a material
adverse effect on the financial condition, businesses, assets or prospects of
PCCC. There will be no material contracts or relationships of ARC or PCCC with
any customer, Investigator, research site, pharmaceutical company, clinical
research organization or similar entity that will be adversely affected by
consummation of the Merger.
8.9 Cancellation of Options. PCCC shall have caused the cancellation,
without any liability to PCCC (whether actual or contingent), of every security
or right convertible into, exchangeable for, or evidencing the right to
subscribe for any shares of capital stock of PCCC and every right, warrant,
option, call, commitment and other agreement of any character to acquire any
capital stock of PCCC or any securities or rights convertible into, exchangeable
for, or evidencing the right to subscribe for, any capital stock of PCCC.
8.10 PCCC Common Share Certificates. The Stockholders shall have
delivered at the Closing stock certificates (together with stock powers duly
endorsed in blank) representing all issued and outstanding PCCC Common Shares
and registered in the names of the Stockholders.
8.11 Tax Opinion. Acquisition Sub and ARC shall have received an
opinion, dated as of the Closing Date, from counsel to PCCC addressed and in
form and substance reasonably satisfactory to Acquisition Sub and ARC to the
effect that: (i) the Merger will qualify as a tax-free reorganization within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code; (ii) no gain
or loss will be recognized by PCCC or Acquisition Sub as a result of the Merger;
(iii) no gain or loss will be recognized by any Stockholder who, pursuant to the
provisions of this Agreement, exchanges his or her PCCC Common Shares solely for
Merger Shares; and (iv) the payment of cash to a Stockholder in lieu of a
fractional share of ARC Common Shares or ARC Series B Preferred Shares will be
treated as a distribution and redemption of the fractional share interest,
subject to the limitations of Section 302 of the Code.
8.12 Other Documents. PCCC and the Stockholders shall have executed and
delivered to Acquisition Sub and ARC such other certificates, documents and
instruments as Acquisition Sub and ARC may reasonably request.
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ARTICLE IX
POST-CLOSING COVENANTS
9.1 Stockholder Lock-Up. In order to facilitate a public offering of
ARC's securities pursuant to a registration statement to become effective under
the Securities Act or any successor thereto or any similar rule or law, each
Stockholder, on behalf of himself or herself and any subsequent holder
(collectively for purposes of this Section 9.1, the "Stockholder") of any
securities of ARC now owned or hereafter acquired either directly or indirectly
by such Stockholder, agrees not to offer, sell or contract to sell, grant an
option to purchase or otherwise dispose of (other than to donees who agree to be
bound by the terms of this agreement), directly or indirectly, or announce an
offering, sale or contract of sale of, any Class A Common Shares, shares of
Class B Common Stock, Series B Preferred Shares or any other equity security of
ARC (collectively, "Securities") owned by such Stockholder either directly or
indirectly, or any securities convertible, exchangeable or exercisable for any
such Securities (such other securities being hereinafter referred to as
"Rights") for a period of 180 days following the effective date of a
registration statement of ARC filed under the Securities Act or any other
underwritten sale of securities by ARC.
Each Stockholder also agrees not to transfer any Securities or any Rights
owned by the Stockholder either directly or indirectly to any transferee who
does not agree to be bound by the terms of this provision. Each Stockholder
agrees that any attempt to effect any transfer of such Securities or Rights held
by the Stockholder either directly or indirectly without the agreement of the
transferee to be bound by the terms of this provision shall be void and of no
force and effect. To this end, each Stockholder agrees that ARC will place a
legend on each certificate representing Merger Shares restricting the transfer
thereof to such transferees who agree to be bound by the terms of this
provision. Each Stockholder agrees and consents to the entry of stop transfer
instructions with ARC's transfer agent against the transfer of the Securities
or Rights held by the Stockholder either directly or indirectly except in
compliance with this provision.
Each Stockholder agrees that ARC may assign all or any part of its rights
hereunder to any underwriter in connection with a sale by ARC of its Securities
to or through such underwriter.
The provisions of this Section 9.1 will be applicable only to the first
such registration statement of the Company that covers securities to be sold on
its behalf to the public in an underwritten offering.
