Exhibit 2.6
SHARE PURCHASE AGREEMENT
AMONG
PHOENIX INTERNATIONAL LIFE SCIENCES INC.
AND
PROF. DR. KLAUS-GEORG BUHRENS
AND
MARTIN GEIST
AND
DR. BERND BLOHM
AND
CHRISTIAN HILGENSTOCK
AND
CLAUS HEMKER
AND
DR. IVAN KOZAK
AND
DR. BERNHARD VENS-CAPPELL
AND
WOLFGANG TETZLOFF
AND
DR. JURGEN HENKE
AND
DR. LOTTE HENKE
AND
TREND FINANZANALYSEN GMBH
AND
MCKNIGHT LABORATORIES GMBH
----------------------
DATED AS OF NOVEMBER 6, 1998
----------------------
SHARE PURCHASE AGREEMENT dated as of November 6, 1998
AMONG: PHOENIX INTERNATIONAL LIFE SCIENCES INC., a corporation
incorporated under the Canada Business Corporations Act, having
its head office at 2350, Cohen Street, Saint-Laurent, Quebec,
Canada, H4R 2N6, herein acting and represented by John Hooper,
its duly authorized representative;
(hereinafter "Phoenix")
AND: PROF. DR. KLAUS-GEORG BUHRENS, residing at Buchtallee 4a, 21465
Reinbek, Germany;
(hereinafter "Buhrens")
AND: MARTIN GEIST, residing at Georgiweg 43, 22453 Hamburg, Germany;
(hereinafter "Geist")
AND: DR. BERND BLOHM, residing at Buchtallee 23, 21465 Reinbek,
Germany;
(hereinafter "Blohm")
AND: CHRISTIAN HILGENSTOCK, residing at Gronenweg 73, 22549 Hamburg,
Germany;
(hereinafter "Hilgenstock")
AND: CLAUS HEMKER, residing at Feldblick 2, 22397 Hamburg, Germany;
(hereinafter "Hemker")
AND: DR. IVAN KOZAK, residing at Kopeniker Str. 15, 22045 Hamburg,
Germany;
(hereinafter "Kozak")
AND: DR. BERNHARD VENS-CAPPELL, residing at Wurtkamp 12, 22527
Hamburg, Germany;
(hereinafter "Vens-Cappell")
- 2 -
AND: WOLFGANG TETZLOFF, residing at Friedenstrasse 56, 82194
Grobenzell, Germany;
(hereinafter "Tetzloff")
AND: DR. JURGEN HENKE, residing at Hohenzollernring 57, 50672 Koln,
Germany, herein acting and represented by Ulrike Schafer, his
duly authorized representative;
(hereinafter "J. Henke")
AND: DR. LOTTE HENKE, residing at Hohenzollernring 57, 50672 Koln,
Germany, herein acting and represented by Ulrike Schafer, her
duly authorized representative;
(hereinafter "L. Henke")
AND: TREND FINANZANALYSEN GMBH, a German corporation with capital of
DM150,000, registered in the Commercial Register of the
Amtsgericht Dusseldorf under number HRB 18161 and having its
head office at Berliner Allee 21, 40212 Dusseldorf, Germany,
herein acting and represented by Ulrike Schafer, its duly
authorized representative;
(hereinafter "TREND")
(Buhrens, Geist, Blohm, Hilgenstock, Hemker, Kozak,
Vens-Cappell, Tetzloff, J. Henke, L. Henke and TREND are
hereinafter collectively referred to as the "Vendors")
AND: MCKNIGHT LABORATORIES GMBH, a German corporation with capital of
DM1,100,000, registered in the Commercial Register of the
Amtsgericht Hamburg under number HRB 28004 and having its head
office at Osterstrasse 86, 20259 Hamburg, Germany, herein acting
and represented by Prof. Dr. Klaus - Georg Buhrens, its duly
authorized representative;
(hereinafter "MKL")
WHEREAS, the Vendors hold, directly or indirectly, as more fully set out
in Schedule A, all of the outstanding shares and voting rights of MKL;
WHEREAS, IPHAR Institut fur Klinische Pharmakologie GmbH ("IPHAR"), a
German corporation, with capital of DM500,000, registered in the Commercial
Register of the Amtsgericht Munchen under number HRB 8768 and having its head
office at Arnikastrasse 4, 85631 Hohenkirchen -Siergertsbrunn, Germany, is a
subsidiary of MKL, held as to 100% by MKL. The capital structure of IPHAR is set
forth in Schedule B;
- 3 -
WHEREAS, McKnight Laboratories (U.S.A.) inc. ("MKL-USA"), a corporation
and having its head office at 122 Main Street, Flemington, New Jersey, United
States, is a subsidiary of MKL, held as to 100% by MKL. The capital structure of
MKL-USA is set forth in Schedule C;
WHEREAS the Vendors have agreed to sell all of the outstanding shares of
MKL to Phoenix in consideration for the issuance to the Vendors of common shares
of Phoenix;
NOW, THEREFORE, the parties hereto agree as follows:
1. INTERPRETATION AND DEFINITIONS
Except as the context otherwise explicitly requires, (a) the capitalized
term "Section" refers to sections of this Agreement; (b) the capitalized terms
"Schedules" and "Exhibit" refer to schedules and exhibits to this Agreement; (c)
references to a particular Section include all subsections thereof; (d) the word
"including" shall be construed as "including without limitation"; (e) accounting
terms not otherwise defined herein have the meaning provided under GAAP (as
defined below); (f) references to a particular law, statute or regulation
include all rules and regulations thereunder and any successor, law, statute,
regulation or rules, in each case as from time to time in effect; (g) references
to a particular Person include such Person's successors and assigns to the
extent not prohibited by this Agreement; (h) references to dollars or $ in this
Agreement are to Canadian dollars. In this Agreement, unless the context
otherwise requires, the following terms shall have the respective meanings
assigned to them:
1.1 "AFFILIATE" means, with respect to any Person, any Person which,
directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with such
Person. For the purposes of this Agreement, "Affiliate" also
means an affiliate as such term is defined by the SEC.
1.2 "ARTICLES" means the original or restated articles of
incorporation, articles of amendment, articles of amalgamation,
articles of continuance, articles of reorganization and articles
of arrangement, including amendments thereto, as in effect from
time to time, of MKL.
1.3 "COMPENSATION" as applied to any Person means the aggregate of
all salaries, compensation, remuneration or bonuses of any
character, retirement or pension benefits of any kind, or other
payments of any kind whatsoever (other than health and medical
benefits made available to employees generally and advances and
reimbursements of business expenses) made directly or indirectly
by MKL, any of the Subsidiaries or other specified Persons to
such Person and affiliates of such Person.
1.4 "COMPLETION DATE" means the date of this Agreement, i.e.
November 6, 1998.
1.5 "CONSOLIDATED", when used with reference to any term, means that
term as applied to the accounts of MKL or other indicated Person
and each of its respective Subsidiaries, consolidated or
combined in accordance with GAAP after eliminating all
inter-company operations and with appropriate deductions for
minority interests in Subsidiaries.
1.6 "CONTRACTUAL OBLIGATION" means, with respect to any Person, any
contracts, agreements, deeds, hypothecs, mortgages, indentures,
leases, licenses, other instruments, commitments, undertakings,
arrangements or understandings, written or oral, or other
documents or instruments, including any provisions of its
articles of incorporation or other constituting documents or
by-laws and any document or instrument evidencing Indebtedness,
to which any
- 4 -
such Person is a party or otherwise subject to or bound by or to
which any property or asset of any such Person is subject.
1.7 "DISTRIBUTION" means (a) the declaration or payment of any
dividend on or in respect of the shares of any class or series
of shares of MKL, any of the Subsidiaries or other specified
Person, other than dividends payable solely in common shares of
the share capital of the payor; (b) the purchase, redemption or
other retirement of any shares of any class of MKL, any of the
Subsidiaries or other specified Person directly, or indirectly
through a Subsidiary or otherwise; or (c) any other distribution
on or in respect of any shares of any class or series of shares
of MKL, any of the Subsidiaries or other specified Person.
1.8 "ESCROW AGENT" means Montreal Trust Company.
1.9 "ESCROW AGREEMENT" means the escrow agreement entered between
the parties hereto and the Escrow Agent a copy of which is
attached hereto as Schedule 1.9.
1.10 "ESCROWED SECURITIES" means the Phoenix Shares escrowed pursuant
to Section 2.4 together with all Proceeds (as defined in the
Escrow Agreement).
1.11 "ESCROWED SHARE PRICE" means the amount obtained by adding the
opening and closing prices of the common shares of Phoenix on
each of the Montreal Exchange and The Toronto Stock Exchange for
the ten trading days preceding the date of execution of the
present Agreement, divided by 40.
1.12 "ENVIRONMENTAL LAWS" means all Legal Requirements (including
consent decrees, administrative orders and contractual
obligations) relating to public health and safety, workers
health and safety and pollution or protection of the
environment.
1.13 "GAAP" means generally accepted accounting principles, as in
effect from time to time, consistently applied.