9.2 Employee Benefit Plans. Until the first anniversary of the Closing,
the Surviving Corporation intends to provide to its employees who were employed
by PCCC immediately prior to the Effective Time benefits substantially similar
in scope and terms to the PCCC Employee Benefit Plans; provided, however, that
the Surviving Corporation may modify, amend or terminate any such benefit if it
obtains the consent thereto of Xxxx Xxxxxx. Nothing contained in this Section
9.2 shall prevent ARC or the Surviving Corporation from terminating the
employment of any individual. The parties to this Agreement do not intend that
any employee or any other person (in each case other than a Stockholder not as
an employee but only as a stockholder of PCCC prior to the Merger) shall be a
third-party beneficiary of the covenant contained in this Section 9.2.
9.3 Continuity of Business Enterprise. Following the Merger,
Acquisition Sub will continue at least one significant historic line of business
of PCCC, or use at least a significant
29
portion of PCCC's historic business assets in a business, in each case within
the meaning of Treasury Regulation (S) 1.368-1(d).
9.4 Release of Guarantees. Within 30 days after the Closing Date,
Surviving Corporation shall obtain releases from Columbia Bank releasing the
personal guarantees executed by Xxxx Xxxxxx and Xxxxx Xxxxxx with respect to
amounts owed by PCCC to Columbia Bank.
9.5 Geneva Foundation. Within 60 days after the Closing Date, the Chief
Executive Officer of ARC shall be appointed as a trustee of the Geneva
Foundation, a not-for-profit corporation organized under the laws of the State
of Washington, in accordance with applicable law.
ARTICLE X
TERMINATION
10.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by the
mutual written consent of PCCC, Acquisition Sub and ARC.
10.2 Termination by any of PCCC, Acquisition Sub or ARC. This Agreement
may be terminated and the Merger may be abandoned by any of PCCC, Acquisition
Sub or ARC if (i) any court of competent jurisdiction in the United States or
other governmental body shall have issued an order, decree or ruling or taken
any other action permanently restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable or (ii) the Merger shall not have been consummated within 15
days following the date of this Agreement; provided, that the right to terminate
this Agreement pursuant to this Section 10.2 shall not be available to any party
whose failure to fulfill any of its obligations under this Agreement results in
the failure of the Merger to occur on or before such date.
10.3 Termination by Acquisition Sub or ARC. This Agreement may be
terminated by Acquisition Sub or ARC and the Merger may be abandoned prior to
the Effective Time if (i) PCCC or the Stockholders shall have failed to perform
in any material respect its obligations under this Agreement theretofore to be
performed by PCCC or the Stockholders, which failure to perform has not been
cured within ten days following receipt by PCCC of notice of such failure to
perform from Acquisition Sub or ARC, or (ii) any material representation or
warranty of PCCC or the Stockholders contained in this Agreement shall not be
true and correct when made or on and as of the Effective Time as if made on and
as of the Effective Time (except to the extent any such representation or
warranty relates to a particular date); provided, that such failure to be true
and correct has not been cured within ten days following receipt by PCCC of
notice of such failure to be true and correct from Acquisition Sub or ARC.
10.4 Termination by PCCC. This Agreement may be terminated by PCCC and
the Merger may be abandoned prior to the Effective Time if (i) Acquisition Sub
or ARC shall have failed to perform in any material respect its obligations
under this Agreement theretofore to be performed by Acquisition Sub or ARC,
which failure to perform has not been cured within ten days following receipt by
Acquisition Sub or ARC of notice of such failure to perform from PCCC, or (ii)
any material representation or warranty of Acquisition Sub or ARC contained in
this Agreement shall
30
not be true and correct when made or on and as of the Effective Time as if made
on and as of the Effective Time (except to the extent any such representation or
warranty relates to a particular date); provided, that such failure to be true
and correct has not been cured within ten days following receipt by Acquisition
Sub or ARC of notice of such failure to be true and correct from PCCC.
10.5 Effect of Termination. In connection with the termination of this
Agreement, PCCC and ARC each will pay their own out-of-pocket costs incurred in
connection with the Agreement and will have no other liability to the other
party; provided, however, that no party to this Agreement shall be relieved or
released from any liability or damages arising out of its intentional or willful
breach of any provision of the Agreement, or by lack of good faith efforts that
result in the failure to perform or fulfill any representation, warranty, or
condition set forth in the Agreement. The provisions of Sections 13.2 and 13.3
will survive the termination of the Agreement.
ARTICLE XI
INDEMNIFICATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
11.1 Indemnity Obligations of the Stockholders. Each of the Stockholders
hereby jointly and severally agrees to indemnify and hold Acquisition Sub and
ARC harmless from, and to reimburse Acquisition Sub and ARC for, any Acquisition
Sub Indemnity Claims. For purposes of this Agreement, the term "Acquisition Sub
Indemnity Claim" shall mean any loss, damage, deficiency, claim, liability,
obligation, suit, action, fee, cost or expense of any nature whatsoever
resulting from (i) any breach of any representation and warranty of PCCC or the
Stockholders which is contained in the Agreement, the PCCC Disclosure Schedule
or any Exhibit hereto or any Transaction Document or certificate delivered
pursuant hereto or thereto; (ii) any breach or non-fulfillment of, or any
failure to perform, any of the covenants, agreements or undertakings of PCCC or
the Stockholders which are contained in or made pursuant to this Agreement or
any Transaction Document; and (iii) all interest, penalties and costs and
expenses (including, without limitation, all reasonable fees and disbursements
of counsel) arising out of or related to any indemnification made under this
Section 11.1.
11.2 Indemnity Obligations of Acquisition Sub and ARC. Acquisition Sub
and ARC jointly and severally agree to indemnify and hold each of the
Stockholders harmless from, and to reimburse each of the Stockholders for, any
Stockholder Indemnity Claims arising under the terms and conditions of this
Agreement. For purposes of this Agreement, the term "Stockholder Indemnity
Claim" shall mean any loss, damage, deficiency, claim, liability, suit, action,
fee, cost or expense of any nature whatsoever incurred by the Stockholders
resulting from (i) any breach of any representation and warranty of Acquisition
Sub or ARC which is contained in this Agreement, the ARC Disclosure Schedule or
any Exhibit hereto or any Transaction Document or certificate delivered pursuant
hereto or thereto; (ii) any breach or non-fulfillment of, or failure to perform,
any of the covenants, agreements or undertakings of Acquisition Sub or ARC which
are contained in or made pursuant to the terms and conditions of this Agreement
or any Transaction Document; and (iii) all interest, penalties, costs and
expenses (including, without limitation, all reasonable fees and disbursements
of counsel) arising out of or related to any indemnification made under this
Section 11.2.
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11.3 Appointment of Representative. Each of the Stockholders hereby
appoints Xxxxx Xxxxxx as his or her exclusive agent to act on his or her behalf
with respect to any and all Stockholder Indemnity Claims and any and all
Acquisition Sub Indemnity Claims or such other representative as may be
hereafter appointed by a majority in interest of the Stockholders. Such agent
is hereinafter referred to as the "Representative." The Representative shall
take, and the Stockholders agree that the Representative shall take, any and all
actions which the Representative believes are necessary or appropriate under
this Agreement for and on behalf of the Stockholders, as fully as if the
Stockholders were acting on their own behalf, including, without limitation,
asserting Stockholder Indemnity Claims against Acquisition Sub and ARC,
defending all Acquisition Sub Indemnity Claims, consenting to, compromising or
settling all Stockholder Indemnity Claims and Acquisition Sub Indemnity Claims,
conducting negotiations with ARC and Acquisition Sub and its representatives
regarding such claims, dealing with Acquisition Sub and ARC with respect to all
matters arising under Section 11.6(b), taking any and all other actions
specified in or contemplated by this Agreement and engaging counsel, accountants
or other representatives in connection with the foregoing matters. Acquisition
Sub and ARC shall have the right to rely upon all actions taken or omitted to be
taken by the Representative pursuant to this Agreement, all of which actions or
omissions shall be legally binding upon each of the Stockholders.