1.14 "GUARANTEE" means (a) any guarantee of the payment or
performance of, or any contingent obligation in respect of, any
indebtedness or other obligation of any other Person, (b) any
other arrangement whereby credit or financial assistance is
extended to one obligor on the basis of any promise or
undertaking of another Person (i) to pay the Indebtedness of
such obligor, (ii) to purchase any obligation owed by such
obligor, or (iii) to maintain the capital, working capital,
solvency or general financial condition of such obligor, whether
or not such arrangement is disclosed in the balance sheet of
such other Person or is referred to in a footnote thereto or
appears in a "keep well" agreement, "comfort letter" or "take or
pay" agreement, and (c) any liability of MKL or any of the
Subsidiaries as general partner of a partnership or as a
venturer in a joint venture in respect of Indebtedness or other
obligations of such partnership or venture; provided, however,
that in no event shall Guarantees include product warranties
given or the endorsement of negotiable instruments for deposit
or collection in the ordinary course of business.
1.15 "INDEBTEDNESS" means (a) all indebtedness, obligations and
liabilities for borrowed money and similar monetary obligations
evidenced by bonds, notes debentures, evidences of indebtedness,
capitalized lease obligations, deferred purchase price of
property (other than ordinary trade payables) or otherwise,
whether direct or indirect; and (b) all indebtedness,
- 5 -
obligations and liabilities secured by any Liens existing on
property owned or acquired, whether or not the liability secured
thereby shall have been assumed.
1.16 "LEGAL REQUIREMENT" means any national, provincial, regional,
municipal, local or foreign law, statute, standard, ordinance,
code, order, rule, regulation, resolution, promulgation, by-law,
policy, guideline, directive, standard and any other provision
having the force or effect of law or any final order, judgment
or decree of any court, arbitrator, tribunal or governmental
authority, or any license, franchise, permit, certificate,
authorization, registration or similar right granted under any
of the foregoing.
1.17 "LIEN" means (a) any hypothec, priority, mortgage, pledge, lien,
charge, security interest or other similar encumbrance upon any
property or assets of any character, or upon the income or
profits therefrom, whether arising by agreement or under law, or
otherwise (b) any conditional sale or other title retention
agreement or arrangement (including a capitalized lease); (c)
any sale, assignment, pledge or other transfer for security of
any accounts, general intangibles, or chattel paper, with or
without recourse, or (d) any transaction (regardless of form)
which is intended to create any charge or encumbrance on
property to secure the payment or performance of an obligation.
1.18 "MANAGEMENT" means each of Barkworth, Buhrens, Geist, Hemker,
Hilgenstock, Kozak, Dr. Mazur, Vens-Cappel, Schmieder and
Tetzloff.
1.19 "MATERIAL ADVERSE EFFECT" means any (a) material adverse effect
whatsoever upon the validity, performance or enforceability of
this Agreement, (b) material adverse effect upon the business,
assets, financial condition, income or prospects of MKL and the
Subsidiaries on a Consolidated basis, or (c) material adverse
effect upon the ability of the Vendors to perform their
obligations under this Agreement.
For the purposes of this Agreement and the Schedules hereto, the
expression "Material Adverse Effect" when used in reference to
obligations, debts, effects, liabilities or claims, shall mean
an obligation, debt, effect, liability or claim, as the case may
be which involves an amount in excess of DM60,000.
1.20 "MKL AFFILIATE" means any of Buhrens and TREND.
1.21 "PERMITTED LIEN" means those Liens indicated on Schedule 1.21.
1.22 "PERSON" means an individual, partnership, corporation, company,
association, trust, joint venture, unincorporated organization,
business trust, limited liability company and any governmental
or administrative department or agency or political subdivision.
1.23 "PHOENIX AFFILIATES" means John Hooper, Stephane Huguet, Heather
Baker, Judy Zilber, Jean-Yves Caloz, Diane Bouchard, Carmen
Discenza, Lucien Steru, Dominique Steru, Susan Thornton, Greg
Holmes, Claude E. Forget, Bertran Spilker, Robert Raich, David
Goldman, Suzanne Peeters, George Engelberg, Dr. Andreas Wicki
and Cornelius P. McCarthy III.
1.24 "SEC" means the United States Securities and Exchange
Commission.
1.25 "SECURITIES ACT" means the United States Securities Act of 1933,
as amended, and all rules and regulations promulgated
thereunder.
- 6 -
1.26 "SHARES" means shares in the nominal value of DM1,100,000 of MKL
being all of the issued and outstanding shares of MKL.
1.27 "SUBSIDIARIES" means IPHAR and MKL-USA and "SUBSIDIARY" means
any of the Subsidiaries on an individual basis.
2. SALE AND PURCHASE OF SHARES
2.1 AGREEMENT TO PURCHASE AND SELL SHARES
Upon the terms and subject to the conditions hereof and in
reliance on the representations and warranties of Phoenix set forth in
Section 4, the Vendors hereby sell to Phoenix and, upon the terms and
subject to the conditions hereof and in reliance on the representations
and warranties of the Vendors set forth in Section 3, Phoenix hereby
purchases from the Vendors, the Shares, as set forth below:
VENDOR NUMBER OF SHARES
------ ----------------
Buhrens DM550,500
Geist DM21,000
Blohm DM21,000
Hilgenstock DM55,500
Hemker DM55,500
Kozak DM55,500
Vens-Cappell DM55,500
Tetzloff DM55,500
J. Henke DM45,000
L. Henke DM45,000
TREND DM140,000
TOTAL DM1,100,000
2.2 PRICE OF SHARES
The purchase price of the Shares is payable by the issuance by
Phoenix to the Vendors of an aggregate of 873,325 common shares of
Phoenix. The aggregate purchase price for the Shares is to be allocated
among the Vendors as follows:
VENDOR NUMBER OF COMMON SHARES OF PHOENIX
------ ----------------------------------
Buhrens 437,059
Geist 16,673
Blohm 16,673
Hilgenstock 44,063
Hemker 44,063
Kozak 44,063
Vens-Cappell 44,063
Tetzloff 44,063
J. Henke 35,727
- 7 -
VENDOR NUMBER OF COMMON SHARES OF PHOENIX
------ ----------------------------------
L. Henke 35,727
TREND 111,151
TOTAL 873,325
(The common shares of Phoenix issued to the Vendors pursuant to this
Section 2.2 are hereinafter collectively referred to as the "Phoenix
Shares".)
2.3 TRANSFER OF SHARES AND PAYMENT OF PURCHASE PRICE
2.3.1 Phoenix hereby acknowledges receipt from each of
Buhrens, Geist, Blohm, Hilgenstock, Hemker, Kozak,
Vens-Cappell, Tetzloff, J. Henke, L. Henke and TREND of
the Shares by notarial deed dated November 6, 1998 of
the Notary Dr. Werner Vogel duly signed, personally or
by his/her attorney with valid power of attorney, by
Buhrens, Geist, Blohm, Hilgenstock, Hemker, Kozak,
Vens-Cappell, Tetzloff, J. Henke, L. Henke and TREND.
2.3.2 Buhrens, Geist, Blohm, Hilgenstock, Hemker, Kozak,
Vens-Cappell, Tetzloff, J. Henke, L. Henke and TREND
hereby acknowledge receipt from Phoenix of certificates
registered in the names of Buhrens, Geist, Blohm,
Hilgenstock, Hemker, Kozak, Vens-Cappell, Tetzloff, J.
Henke, L. Henke and TREND representing 90% of the
purchase price for the Shares.
2.4 ISSUANCE INTO ESCROW
Notwithstanding any provision of this Agreement, upon delivery
of the Phoenix Shares pursuant to Section 2.3, 10% of the aggregate
number of the Phoenix Shares shall be delivered immediately to the
Escrow Agent, on a pro rata basis among the Vendors, to be held and
released by the Escrow Agent pursuant to the terms of this Agreement and
the Escrow Agreement. All such Phoenix Shares shall be issued in the
name of the Escrow Agent, as escrow agent under the Escrow Agreement.
The Vendors hereby acknowledge receipt of such 10% of the purchase price
of the Shares on their behalf by the Escrow Agent.
3. REPRESENTATIONS AND WARRANTIES OF VENDORS
In order to induce Phoenix to enter into this Agreement and to purchase
the Shares hereunder, the Vendors hereby make the following representations and
warranties to Phoenix. The Vendors' liability for the following representations
and warranties shall be joint, and not solidary i.e. pro rata to the number of
Phoenix Shares received by each Vendor according to Section 2.2, except in the
event of fraud with respect thereto.
3.1 SHARES
Each of the Vendors declares that he owns the Shares free and
clear of all Liens and there are no rights or other obstacles of any
nature whatsoever to the sale of the Shares to Phoenix.
3.2 ORGANIZATION
3.2.1 DUE INCORPORATION, ETC. Each of MKL and the Subsidiaries
is duly incorporated or organized and validly exists
under the laws of its jurisdiction of incorporation, and
- 8 -
is in good standing under the laws applicable to it and
has all necessary corporate capacity and power to own
and lease its property and assets and to carry on the
businesses now conducted or presently proposed to be
conducted by it.
3.2.2 SUBSIDIARIES. MKL does not own or control, directly or
indirectly, or have an interest in, any other
corporation, partnership, association or business entity
other than the Subsidiaries.
3.2.3 MANAGEMENT. The Management of MKL and the Subsidiaries
is exclusively comprised of the Persons referred to in
Section 1.18.
3.2.4 AUTHORIZATIONS AND APPROVALS. All authorizations,
approvals, licences, permits, certificates,
registrations, consents, exemptions or declarations
required in order for each of MKL and the Subsidiaries
to own or lease their property and assets and to carry
on their business in all jurisdictions in which such
property and assets are located or such business is
carried on have been duly obtained or effected and are
in full force and effect except for authorizations,
approvals, licences, permits, certificates,
registrations, consents, exemptions or declarations, the
absence of which, individually or in the aggregate, does
not and shall not result in a Material Adverse Effect.