11.4 Notification of Claims. Subject to the provisions of Section 11.5,
in the event of the occurrence of an event which any party asserts constitutes a
Acquisition Sub Indemnity Claim or a Stockholder Indemnity Claim, as applicable,
such party shall provide the indemnifying party with prompt notice of such event
and shall otherwise make available to the indemnifying party all relevant
information which is material to the claim and which is in the possession of the
indemnified party. If such event involves the claim of any third party (a
"Third-Party Claim"), the indemnifying party shall have the right to elect to
join in the defense, settlement, adjustment or compromise of any such Third-
Party Claim, and to employ counsel to assist such indemnifying party in
connection with the handling of such claim, at the sole expense of the
indemnifying party, and no such claim shall be settled, adjusted or compromised,
or the defense thereof terminated, without the prior consent of the indemnifying
party unless and until the indemnifying party shall have failed, after the lapse
of a reasonable period of time, but in no event more than 30 days after written
notice to it of the Third-Party Claim, to join in the defense, settlement,
adjustment or compromise of the same. An indemnified party's failure to give
timely notice or to furnish the indemnifying party with any relevant data and
documents in connection with any Third-Party Claim shall not constitute a
defense (in part or in whole) to any claim for indemnification by such party,
except and only to the extent that such failure shall result in any material
prejudice to the indemnifying party. If so desired by any indemnifying party,
such party may elect, at such party's sole expense, to assume control of the
defense, settlement, adjustment or compromise of any Third-Party Claim, with
counsel reasonably acceptable to the indemnified parties, insofar as such claim
relates to the liability of the indemnifying party, provided that such
indemnifying party shall obtain the consent of all indemnified parties before
entering into any settlement, adjustment or compromise of such claims, or
ceasing to defend against such claims, if as a result thereof, or pursuant
thereto, there would be imposed on an indemnified party any material liability
or obligation not covered by the indemnity obligations of the indemnifying
parties under this Agreement (including, without limitation, any injunctive
relief or other remedy) and if the indemnifying party acknowledges to the
indemnified party in writing its obligation to indemnify the indemnified party
with respect to such claim. In connection with any Third-Party Claim, the
indemnified party, or the indemnifying party if it has assumed the defense of
such claim pursuant to the preceding sentence, shall diligently pursue the
defense of such Third-Party Claim.
32
11.5 Survival. All representations and warranties, and, except as
otherwise provided in this Agreement, all covenants and agreements of the
parties contained in or made pursuant to this Agreement, and the rights of the
parties to seek indemnification with respect thereto, shall survive the Closing.
11.6 Limitations; Escrow. (a) After the Claims Bar Date, no party shall
be entitled to assert any right of indemnification under Section 11.1 for any
Acquisition Sub Indemnity Claim or under Section 11.2 for any Stockholder
Indemnity Claim except that, if as of the Claims Bar Date there shall be pending
any Acquisition Sub Indemnity Claim or Stockholder Indemnity Claim of which the
indemnified party shall have notified the indemnifying party in writing on or
prior to the Claims Bar Date, such indemnified party shall continue to have the
right, subject to the other provisions of this Section 11.6, to be indemnified
with respect to such claim. For purposes of this Agreement, the Claims Bar Date
shall mean the date of the occurrence of the earlier of (i) the third
anniversary of the Closing Date, or (ii) the first anniversary of the closing of
an underwritten public offering by ARC of ARC Common Shares (an "IPO").
(b) Notwithstanding the foregoing, any claim by an indemnified party
against any indemnifying party under this Agreement shall be payable by the
indemnifying party only in the event, and to the extent, that the accumulated
amount of the claims in respect of such indemnifying party's obligations to
indemnify under this Agreement shall exceed the Indemnification Threshold for
such indemnifying party. The Indemnification Threshold for ARC and Acquisition
Sub shall be $250,000 in the aggregate. The Indemnification Threshold for PCCC
and the Stockholders shall be, in the aggregate, the sum of (i) $125,000 plus
(ii) the amount, if any, in excess of $90,000 that ARC or the Surviving
Corporation receive after the Effective Time with respect to ongoing lawsuits
(i) related to PCCC's Medford, Oregon operation, in which PCCC seeks damages for
violations of its noncompete agreement by former employees and for tortious
interference, theft and defamation, and (ii) related to PCCC's Boise, Idaho
office in which PCCC seeks recovery on some terminated studies from a physician
who set up a competing business, based on unjust enrichment and tortious
interference, both matters being more fully detailed in the PCCC Disclosure
Schedule. The maximum liability of ARC and Acquisition Sub for Stockholder
Indemnified Claims shall be $1,750,000.