In particular:
(a) except for permits, certificates, licences,
registrations and other authorizations, the
absence of which, individually or in the
aggregate, does not and shall not result in a
Material Adverse Effect, each of MKL and the
Subsidiaries hold all permits, certificates,
licenses, registrations and other authorizations
required under applicable Environmental Laws for
their operations (the "Environmental Permits");
each such Environmental Permit is valid and in
force and the operations of MKL and the
Subsidiaries are in compliance with the
conditions set out in such Environmental Permits
and their is no ground for revocation, expiry or
annulment of any such Environmental Permits;
(b) except for permits, certificates, licences,
registrations and other authorizations, the
absence of which, individually or in the
aggregate, does not and shall not result in a
Material Adverse Effect, each of MKL and the
Subsidiaries hold all permits, certificates,
licenses, registrations and other authorizations
required under applicable Legal Requirement for
clinical research for the pharmaceutical
industry and pharmaceutical research (the
"Research Permits"); each such Research Permit
is valid and in force, the operations of MKL and
the Subsidiaries are in compliance with the
conditions set out in such Research Permits and
there is no ground for revocation, expiry or
annulment of any such Research Permits.
3.2.5 CORPORATE RECORDS. The Corporate records of MKL and each
of the Subsidiaries are complete and up to date.
- 9 -
3.2.6 OFFICERS AND DIRECTORS. The officers and directors of
MKL and each of the Subsidiaries have been properly
elected or appointed in accordance with applicable laws
and the relevant articles of incorporation or other
constituting documents.
3.2.7 CORPORATE ACTION. All necessary action has been taken by
MKL, to authorize the execution of this Agreement and
the consummation of the transactions contemplated
hereby.
3.3 CAPITALIZATION
3.3.1 SHARE CAPITAL OF MKL. The outstanding share capital of
MKL is exhaustively set forth in Schedule A, all of
which has been validly issued and is fully paid and
non-assessable. Each of the Vendors declares that his
Shares are subject to no Lien, adverse claim or
restriction on transfer, except restrictions on transfer
under this Agreement.
3.3.2 OPTIONS, ETC. Other than as set forth in Schedule A and
Schedule 3.3.2, MKL does not have outstanding (a) any
rights (either preemptive or otherwise) or options to
subscribe for or purchase, or any warrants or other
agreements providing for or requiring the issuance of,
any shares or any securities convertible into or
exchangeable for its shares, (b) any obligation to
redeem, purchase or otherwise acquire or retire any of
its shares, any securities convertible into or
exchangeable for its shares or any rights, options or
warrants with respect thereto, (c) any rights to require
MKL to qualify for distribution for securities laws
purposes, or (d) any restrictions on voting.
3.3.3 CAPITAL STOCK OF THE SUBSIDIARIES. The issued and
outstanding shares of each Subsidiary are as set forth
in Schedules B and C. The issued and outstanding shares
of each Subsidiary are validly issued, and paid and
non-assessable and subject to no Lien, adverse claim or
restriction on transfer, other than as set forth in
Schedule 3.3.3.
3.3.4 SUBSIDIARY OPTIONS, ETC. Other than as set forth in
Schedule 3.3.4, none of the Subsidiaries has outstanding
(a) any rights (either preemptive or otherwise) or
options to subscribe for or purchase, or any warrants or
other agreements providing for or requiring the issuance
of, any shares or any securities convertible into or
exchangeable for its shares, (b) any obligation to
redeem, purchase or otherwise acquire or retire any of
its shares, any securities convertible into or
exchangeable for its shares or any rights, options or
warrants with respect thereto, (c) any rights to require
the Subsidiary to qualify for distribution for
securities laws purposes, or (d) any restrictions on
voting.
3.3.5 NO COMMITMENTS AFFECTING SHARES, ETC. Other than as set
forth in Schedule 3.3.5, neither MKL nor any of the
Subsidiaries is a party to or bound by any agreement,
commitment or understanding, whether verbal or written,
affecting its shares or the participating or voting
rights attached thereto.
- 10 -
3.4 REPORTS, FINANCIAL STATEMENTS AND OTHER DOCUMENTS
Phoenix has been provided with complete and correct copies of
audited financial statements of MKL and IPHAR for the years ended
December 31, 1995, 1996 and 1997 and for the eight-month period ended
August 31, 1998, copies of which are attached hereto as Schedule 3.4A.
The financial statements of MKL and the Subsidiaries referred to
above have been prepared in accordance with German GAAP and all such
financial statements fairly present the financial condition of MKL and
the Subsidiaries at the dates thereof and the results of their
operations for the periods covered thereby. Other than as set forth in
Schedule 3.5, neither MKL nor any of the Subsidiaries has material
liabilities, contingent or otherwise, which are not referred to in the
financial statements.
The financial statements for the year ended December 31, 1995,
1996 and 1997, copies of which are attached hereto as Schedule 3.4A have
been properly approved by the annual general meetings of shareholders of
the relevant entities in due form without reservation. The last general
meeting of the shareholders of each of MKL and IPHAR were held on May
13, 1998 and May 13, 1998, respectively and there has been no meeting of
shareholders of MKL and IPHAR since then.
For purposes of financial presentation, MKL and the subsidiaries
recognize net revenue from their contracts on a percentage of completion
basis as work is performed. The percentage of completion, and
consequently the revenue to be recorded, of each individual contract is
determined through detailed analysis and discussion between all
appropriate operational and financial department management. Although
MKL and the subsidiaries do not require collateral for unpaid balances,
credit losses have consistently been within Management's expectations.
Certain contracts contain provisions for price adjustment for cost
overruns. Such adjusted amounts are included in service revenue when
realization is assured and the amounts can be reasonably determined. In
the period in which it is determined that a loss will result from the
performance of a contract, the entire amount of the estimated ultimate
loss is charged against income.
Since January 1, 1998, the business of MKL and the Subsidiaries
has been operated in the customary fashion and no revenues that would
have been earned by MKL or the Subsidiaries have been earned by any
Person who is an Affiliate of any of the Vendors.
Notwithstanding anything else in this Agreement, including,
without limitation, the provisions of this Section 3.4, the Vendors make
no representation or warranty of any kind whatsoever with respect to
future business, financial performance or future profitability of MKL.
3.5 OFF BALANCE SHEET OBLIGATIONS
Schedule 3.5 contains a complete list of the off-balance sheet
obligations of MKL and the Subsidiaries, including all guarantees and
obligations to the benefit of the Vendors, members of their families or
third parties.
3.6 CHANGES IN CONDITION
Since January 1, 1998:
3.6.1 MATERIAL ADVERSE EFFECT. No event having a Material
Adverse Effect has occurred.
- 11 -
3.6.2 EXTRAORDINARY TRANSACTIONS, ETC. Other than as set forth
in Schedule 3.4A, neither MKL nor any of the
Subsidiaries has (a) made any Distribution, (b) other
than as set forth in Schedule 3.6.2, made any payment
(other than Compensation of its directors, officers and
employees in amounts in effect prior to January 1, 1998
or for bonuses accrued in accordance with normal
practice prior to January 1, 1998) to any of the
Vendors, (c) other than as set forth in Schedule 3.6.2,
increased the Compensation, including bonuses, payable
or to be payable to any of its directors, officers or
employees by more than 5%, or (d) entered into any
Contractual Obligation, or entered into or performed any
other transaction, not in the ordinary and usual course
of business and consistent with past practice.
3.6.3 INVENTORY AND WORK-IN-PROGRESS. The value of inventory
and work-in-progress reflected in the financial
statements of MKL and the Subsidiaries has been
established in accordance with German GAAP and there has
been no material change in the period subsequent to
December 31, 1997, other than in the ordinary and usual
courses of business.
3.6.4 REVENUES. The business of MKL and the Subsidiaries has
been operated in the customary fashion and no revenues
that would have been earned by MKL or the Subsidiaries
have been earned by any Person which is an Affiliate of
any of the Vendors.
3.7 SOLVENCY
Each of MKL and the Subsidiaries shall be able to pay its
liabilities existing at the time of the signing of this Agreement as
they become due.
3.8 CONTRACTUAL OBLIGATIONS, ETC.
3.8.1 CERTAIN CONTRACTS. Schedule 3.8.1 contains, together
with a reference to the subparagraph pursuant to which
each item is being disclosed, a correct and complete
list of all Contractual Obligations of MKL and the
Subsidiaries of the types described below:
(a) All collective bargaining agreements; all
agreements with any member of the Management, a
list of all employees, all profit sharing,
profit participation, deferred compensation,
bonus, stock option, stock purchase, pension,
retainer, consulting, retirement, welfare or
incentive plans or agreements; and all plans,
agreements or practices which constitute
Compensation or "fringe benefits" to any of the
employees of MKL or the Subsidiaries, including
vacation programs, sick leave programs, group
medical insurance, group life insurance,
disability insurance and related benefits.
(b) All Contractual Obligations under which MKL or
the Subsidiaries are restricted from carrying on
any business, venture or other activities
anywhere in the world.
(c) All Contractual Obligations (including options)
to sell, lease (as lessor), exchange or
otherwise dispose of or transfer any of the
properties or assets of MKL or the Subsidiaries
except in the ordinary course of business.
- 12 -
(d) All Contractual Obligations pursuant to which
MKL or the Subsidiaries guarantees or otherwise
assumes any liability of or gives financial
assistance to any Person, or pursuant to which
any Person guarantees or otherwise assumes any
liability of MKL or the Subsidiaries.
(e) All Contractual Obligations constituting license
agreements, service agreements, consulting
agreements or other similar arrangements, the
termination of which, individually or in the
aggregate, would result in a Material Adverse
Effect.
(f) All Contractual Obligations under which MKL or
any of the Subsidiaries leases immovable
property or is obligated to lease or purchase
immovable property or incur capital expenditures
in excess of DM60,000 annually.
(g) All Contractual Obligations of MKL or the
Subsidiaries relating to the borrowing of money
or to the creation of a Lien, other than a
Permitted Lien, on any property or asset of MKL,
or the Subsidiaries.
(h) All Contractual Obligations of MKL or any of the
Subsidiaries requiring a notice exceeding six
months for termination and involving
expenditures in excess of DM60,000.
3.8.2 NATURE OF CONTRACTS. All of the Contractual Obligations
of MKL and the Subsidiaries at the Completion Date are
enforceable against MKL and the Subsidiaries, the other
parties thereto, in accordance with their terms, except
as such enforcement may be limited by bankruptcy,
insolvency or other laws of general application
affecting the rights of creditors and except that
specific performance is an equitable remedy which may
only be awarded in the discretion of the court; and
except for Contractual Obligations the failure of which
to be so enforceable does not and shall not,
individually or in the aggregate, result in a Material
Adverse Effect. Except for breaches, defaults and
liabilities which do not and shall not individually or
in the aggregate result in a Material Adverse Effect,
neither MKL nor any of the Subsidiaries is now in
default, and no event has occurred which with notice or
lapse of time or both would constitute a default under,
nor are there any liabilities arising from any breach or
default by any of them or event which with notice or
lapse of time or both would constitute a default by any
of them prior to the Completion Date of, any provision
of any such Contractual Obligation.
3.8.3 ARTICLES. Neither MKL nor any of the Subsidiaries is in
violation of, or in default under, any provision of its
articles or constituting documents and Phoenix has been
provided with complete and correct copies of such
articles or constituting documents.
3.8.4 INSURANCE. Each of MKL and IPHAR carries insurance
policies with independent third party insurers according
to Schedule 3.8.4. All such policies are in full force
and effect and free from any present right of
termination on the part of the applicable insurance
carriers. There are no outstanding unpaid premiums
except in the ordinary course of business, and neither
MKL nor any Subsidiary has received any notice of
cancellation or non-renewal of any such policy. Neither
MKL nor any Subsidiary is aware of any risks,
situations, occurrences or other matters which have been
disclosed, or should have been disclosed, to insurance
carriers or brokers in
- 13 -
connection with any application for such insurance as a
result of which an insurance carrier would have a right
to cancel the corresponding insurance policy or deny
coverage with respect to any rights under any such
policies. There exists no event of default or event,
occurrence, condition or act (including the transactions
contemplated by this Agreement) which, with the giving
of notice, the lapse of time or the happening of any
further event or condition, would become a default or
occasion a material premium increase under any such
policy or give rise to, and neither MKL nor any
Subsidiary has any anticipation of, any termination or
cancellation thereof or material premium increase
therefor.
3.8.5 INSURANCE CLAIM. Each of the Vendors declares that after
thorough internal investigation, there is no known fact,
situation or circumstance involving the Company or one
of the Subsidiaries or their directors or officers,
which would reasonably be expected to result in any
future claim being made against the Company or any
Subsidiaries.
3.8.6 DISPUTE. Neither MKL nor any of the Subsidiaries has
received any notice from any supplier, vendor,
contractor, customer or client with which MKL or such
Subsidiary has conducted business during the one-year
period ending on the date of this Agreement confirming
such Person's intention to reduce the volume under,
terminate or otherwise alter any Contractual Obligation
with MKL or any Subsidiary, the effect of which,
individually or in the aggregate, would result in a
Material Adverse Effect.
3.9 OPERATIONS IN CONFORMITY WITH LAW, ETC.
The operations of MKL and the Subsidiaries as now conducted, and
their properties, assets, equipments, buildings, immoveables and leased
or occupied properties, are not, and have not been, in violation of, nor
is MKL or any of the Subsidiaries in default and no event has occurred
which with notice or lapse of time or both would constitute a default
under, any applicable Legal Requirements including, in particular, any
applicable Environmental Laws or applicable Legal Requirements regarding
clinical research and experimentation on humans, except for such
violations and defaults as do not and shall not, in the aggregate, have
a Material Adverse Effect. Neither MKL nor any of the Subsidiaries has
received notice of any such violation or default and neither the Vendors
nor the Management have knowledge of any basis on which the operations
of MKL or any of the Subsidiaries, when conducted as currently proposed
to be conducted after the Completion Date, would be held so as to
violate or to give rise to any such violation or default. MKL and the
Subsidiaries have all franchises, licenses, permits, certificates,
authorizations, registrations or other authority presently necessary for
the conduct of their business as now conducted, except for franchises,
licences, permits, certificates, authorizations, registrations or other
authority, the absence of which, individually or in the aggregate, does
not and shall not result in a Material Adverse Effect. Based on the
facts presently known to the Vendors and Management, all future
expenditures on the part of MKL and the Subsidiaries required to meet
the provisions of any presently existing applicable Legal Requirements
(including Legal Requirements relating to employment practices or to
occupational or health standards or to environmental considerations)
shall not, in the aggregate, have a Material Adverse Effect. MKL and the
Subsidiaries have complied and are in compliance with applicable
competition regulations and have, to the best of Vendors' and
Management's knowledge, never infringed fair competition in the markets
where they operate, either with or towards third companies or between
themselves. MKL and the Subsidiaries do not hold separately or together
a dominant position on the markets involved and their market share and
net aggregate turnover do not meet the European or German thresholds
which
- 14 -
authorizes European or domestic competition authorities to control the
operation and impede the completion of the transaction contemplated
hereby.
3.10 INTELLECTUAL PROPERTY
Schedule 3.10 contains a list of all the trade-marks, trade
names and patents used by any of MKL or the Subsidiaries (collectively
"Used Intellectual Property"). The entity indicated in said Schedule as
owner of Used Intellectual Property is the registered and beneficial
owner of such Used Intellectual Property or the registration thereof, if
applicable, (except as set forth in Schedule 3.10), with good and
marketable title, unencumbered (except for Permitted Liens), and with
full right to sell, assign or otherwise transfer or license to others
and subject to no pending challenge, refutation, expiry or termination
other than as set forth in Schedule 3.10. To the Vendors' and
Management's knowledge, other than as set forth in Schedule 3.10, none
of MKL or the Subsidiaries uses any intellectual property not owned by
it, other than software purchased "off the shelf", all of which each
entity using said property has the right to use (collectively "Licenced
Intellectual Property"). (Used Intellectual Property and Licensed
Intellectual Property are sometimes hereinafter referred to collectively
as "Intellectual Property"). None of MKL or the Subsidiaries is required
to pay royalties, fees or other consideration to any other person with
respect to the use of any of the Intellectual Property or in connection
with the conduct of its business or otherwise. To the Vendors' and
Management's knowledge, none of MKL or the Subsidiaries has infringed
the intellectual or industrial property rights of any other person, nor
has any of them used any intellectual or industrial property (including,
without limitation, trademarks, trade names, patents, models, designs
and copyrights) which it does not own or have the right to use other
than as set forth in Schedule 3.10. There are no outstanding claims
asserted against any of MKL or the Subsidiaries alleging the
infringement or the misappropriation by any of them of any intellectual
or industrial property. None of MKL or the Subsidiaries has granted any
licences or sub-licences to third parties with respect to any of the
Intellectual Property other than as set forth in Schedule 3.10 and
neither the Vendors nor Management has any knowledge of any infringement
or misappropriation by any other Person of any of the Intellectual
Property. Neither the execution nor delivery of this Agreement will
constitute a breach of or a default under any agreement relating to the
Intellectual Property.
3.11 ENVIRONMENTAL MATTERS
3.11.1 MKL and the Subsidiaries, their employees, agents,
shareholders, directors and officers (acting in their
capacity of employees, agents, shareholders, directors
or officers of MKL or of one of the Subsidiaries) have
never been declared guilty of committing an offence for
a violation of Environmental Laws and have never been
fined for such an offence or have otherwise settled such
a prosecution in connection with the activities of MKL
and the Subsidiaries;
3.11.2 There are no contaminants, waste or pollutants of any
kind whatsoever in, on or under the equipment,
buildings, immoveables or properties owned, leased or
occupied by MKL or any of the Subsidiaries and caused by
MKL, the Subsidiaries or their employees, agents,
shareholders, directors or officers (acting in their
capacity of employees, agents, shareholders, directors
or officers of MKL or one of the Subsidiaries), the
presence of which constitutes a violation of applicable
Environmental Laws and the presence of which,
individually or in the aggregate, constitutes a Material
Adverse Effect;
- 15 -
3.11.3 Neither MKL nor any of the Subsidiaries has received any
written notice or request for information in the context
of any national, supra-national, provincial, regional,
local or municipal environmental investigation or
inspection;
3.11.4 There are no PCBs, asbestos or urea formaldehyde
insolation in, on or under the equipment, buildings,
immoveables or properties owned, leased or occupied by
MKL or the Subsidiaries;
3.11.5 There is no action, suit or proceeding pending in
relation to environmental matters against MKL or the
Subsidiaries, its employees, agents, shareholders,
directors and officers (acting in their capacity of
employees, agents, shareholders, directors or officers
of MKL or of one of the Subsidiaries), or involving MKL
or the Subsidiaries or its assets, before any judicial
body, tribunal, commission, agency or other governmental
entity, and to the Vendors' knowledge and to the
knowledge of Management, there is no threat of, or event
or fact based on which, such action, suit or proceeding
may be instituted;
3.11.6 To the knowledge of Management and the Vendors, MKL and
the Subsidiaries are in compliance with all applicable
Environmental Laws.