(c) At the Closing, the Stockholders shall deposit (pro rata in proportion
to their equity interests in PCCC immediately prior to the Effective Time) into
escrow, pursuant to the terms of the Escrow Agreement attached hereto as Exhibit
11.6, a total of 152,622 ARC Common Shares and 57,109 ARC Series B Preferred
Shares (such deposit being referred to as the "Escrow Deposit") issued in
connection with the Merger. All Acquisition Sub Indemnity Claims shall be
satisfied out of and only to the extent of the Merger Shares held in the Escrow
Deposit (pro rata on the basis of each Stockholder's Merger Shares in the Escrow
Deposit). For purposes hereof, all Merger Shares reacquired by ARC in
settlement of any Acquisition Sub Indemnity Claims under the Escrow Agreement
shall be valued at the prices described in the next paragraph. Any liability of
the Stockholders for Acquisition Sub Indemnity Claims shall be satisfied through
the transfer to ARC of Merger Shares held in the Escrow Deposit.
For purposes of this Agreement, the term "Deemed Escrow Value" shall mean
(i) the value of the ARC Common Shares to be transferred by the Stockholders
into the Escrow Deposit, determined by multiplying such number of ARC Common
Shares times the Class A Escrow Value (subject to equitable adjustment to
account for any reclassification, recapitalization, reorganization,
33
split-up, combination, exchange of shares or readjustment in respect of or
affecting the ARC Common Shares which is effected after the Effective Time and
prior to the valuation date) plus (ii) the value of the ARC Series B Preferred
Shares to be transferred by the Stockholders into the Escrow Deposit, determined
by multiplying such number of ARC Series B Preferred Shares times the Series B
Escrow Value (subject to equitable adjustment to account for any
reclassification, recapitalization, reorganization, split-up, combination,
exchange of shares or readjustment in respect of or affecting the ARC Series B
Preferred Shares which is effected after the Effective Time and prior to the
valuation). For purposes of this Agreement, (i) the term "Class A Escrow Value"
shall mean, until the closing date of an IPO $10.125, and on and after the
closing date of an IPO $11.25, and (ii) the term "Series B Escrow Value" shall
mean, until the closing date of an IPO $1.125, and on and after the closing date
of an IPO $1.25. With respect to any Merger Shares to be returned to Acquisition
Sub or ARC by the Stockholders in settlement of Acquisition Sub Indemnity Claims
pursuant to this Section 11.6(c), any dividends previously paid in respect of
such returned Merger Shares (whether paid in cash, ARC Common Shares, ARC Series
B Preferred Shares or other property) shall also be returned to Acquisition Sub
or ARC, provided that the value of such dividends shall not be taken into
account for purposes of determining the value of such returned Merger Shares.
Upon the transfer of any Merger Shares to ARC pursuant to the terms of the
Escrow Agreement, the Stockholder who is the holder of record of such Merger
Shares shall cease to have any rights as a stockholder of ARC with respect to
such Merger Shares.
Certificates representing Merger Shares deposited in the Escrow Deposit
will bear the following legend (the "Escrow Legend"):
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS OF SECTION 11 OF THE
MERGER AGREEMENT AND THE TERMS OF AN ESCROW AGREEMENT RELATED THERETO AND
MAY NOT BE TRANSFERRED OR SOLD PRIOR TO THE ESCROW RELEASE DATE (AS DEFINED
THEREIN).
Any Merger Shares remaining in the Escrow Deposit at the earlier of the
following to occur (the "Escrow Release Date") will be returned to the
Stockholders: (i) the third anniversary of the Closing Date, or (ii) the first
anniversary of the closing of an IPO. On and after the Escrow Release Date, at
the request of the registered holder, ARC will remove the Escrow Legend from any
Merger Shares released from the Escrow Deposit on the Escrow Release Date.
Notwithstanding the foregoing, no Merger Shares will be released from the Escrow
Deposit if, prior to the Escrow Release Date, ARC shall have notified the
Stockholders of the occurrence of any event which ARC asserts constitutes an
Acquisition Sub Indemnity Claim, in which case the Merger Shares remaining in
the Escrow Deposit shall remain therein until the resolution of all such
Acquisition Sub Indemnity Claims.