3.12 LABOUR AND EMPLOYMENT MATTERS
3.12.1 Without limiting the generality of Section 3.9, each of
MKL and the Subsidiaries has complied with all
applicable laws relating to the employment of labour,
including provisions thereof relating to wages, hours
and collective bargaining rights.
3.12.2 Other than as disclosed under Section 3.8, there is no
collective agreement by which MKL or any of the
Subsidiaries is bound which relates to the employees of
MKL or the Subsidiaries. To the knowledge of the Vendors
and to the knowledge of Management, there are no
threatened or pending attempts to organize or establish
any labour union or employee association in connection
with the business of MKL or any of the Subsidiaries. To
the knowledge of the Vendors and to the knowledge of
Management, there is no pending or threatened labour
dispute, grievance, strike, or work stoppage materially
affecting the business of any of MKL or any of the
Subsidiaries. Neither MKL nor any of the Subsidiaries is
a party to any other written employment agreement,
contract, arrangement, management contract or service
contract affecting employees other than as set forth in
Schedule 3.8.1, nor are any such contracts, agreements,
arrangements, management contracts or service contracts
being currently negotiated or proposed other than in the
ordinary course of business.
3.12.3 There exist no retirement plans, profit sharing, option
or incentive plans, or other employee benefit plans for
employees of MKL or any of the Subsidiaries other than
as set forth in Schedule 3.8.1 for which adequate
arrangements have been made since January 1, 1998 to set
aside the requisite amounts in the prescribed fashion,
and neither MKL nor any of the Subsidiaries has promised
or intends to implement other such plans.
3.12.4 Other than as set forth in Schedule 3.12.4, neither MKL
nor any of the Subsidiaries has any employee who cannot
be dismissed without further liability upon such notice
period not exceeding what it is required by the
applicable Legal Requirement.
- 16 -
3.12.5 Each of MKL's or any of the Subsidiary's employees who
is practising as a physician, nurse or pharmacist is
identified in Schedule 3.12.5, and each such employee is
duly licensed and in good standing to practice as a
physician, nurse or pharmacist, as the case may be, in
each jurisdiction in which such employee renders
services for or on behalf of MKL or any Subsidiary. None
of the employees listed on Schedule 3.12.5 is or has
been subject to any claim in connection with his or her
practice as physician, nurse or pharmacist while
employed by MKL or the Subsidiary, as the case may be,
and no fact or occurrence is known to the Management to
exist which is likely to give rise to the revocation of
any such licence.
3.12.6 None of MKL's or any of the Subsidiary's employees has
signed non-compete covenants in favour of MKL or the
Subsidiary.
3.13 TAXES
Other than as set forth in Schedule 3.13, all tax returns
required to be filed by MKL and the Subsidiaries in any jurisdiction
have been filed and all taxes, assessments, levies and other
governmental charges upon MKL and the Subsidiaries or upon any of their
properties or income, including any tax in respect of value added, have
been paid if and when due unless such payment is being contested in good
faith and by appropriate proceedings and adequate reserves with respect
thereto determined in accordance with applicable policies have been
established by MKL and the Subsidiaries. There is no tax revision
threatened in writing against MKL and any of the Subsidiaries and there
is no basis for such assessment.
3.14 WITHHOLDINGS
Each of MKL and the Subsidiaries has withheld from each payment
made to any of its shareholders, officers, directors, non-resident
creditors and employees the amount of all taxes and other deductions
required to be withheld and has remitted all such amounts to the
appropriate authorities within the prescribed times, and has otherwise
fulfilled all requirements of all Legal Requirements governing such
deductions and withholdings. Each of MKL and the Subsidiaries has
remitted to the proper authorities all employer contributions due and
payable under all social security, occupational health and safety and
pension plans.
3.15 GOOD TITLE
Other than as set forth in Schedule 3.15 and Schedule 1.21, each
of MKL and the Subsidiaries has good and marketable title to all assets
in the balance sheets as per December 31, 1998 and August 31, 1998 free
and clear of Liens and other adverse claims.
3.16 LITIGATION
Other than as set forth in Schedule 3.16, no litigation or
proceeding before, or investigation by, any foreign, national,
supra-national or municipal, judicial, tax or customs tribunal or board
or other governmental or administrative agency or any arbitrator, is
pending or threatened (or, according to Management's knowledge, does any
basis exist therefor), against MKL or the Subsidiaries or, to the
Vendors' knowledge or to the knowledge of Management, any director or
officer of MKL or any of the Subsidiaries, which individually or in the
aggregate could result in a Material Adverse Effect, or which seeks
rescission of, seeks to enjoin the consummation of, or which questions
the validity of, this Agreement or any of the transactions contemplated
hereby. Neither MKL nor the Subsidiaries has
- 17 -
been charged, nor to the Vendors' knowledge or to the knowledge of
Management, is it threatened to be charged, with infringement of any
trademark, trade name, service mark, copyright, patent, patent right or
other proprietary right of any Person.
3.17 PRESS COVERAGE
Neither MKL nor any of the Subsidiaries has been the object of
any demonstrations, press campaigns or other attacks due to the nature
of its activities.
3.18 VIOLATION OF OTHER INSTRUMENTS
Neither the execution and delivery of this Agreement by the
Vendors, the consummation of any of the transactions contemplated hereby
or in Schedule 3.18, shall (a) constitute a breach of or a default or an
event which with notice or lapse of time or both would constitute a
default under any Contractual Obligation of MKL or any of the
Subsidiaries, (b) result in acceleration in the time for performance of
any obligation of MKL or the Subsidiaries under any such Contractual
Obligation, (c) result in the creation of any Lien upon any property or
asset of MKL or the Subsidiaries, (d) require any consent, waiver or
amendment to any such Contractual Obligation that has not been obtained
and remains in full force and effect, (e) give rise to any severance
payment, right of termination, securities purchase or redemption right
or other right under any such Contractual Obligation, or (f) violate or
give rise to a default or an event which with notice or lapse of time or
both could constitute a default under any Legal Requirements, except for
events or conditions described in clauses (a) through (f) above which
shall not, individually or in the aggregate, have any Material Adverse
Effect or (g) result in any state of facts which could have a Material
Adverse Effect, and except for events or conditions described in
Schedule 3.18.
3.19 APPROVALS, CONSENTS, ETC.
Other than as set forth in Schedule 3.19, no approval, consent,
authorization or other order of, and no declaration, filing,
registration, qualification or recording with, any governmental
authority or any other Person is required to be made by or on behalf of
the Vendors, MKL or any of the Subsidiaries in connection with the
execution, delivery or performance of this Agreement or any of the
transactions contemplated hereby.
3.20 INVESTMENT OR DIVESTITURE
Schedule 3.20 contains a complete list of all investments and
divestitures in process which are not mentioned in the financial
statements of MKL and the Subsidiaries (balance sheet, statement of
earnings and schedules) for the period ended August 31, 1998 and which
are not in the ordinary course of business.
3.21 FULL DISCLOSURE
Disclosure made by the Vendors in respect of one of the
representations contained in this Section 3 is considered being made in
respect of all other representations. There is no fact that the Vendors,
to the best of their knowledge, have not disclosed to Phoenix which
could have a Material Adverse Effect on the properties, business,
prospects or condition (financial or otherwise) of MKL or any of the
Subsidiaries. Neither the reports, financial statements and other
documents referred to in Section 3.4, nor any certificate, statement or
document forming part of this Agreement contains any
- 18 -
untrue statement of a fact or omits to state any fact necessary to keep
the statements contained herein or therein from being misleading in a
manner that would constitute a Material Adverse Effect.
4. REPRESENTATIONS AND WARRANTIES OF PHOENIX
Phoenix represents and warrants to the Vendors that:
4.1 DUE INCORPORATION, ETC.
Phoenix is duly incorporated, validly exists and is in good
standing under the Canada Business Corporations Act and has all
necessary corporate capacity and power to own and lease its property and
assets and to carry on the business now conducted by it.
4.2 SHARE CAPITAL OF PHOENIX
The authorized share capital of Phoenix is composed of an
unlimited number of common shares and an unlimited number of preferred
shares issuable in series of which, as at November 4, 1998, there were
24,857,059 common shares issued and outstanding.
4.3 OPTIONS
Other than the options to acquire common shares of Phoenix
granted pursuant to Phoenix's Key Employee Share Option Plan, shares to
be issued to Dorn Cook under an earn-out formula which has been
disclosed to the Vendors and an approximate number of 1,800,000 common
shares of Phoenix to be issued in connection with proposed acquisitions,
Phoenix does not have any rights or options to subscribe for, or any
warrants or other agreements providing for or requiring the issuance of
common shares or preferred shares.
4.4 DUE AUTHORIZATION
All necessary corporate action has been taken by Phoenix to
authorize the execution of this Agreement and the consummation of the
transactions contemplated hereby, including the issuance of the Phoenix
Shares as fully paid and non-assessable in consideration for the
purchase of the Shares.
4.5 STOCK EXCHANGE APPROVALS
The listing of the Phoenix Shares on The Montreal Exchange and
the Toronto Stock Exchange has been approved by such exchanges, subject
to Phoenix fulfilling all of the standard requirements of such exchanges
before November 27, 1998 and the Phoenix Shares are not subject to any
statutory hold period or resale restrictions under the SECURITIES ACT
(Quebec) or any other contractual resale restrictions other than as
mentioned in this Agreement. However, the sale of the Shares in the
province of Quebec will constitute a distribution requiring the
establishment of a prospectus or an exemption therefrom except if such
sale is effected on a stock exchange or on the over-the-counter-market.
Phoenix is a reporting issuer in good standing under the SECURITIES ACT
(Quebec).
- 19 -
4.6 PHOENIX SHARES
The Phoenix Shares will at the time of issuance be duly
authorized, validly issued, fully paid and non-assessable common shares
in the share capital of Phoenix and registered in the names of the
Vendors or the Escrow Agent, as the case may be, on the share registers
of Phoenix.
4.7 UNDERTAKING
Phoenix undertakes, on a best effort basis, to obtain a release
of the guarantee provided by Buhrens to Hamburger Sparkasse in favour of
MKL.
5. POOLING OF INTERESTS
5.1 ACCOUNTING TREATMENT
Phoenix, MKL and the Vendors intend and desire for the
transactions contemplated by this Agreement to qualify for "pooling of
interests" treatment for US GAAP purposes in accordance with Accounting
Principles Board Opinion No. 16.
5.2 POOLING LETTERS
On or prior to the Completion Date, MKL shall cause to be
executed and delivered to Ernst & Young, auditors to Phoenix, and to
Phoenix a letter or letters, dated the Completion Date, from MKL's
shareholders in form and substance reasonably satisfactory to Phoenix
and its auditors relating to "pooling of interests" accounting (the "MKL
Pooling Letter"). On or prior to the Completion Date, Phoenix shall
deliver to Ernst & Young, auditors to Phoenix, a letter or letters,
dated the Completion Date, from Phoenix's management in form and
substance reasonably satisfactory to its auditors relating to "pooling
of interests" accounting.
5.3 OPINIONS OF ACCOUNTANTS AND AUDITORS OF PHOENIX
On or prior to the Completion Date, Phoenix shall have received
a letter, dated the Completion Date, from Ernst & Young, accountants and
auditors to Phoenix, in form and substance satisfactory to Phoenix,
regarding the appropriateness of pooling of interests treatment for the
transactions contemplated herein.
5.4 OPINIONS OF ACCOUNTANTS AND AUDITORS OF MKL
On or prior to the Completion Date, MKL and Phoenix shall have
received a letter, dated the Completion Date, from Bernd Rohrberg,
accountant and auditor of MKL, attesting to the validity of the MKL
Pooling Letter referred to in Section 5.2, in form and substance
satisfactory to MKL and Phoenix.
5.5 PLACEMENT AND STOCK TRANSFER RESTRICTIONS AND RELATED MATTERS
Each party to this Agreement agrees that from and after the date
of this Agreement, such party shall not knowingly take any action, or
knowingly fail to take any action, which action or failure is reasonably
likely to disqualify the transactions contemplated by this Agreement
from pooling of interests accounting treatment by Phoenix, and that such
party shall take all reasonable actions necessary to cause the
transactions contemplated by this Agreement to qualify as a pooling of
interest,
- 20 -
if such characterization shall be jeopardized by action taken by such
party. Without limiting the foregoing, each Vendor who is a Pooling
Affiliate of MKL agrees that such Vendor shall not sell, transfer,
pledge, or otherwise dispose of such Vendor's interests in or reduce
such Vendor's risk relative to any of the Phoenix Shares until Phoenix
shall have published financial results (including combined sales and net
income) covering at least thirty (30) days of combined operations of
Phoenix and MKL after the Completion Date. No later than April 30, 1999,
Phoenix shall prepare and publish such financial results for the first
full month of operations following the Completion Date. Each of the
Vendors and MKL acknowledge and agree with Phoenix that none of the
Vendors or MKL is a party to any agreement or arrangement among
themselves or with third parties regarding the transactions contemplated
by this Agreement or the subject matter hereof.
Prior to the Completion Date, Phoenix shall deliver to MKL a
list of names and addresses of those persons who are or may be, in
Phoenix's reasonable judgement, Affiliates of Phoenix within the meaning
of Rule 145 of the rules and regulations promulgated under the
Securities Act or applicable SEC accounting releases with respect to
pooling of interests accounting treatment (each such persons, a "Pooling
Affiliate"). Phoenix also shall provide MKL with such information and
documents as MKL shall reasonably request for purposes of reviewing such
list. Prior to the Completion Date, Phoenix shall deliver to MKL an
affiliate letter, in form and substance reasonably satisfactory to MKL,
executed by each of the Pooling Affiliates identified in the foregoing
list.
Prior to the Completion Date, MKL shall deliver to Phoenix a
list of names and addresses of those persons who are or may be, in MKL's
reasonable judgment, Pooling Affiliates of MKL. MKL also shall provide
Phoenix with such information and documents as Phoenix shall reasonably
request for purposes of reviewing such list. Prior to the Completion
Date, MKL shall deliver to Phoenix an affiliate letter, in form and
substance reasonably satisfactory to Phoenix, executed by each of the
Pooling Affiliate of MKL identified in the foregoing list.
6. EMPLOYMENT AGREEMENT
6.1 EMPLOYMENT AGREEMENTS WITH BUhrens and Tetzloff
Buhrens and MKL shall execute an employment agreement
satisfactory in form and content to Phoenix and MKL.
Tetzloff and MKL shall execute an employment agreement
satisfactory in form and content to Phoenix and IPHAR.
7. SURVIVAL OF REPRESENTATIONS; INDEMNITY
7.1 SURVIVAL OF REPRESENTATIONS
The respective representations and warranties of the Vendors
contained in this Agreement or in any schedule attached hereto shall
survive the consummation of the transactions contemplated hereby and
shall remain in full force and effect notwithstanding any investigation
or examination of, or knowledge with respect to, the subject matter
thereof by or on behalf of Phoenix until the earlier of November 6, 1999
or the date of completion of the audit of the combined financial
statements of Phoenix and MKL (the period ending on such date being
referred to herein as the "Representations Period"), except that such
representations and warranties shall survive indefinitely in the event
of fraud with respect thereto. No claim for indemnification pursuant to
Section 7.2.1 below may be brought after the expiration of the
Representations Period, except for claims made in good faith in
- 21 -
writing prior to such expiration and setting forth in reasonable detail
the claim, regardless of whether any action or demand has been commenced
against Phoenix (it being understood without limitation, that any and
all Losses (as defined below) arising after the expiration of the
Representations Period shall be recoverable upon notice properly given
prior to the expiration of the Representations Period in accordance with
this Section 7.1). The representations and warranties of Phoenix
contained in this Agreement or in any schedule attached hereto shall
terminate upon and not survive the Completion Date, except in the event
of fraud by Phoenix with respect thereto, in which case they shall
survive indefinitely.
7.2 INDEMNIFICATION
7.2.1 From and after the Completion Date, Phoenix and its
Affiliates (including MKL and the Subsidiaries) and all
of their respective officers, directors, employees,
agents and shareholders (each, an "Indemnitee") shall be
defended, indemnified and held harmless by the Vendors
pursuant to this Agreement and the Escrow Agreement to
the full extent permitted by law, from and against any
and all losses, evictions, claims, actions, damages,
liabilities, costs and expenses (including attorneys'
fees and expenses) (collectively, "Losses") relating to
or arising from or in connection with (i) any
misrepresentation or any non-fulfilment of any
representation, warranty, covenant, obligation or
agreement by any Vendor contained in or made pursuant to
this Agreement or any other document, agreement,
officer's certificate or other certificate delivered to
Phoenix in connection with this Agreement, and (ii) the
enforcement by Phoenix of its rights pursuant to this
Section 7.2, or any litigation, proceeding or
investigation relating to any of the foregoing. The
indemnification obligations of the Vendors pursuant
hereto shall be joint and not solidary, i.e. prorata to
the number of Phoenix Shares received by each Vendor in
accordance with Section 2.2.
7.2.2 Notwithstanding the foregoing provisions of this Section
7.2, but except with respect to any Losses resulting
from or arising out of fraud or other intentional or
willful misconduct or misrepresentation, (i) the maximum
aggregate recourse by the Indemnitees pursuant to
Section 7.2.1 above shall not exceed the aggregate value
(calculated by adding together the opening and closing
prices of the common shares of Phoenix on each of the
Toronto Stock Exchange and The Montreal Exchange for
each of the ten trading days preceding the Completion
Date, and dividing this sum by 40) of the Escrowed
Securities (the "Indemnity Cap"), and (ii) the sole
recourse of any Indemnitee in respect of Losses (but not
in respect of fraud or other intentional or willful
misconduct or misrepresentation) shall be from, out of,
and to the extent of the Escrowed Securities. It being
understood that the Indemnitees shall in no
circumstances be entitled to recover the property of the
Phoenix Shares transferred under this Agreement. Any
indemnification shall be payable by the return of
Escrowed Securities to Phoenix in accordance with the
provisions of the Escrow Agreement. In particular, the
number of Escrowed Shares to be remitted to Phoenix in
payment of any indemnification obligation shall be
calculated on the basis of the average price of the
Escrowed Shares obtained by adding together the opening
and closing prices of the common shares of Phoenix on
each of the Toronto Stock Exchange and The Montreal
Exchange for each of the ten trading days preceding the
Completion Date, and dividing this sum by 40. All
dividends or other distributions received by a Vendor in
respect of common shares of Phoenix which are remitted
to
- 22 -
Phoenix in satisfaction of an indemnification obligation
under this Section 7, shall also be repaid to Phoenix at
the time of payment of indemnification.