(d) Notwithstanding anything to the contrary herein, any liability of
Acquisition Sub or ARC under this Agreement for Stockholder Indemnity Claims may
be satisfied, at the Company's election, with cash, through the issuance of
additional ARC Common Shares and ARC Series B Preferred Shares, such shares to
valued as described in the definition of "Deemed Escrow Value" above (subject to
equitable adjustment to account for any reclassification, recapitalization,
reorganization, split-up, combination, exchange of shares or readjustment, or a
stock dividend or
34
other extraordinary distribution (other than a nonliquidating cash dividend) in
respect of or affecting the ARC Common Shares or ARC Series B Preferred Shares
which is effected after the Effective Date and prior to the issuance of such
additional ARC Common Shares or ARC Series B Preferred Shares) or through a
combination thereof, paid or issued on a pro rata basis to the Stockholders
based on their relative equity interests in PCCC as of the Closing Date.
(e) The provisions of this Section 11.6 shall not apply to any Tax
Indemnity Claim (as defined in Section 11.7).
11.7 Tax Indemnification. Each of the Stockholders hereby agrees to
indemnify and hold Acquisition Sub and ARC harmless from, and to reimburse
Acquisition Sub and ARC for, any Tax Indemnity Claim. For purposes of this
Agreement, the term "Tax Indemnity Claim" shall mean any tax, penalty and
interest ("Taxes") imposed on ARC or Acquisition Sub by any taxing authority as
a result of the Merger failing to qualify as a tax-free reorganization within
the meaning of Section 368(a) of the Code and all costs and expenses of
Acquisition Sub or ARC (including, without limitation, all reasonable fees and
disbursements of counsel) related to addressing or contesting such Taxes. The
provisions of Sections 11.3 and 11.4 shall apply to all Tax Indemnity Claims to
the same extent as if the term Tax Indemnity Claim were substituted for the term
Acquisition Sub Indemnity Claim (or their respective plurals) throughout such
sections; provided, however, that the Stockholders shall not be entitled to
settle, either administratively or after commencement of litigation, any Tax
Indemnity Claim that would adversely affect the tax liabilities of ARC or
Acquisition Sub for any taxable period ending after the Effective Time without
the prior written consent of ARC. Notwithstanding the foregoing, any Tax
Indemnity Claim shall be payable by the Stockholders only in the event, and to
the extent, that the amount of the Tax Indemnity Claim exceeds $50,000. The
provisions of this Section 11.7 shall survive until the 180th day after the
sixth anniversary of the Closing Date, except with respect to Tax Indemnity
Claims related to any period for which the applicable statute of limitations has
been extended or waived beyond such date, in which case these provisions shall
survive until the 90th day after the expiration of such extension or waiver.
ARTICLE XII
EXPENSES OF THE PARTIES
Except as specifically provided herein, all expenses incurred by or on
behalf of the parties hereto, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants employed by the
parties hereto in connection with the preparation of this Agreement and the
consummation of the transactions contemplated by this Agreement shall be borne
solely by the party or parties who shall have incurred such expenses, and the
other party or parties shall have no liability in respect thereof.
Notwithstanding the foregoing, if the Merger is consummated, (a) the fees and
costs of Xxxxxx, Xxxxxx, Honeywell, Malanca, Xxxxxxxx & Dabem, PLLC (i) up to
$100,000 shall be borne by PCCC (50%) and the Stockholders (50%), and (ii) to
the extent in excess of $100,000 shall be borne by the Stockholders and (b) the
fees and expenses related to the Escrow Agreement (including the fees and
expenses of the Escrow Agent) shall be borne by the Stockholders (50%) and ARC
(50%).
35
ARTICLE XIII
MISCELLANEOUS
13.1 Notices. All notices and other communications provided for
hereunder shall be in writing, unless otherwise specified, and shall be deemed
to have been duly given if delivered personally or by courier service, given by
prepaid telegram, facsimile transmission or similar means, or mailed, postage
prepaid, registered or certified mail, to the following addresses or at such
other addresses as the parties hereto may designate from time to time in
writing:
If to PCCC and the Stockholders:
Xxxxx Xxxxxx
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
With a copy to:
Xxxxxx, Xxxxxx, Honeywell
Malanca, Xxxxxxxx & Daheim, PLLC
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000-0000
Attn: J. Xxxxx Xxxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
If to ARC or Acquisition Sub:
Affiliated Research Centers, Inc.