7.2.3 Notwithstanding any other provision of this Agreement,
as of and after the Completion Date, MKL shall not have
any liability under this Agreement, and no Vendor shall
threaten or bring any claim or action whatsoever against
MKL for contribution to any amounts payable under this
Section 7.2 by such Vendor.
8. NOTICES
Any demand, notice or other communication to be given in connection with
this Agreement shall be given in writing and shall be given by personal
delivery, by registered mail or by electronic means of communication addressed
to the recipient as follows:
8.1 To Phoenix:
Phoenix International Life Sciences Inc.
2350, Cohen Street
Saint-Laurent, Quebec
H4R 2N6 Canada
Telecopier No.: (514) 333-7306
ATTENTION: JEAN-YVES CALOZ
8.2 To Buhrens
Prof. Dr. Klaus-Georg Buhrens
Buchtallee 4a
21465 Reinbek, Germany
8.3 To Geist:
Dr. Martin Geist
Georgiweg 43
22453 Hamburg, Germany
8.4 To Blohm:
Dr. Bernk Blohm
Buchtallee 23
21465 Reinbek, Germany
8.5 To Hilgenstock:
Dr. Christian Hilgenstock
Gronenweg 73
22549 Hamburg, Germany
- 23 -
8.6 To Hemker:
Dr. Claus Hemker
Feldblick 2
22397 Hamburg, Germany
8.7 To Kozak:
Dr. Ivan Kozak
Kopeniker Str. 15
22045 Hamburg, Germany
8.8 To Vens-Cappell:
Dr. Bernhard Vens-Cappell
Wurtkamp 12
22527 Hamburg, Germany
8.9 To Tetzloff:
Dr. Wolfgang Tetzloff
Friedenstrasse 56
82194 Grobenzell, Germany
8.10 To J. Henke:
Dr. Jurgen Henke
Hohenzollernring 57
50672 Koln, Germany
8.11 To L. Henke:
Dr. Lotte Henke
Hohenzollernring 57
50672 Koln, Germany
8.12 To TREND:
TREND Finanzanalysen GmbH
Berliner Allee 21
40212 Dusseldorf, Germany
- 24 -
8.13 To MKL:
McKnight Laboratories GmbH
Osterstrasse 86
20259 Hamburg, Germany
Telecopier No.: 011-49-40-490-5055
ATTENTION: PROF. DR. KLAUS-GEORG BUHRENS
9. MODIFICATION
All modifications or amendments of any provision of this Agreement shall
be effective only if the same shall be in writing and then shall be effective
only in the specific instance and for the purpose for which given.
10. WAIVER
No failure to exercise, and no delay in exercising, on the part of a
party hereto, any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right. No waiver of any provision of this
Agreement shall be effective unless in writing. No notice or demand given in any
case shall constitute a waiver of the right to take other action in the same,
similar or other instances without such notice or demand.
11. CONFIDENTIALITY
The parties agree to treat this Agreement as confidential and not to
disclose its contents to third parties other than their advisers, except to the
extent necessary to enforce performance of obligations hereunder, or as is
required to comply with applicable laws or regulations, including regulations of
any stock exchange on which the securities of Phoenix are listed following
consultations with the Vendors.
12. FURTHER ASSURANCES
The parties shall, with all reasonable diligence, do all such things and
provide all such reasonable assurances as may be required to consummate the
transactions contemplated hereby, and each party shall provide such further
documents or instruments required by another party as may be reasonably
necessary or desirable to give effect to the purpose of this Agreement and to
carry out its provisions.
13. GOVERNING LAWS
This Agreement shall be governed by the laws of the Province of Quebec
and the laws of Canada applicable therein.
14. ARBITRATION
All disputes arising out of or in connection with the present Agreement
shall be finally settled under the Rules of Arbitration of the International
Chamber of Commerce by one or more arbitrators appointed in accordance with the
said Rules.
The place of arbitration shall be Montreal.
- 25 -
The language of the arbitration shall be English.
15. GENERAL
The invalidity or unenforceability of any term or provision hereof shall
not affect the validity or enforceability of any other term or provision hereof.
The headings in this Agreement are for convenience of reference only and shall
not alter or otherwise affect the meaning hereof. This Agreement and the other
documents and instruments referred to herein constitute the entire understanding
of the parties hereto with respect to the subject matter hereof and thereof and
supersede all present and prior agreements, whether written or oral. No
investigation made by or on behalf of a party hereto shall mitigate, diminish or
affect the representations and warranties made herein by the Vendors. This
Agreement may be executed in any number of counterparts which together shall
constitute one instrument and shall be governed by and construed in accordance
with the laws of the Province of Quebec and the laws of Canada applicable
therein, and shall bind and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, personal representatives,
successors and assigns. The parties hereto have expressly required that this
Agreement and all documents and notices related hereto be drafted in English.
LES PARTIES AUX PRESENTES ONT EXPRESSEMENT EXIGE QUE LE PRESENT CONTRAT ET TOUS
LES DOCUMENTS ET AVIS Y AFFERENTS SOIENT REDIGES EN ANGLAIS.
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be duly
executed as of the Completion Date.
PHOENIX INTERNATIONAL LIFE
SCIENCES INC.
By: /s/ John Hooper /s/ Klaus-Georg Buhrens
------------------------------------- -------------------------------
John Hooper, Ph.D. PROF. DR. KLAUS-GEORG BUHRENS
Title: Chairman and Chief Executive Officer
/s/ Martin Geist /s/ Bernd Blohm
- ----------------------------------- -----------------------------------
DR. MARTIN GEIST DR. BERND BLOHM
/s/ Christian Hilgenstock /s/ Claus Hemker
- ----------------------------------- -----------------------------------
DR. CHRISTIAN HILGENSTOCK DR. CLAUS HEMKER
/s/ Ivan Kozak /s/ Bernard Vens-Cappell
- ----------------------------------- -----------------------------------
DR. IVAN KOZAK DR. BERNHARD VENS-CAPPELL
/s/ Wolfgang Tetzloff /s/ Ulrike Schafer
- ----------------------------------- -----------------------------------
DR. WOLFGANG TETZLOFF DR. JURGEN HENKE, by Ulrike Schafer
- 26 -
/s/ Ulrike Schafer
- ----------------------------------- TREND FINANZANALYSEN GMBH
DR. LOTTE HENKE, by Ulrike Schafer
By: /s/ Ulrike Schafer
-----------------------------------
Ulrike Schafer
MCKNIGHT LABORATORIES GMBH
By: /s/ Klaus-Georg Buhrens
-------------------------------
Prof. Dr. Klaus-Georg Buhrens
LIST OF SCHEDULES
Schedule A Outstanding shares and voting rights of MKL
Schedule B The capital structure of IPHAR
Schedule C The capital structure of MKL/USA
Schedule 1.9 Escrow Agreement
Schedule 1.21 Permitted Lien
Schedule 3.3.2 Options
Schedule 3.3.3 Capital Stock of the Subsidiaries
Schedule 3.3.4 Subsidiary Options
Schedule 3.3.5 Commitments affecting shares or voting rights of MKL or the Subsidiaries
Schedule 3.4A Financial Statements
Schedule 3.5 Material liabilities, contingent or otherwise of MKL or any of the Subsidiaries
and off-balance sheet obligations of MKL and the Subsidiaries
Schedule 3.6.2 Extraordinary Transactions after January 1, 1998
Schedule 3.8.1 Contractual Obligations
Schedule 3.8.4 Insurance
Schedule 3.10 Intellectual Property
Schedule 3.12.4 Liability for employee dismissal
Schedule 3.12.5 Physicians, nurses or pharmacists employed by MKL and the Subsidiaries
Schedule 3.13 Taxes
Schedule 3.15 Title to assets
Schedule 3.16 Litigation
Schedule 3.18 Violation of Other Instruments
Schedule 3.19 Approvals, Consents, etc.
Schedule 3.20 Investment or Divestiture
Schedule 1.09
ESCROW AGREEMENT dated as of November 6, 1998.