0000 Xxx-Xxxxx Xxxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: President
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
00 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
13.2 GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS,
EXCLUDING THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. ANY CLAIM, ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT
36
WILL BE BROUGHT ONLY IN A STATE COURT LOCATED IN LAKE COUNTY, ILLINOIS OR A
FEDERAL COURT LOCATED IN THE NORTHERN DISTRICT OF THE STATE OF ILLINOIS, AND
EACH PARTY HERETO HEREBY CONSENTS TO PERSONAL JURISDICTION, SERVICE OF PROCESS
AND VENUE OF SUCH COURT AND WAIVES ANY OBJECTION TO THE BRINGING OF ANY SUCH
CLAIM, ACTION OR PROCEEDING IN SUCH COURT, WHETHER BASED ON DOMICILE, HABITUAL
RESIDENCE OR OTHERWISE.
13.3 Confidentiality. None of the parties hereto shall reveal the
contents of this Agreement or any of the documents, materials or information
provided to such party pursuant to this Agreement to any person or other entity
unless agreed in writing by the parties, except that the parties may disclose
such information to their professional advisors (provided that such parties
require their advisors to keep such information confidential) and to
governmental and regulatory agencies in accordance with the applicable legal
requirements and except that the parties may disclose information which has been
disclosed to the public either through filings with governmental agencies which
are open to the public or through public announcements which have been approved
by the parties to this Agreement.
13.4 Section Headings. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
13.5 Amendments. This Agreement, including, without limitation, the
Disclosure Schedules, the Exhibits, the attachments or any other document or
certificate delivered pursuant hereto, may be amended, modified, superseded or
canceled and any of the terms, provisions and conditions hereof may be waived
only by a written instrument executed by all of the parties hereto. Notice or
knowledge of any matter shall not constitute a waiver of any representation or
warranty with respect to such matter. The waiver by any party of any breach of
any provision shall not be construed as a waiver of any other provision by such
party. Each party shall have the right to waive fulfillment of a condition or
covenant or compliance with a representation or warranty of which it is the
beneficiary.
13.6 Entire Agreement. This Agreement and the Confidentiality Agreement
between ARC and PCCC dated November 14, 1997 constitute the entire agreement
among the parties hereto and supersede all prior agreements, understandings and
arrangements, oral or written, between the parties hereto with respect to the
subject matter hereof, including, the letter dated February 27, 1988. This
Agreement inures to the benefit of and shall be binding on each of the parties
hereto or any of them, their respective representatives and successors;
provided, however, this Agreement and the rights and obligations hereunder shall
not be assignable by any party.
13.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument. The signature of any
party hereto may be facsimile.
13.8 Severability. In the event any provision of this Agreement is
deemed to be unenforceable, the remainder of this Agreement shall not be
affected thereby and each provision hereof shall be valid and enforced to the
fullest extent permitted by law.
[remainder of page intentionally left blank]
37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
Acquisition Sub:
ARC ACQUISITION SUB-I, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Title: Chairman, CEO and President
----------------------------
ARC:
AFFILIATED RESEARCH CENTERS, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------
Title: CFO and President
----------------------------
PCCC:
PACIFIC COAST CLINICAL
COORDINATORS, INC.
By: /s/ Xxxx Xxxxxx
-------------------------------
Title: Chief Executive Officer
----------------------------
STOCKHOLDERS:
/s/ Xxxx Xxxxxx
-------------------------------
Xxxx Xxxxxx
/s/ Xxxxx Xxxxxx
-------------------------------
Xxxxx Xxxxxx
AYER FAMILY TRUST
/s/ Xxxx X. Xxxx, Trustee
-------------------------------
By: Xxxx X. Xxxx, Trustee
38
/s/ Xxxxx X. Xxxxxxx
-------------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxx X. Xxxxxxx
-------------------------------
Xxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxx
--------------------
Xxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxx Xxxx
-------------------------------
Xxxxx Xxxx
/s/ Xxxxxx Xxxx
-------------------------------
Xxxxxx Xxxx
/s/ Xxxx Xxxxxxx
-------------------------------
Xxxx Xxxxxxx
/s/ Xxxxx Xxxxxx
-------------------------------
Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxxxx
-------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxx Xxxxxx
-------------------------------
Xxxx Xxxxxx
39