AMONG: PHOENIX INTERNATIONAL LIFE SCIENCES INC., a corporation
incorporated under the Canada Business Corporations Act, having
its head office at 2350, Cohen Street, Saint-Laurent, Quebec,
Canada, H4R 2N6, herein acting and represented by John Hooper,
its duly authorized representative;
(hereinafter "Phoenix")
AND: PROF. DR. KLAUS-GEORG BUHRENS, residing at Buchtallee 4a, 21465
Reinbek, Germany;
(hereinafter "Buhrens")
AND: MARTIN GEIST, residing at Georgiweg 43, 22453 Hamburg, Germany;
(hereinafter "Geist")
AND: DR. BERND BLOHM, residing at Buchtallee 23, 21465 Reinbek,
Germany;
(hereinafter "Blohm")
AND: CHRISTIAN HILGENSTOCK, residing at Gronenweg 73, 22549 Hamburg,
Germany;
(hereinafter "Hilgenstock")
AND: CLAUS HEMKER, residing at Feldblick 2, 22397 Hamburg, Germany;
(hereinafter "Hemker")
AND: DR. IVAN KOZAK, residing at Kopeniker Str. 15, 22045 Hamburg,
Germany;
(hereinafter "Kozak")
- 2 -
AND: DR. BERNHARD VENS-CAPPELL, residing at Wurtkamp 12, 22527
Hamburg, Germany;
(hereinafter "Vens-Cappell")
AND: WOLFGANG TETZLOFF, residing at Friedenstrasse 56, 82194
Grobenzell, Germany;
(hereinafter "Tetzloff")
AND: DR. JURGEN HENKE, residing at Hohenzollernring 57, 50672 Koln,
Germany;
(hereinafter "J. Henke")
AND: DR. LOTTE HENKE, residing at Hohenzollernring 57, 50672 Koln,
Germany;
(hereinafter "L. Henke")
AND: TREND FINANZANALYSEN GMBH, a German corporation with capital of
DM150,000, registered in the Commercial Register of the
Amtsgericht Dusseldorf under number HRB 18161 and having its
head office at Berliner Allee 21, 40212 Dusseldorf, Germany,
herein acting and represented by Peter Martin, its duly
authorized representative;
(hereinafter "TREND")
AND: MONTREAL TRUST COMPANY, 1800 McGill College Avenue, Montreal,
Quebec, H3A 3K9, as escrow agent, herein represented by its duly
authorized representatives Rose Marie Labbe and Guy L'Esperance;
(hereinafter the "Escrow Agent")
WHEREAS Phoenix and the Vendors are parties to a share purchase
agreement dated November 6, 1998 (the "Purchase Agreement");
WHEREAS the Purchase Agreement provides that certain shares of Phoenix
issued to the Vendors pursuant thereto are to be held in escrow for the purposes
described therein;
NOW THEREFORE the parties hereby agree as follows:
- 3 -
1. INTERPRETATION AND DEFINITIONS
1.1 Whenever used in this Agreement:
1.1.1 "AFFILIATE" means any of Buhrens and TREND and
"Affiliates" means more than one of them;
1.1.2 "CLAIM" means any claim by Phoenix against and the
Vendors under Section 7.2 of the Purchase Agreement;
1.1.3 "DISTRIBUTIONS" has the meaning ascribed thereto in
Section 2.3 hereof;
1.1.4 "ESCROWED SHARES" has the meaning ascribed thereto in
Section 2.1 hereof;
1.1.5 "ESCROWED SHARE PRICE" means the amount obtained by
adding the opening and closing prices of the common
shares of Phoenix on each of the Montreal Exchange and
The Toronto Stock Exchange for the ten trading days
preceding the date of execution of the Purchase
Agreement, divided by 40;
1.1.6 "NON-AFFILIATE" means Geist, Blohm, Hilgenstock, Hemker,
Kozak, Vens- Cappell, Tetzloff, J. Henke and L. Henke;
1.1.7 "NOTICE OF CLAIM" means a written notice of any Claim
given by Phoenix setting forth the details of each Claim
referred to therein including the amount thereof, if
known to Phoenix, or Phoenix's reasonable estimate
thereof, as well as the provisions of the Purchase
Agreement upon which such Claim is based;
1.1.8 "OBJECTION" means, in respect of any Claim, any
objection raised in the Response by any of the Vendors
to such Claim;
1.1.9 "PROCEEDS" has the meaning ascribed thereto in Section
3.2 hereof;
1.1.10 "PURCHASE AGREEMENT" has the meaning ascribed thereto in
the preamble to this Agreement;
1.1.11 "RELEASED SHARES" has the meaning ascribed thereto in
Section 3.5.1.1 hereof;
1.1.12 "RESPONSE" means, in respect of any Claim, the joint
written response of the representatives of the Vendors
duly appointed in the manner set forth in Section 3.1
hereof indicating whether they accept or dispute such
Claim; and
1.1.13 "VENDORS" means Buhrens, Geist, Blohm, Hilgenstock,
Hemker, Kozak, Vens-Cappell, Tetzloff, J. Henke, L.
Henke and TREND.
1.2 Each capitalized term used in this Agreement but not defined
herein as the meaning ascribed thereto in the Purchase
Agreement.
- 4 -
1.3 In the event of (i) any subdivision, consolidation or
reclassification of the class of shares comprising the Escrowed
Shares or (ii) any reorganization of the share capital of
Phoenix affecting the Escrowed Shares or (iii) the amalgamation
of Phoenix with any other company, the number of Escrowed Shares
and Escrowed Share Price shall be adjusted, if required, so that
none of the parties hereto shall be in a position less favorable
to it than as provided in this Agreement as a result of any of
the foregoing actions.
1.4 For all purposes of this Agreement, the amount of any Claim in a
currency other than Canadian dollars shall be converted to
Canadian dollars at the exchange rate between Canadian and such
currency shall be the "Spot Rate" of the alternate currency on
the business day preceding the day as of which the conversion
from one currency to the other is to be effected, as reported in
the Financial Post of Canada on that day.
1.5 In any calculation hereunder of the applicable number of
Escrowed Shares results in fractional shares, the result shall
be rounded up or down, as the case may be, to the nearest whole
number and, if such result represents exactly one-half of a
whole number, then such fraction shall be rounded up to the next
whole number.
2. ESTABLISHMENT OF ESCROW
2.1 Phoenix hereby delivers in escrow to the Escrow Agent
certificates representing an aggregate of 87,332 common shares
of Phoenix registered in the name of the Escrow Agent, as escrow
agent (the "Escrowed Shares"). The Vendors' interests in the
Escrowed Shares are as set forth below:
VENDOR ESCROWED SHARES
------ ---------------
Buhrens 47,707
Geist 1,667
Blohm 1,667
Hilgenstock 4,406
Hemker 4,406
Kozak 4,406
Vens-Cappell 4,406
Tetzloff 4,406
J. Henke 3,573
L. Henke 3,573
TREND 11,115
- 5 -
2.2 The Escrow Agent hereby accepts delivery and acknowledges
receipt of the Escrowed Shares and agrees to act as escrow agent
and to hold, safeguard and release the Escrowed Shares in
accordance with the provisions of this Agreement. The Escrowed
Shares shall not be assigned, hypothecated, alienated, released
from escrow, transferred within escrow or dealt with in any
manner whatsoever except as provided in this Agreement.
2.3 Notwithstanding the registration of the Escrowed Shares in the
name of the Escrow Agent, the Vendors shall, subject to the
provisions hereof, remain the owners thereof in the proportion
contemplated by Section 2.1 hereof and be entitled to the
exercise of all voting rights related thereto and to receive all
dividends, income and other distributions in respect thereof
(collectively, "Distributions"). In the event that any Escrowed
Shares are remitted to Phoenix for cancellation pursuant to the
provisions of Section 3 hereof, the Vendors shall repay to
Phoenix any Distributions received in respect of such Escrowed
Shares.
3. INSTRUCTIONS TO ESCROW AGENT
3.1 All communications made by the Vendors, including instructions
to the Escrow Agent or Responses hereunder, shall be made by
Buhrens and Dr. Ulrike Schafer jointly on behalf of the Vendors.
All of the Vendors hereby authorize Buhrens and Dr. Ulrike
Schafer to duly represent them in accordance with all
communications under this Agreement. Should the Vendors wish to
withdraw this authorization and to designate new
representatives, they have to do so jointly by notifying Phoenix
and the Escrow Agent in accordance with Section 7 hereof.
3.2 At any time while the Escrowed Shares are held by the Escrow
Agent, a Non-Affiliate may instruct the Escrow Agent in writing
to sell all or part of such Non-Affiliate's portion of the
Escrowed Shares. Upon receipt of such written instruction, the
Escrow Agent shall sell such Escrowed Shares on the open market
and shall retain the proceeds of sale, less any expenses
incurred in realizing such sale (the "Proceeds") as escrowed
property for such Non-Affiliate. The Escrow Agent shall invest
such Proceeds according to the written instructions of such
Non-Affiliate for the duration of the escrow. The Escrow Agent
shall keep complete records of any such sales of Escrowed
Shares.
3.3 At any time after receipt by the Escrow Agent of written notice
by Phoenix of the release, in the format prescribed by the SEC,
of at least 30 days of post-combination financial results of
Phoenix and McKnight Laboratories GmbH, and provided that the
Escrowed Shares are not then subject to any restrictions on
transfer imposed by any Regulatory Authority, an Affiliate may
also instruct the Escrow Agent to sell all or part of their
portion of the Escrowed Shares in the manner set forth in
Section 3.2. In such event, the Escrow Agent shall proceed as
set forth in Section 3.2.
3.4 Whenever Phoenix has a Claim it shall promptly give a Notice of
Claim in respect thereof to the Vendors and the Escrow Agent.
Upon receipt of a Notice of Claim, the Escrow Agent shall
immediately reserve for distribution in accordance with the
provisions of Section 3.5 hereof (but shall not release from
escrow except in accordance with the provisions hereof)
- 6 -
that number of the Escrowed Shares which is equal in value to
the amount provided for in the Notice of Claim, calculated on
the basis of the Escrowed Share Price for such Claim.
3.5 Within 15 days of receipt of a Notice of Claim, the Vendors (or
any of them) shall give to Phoenix and the Escrow Agent a
Response with respect to each Claim set forth therein. If:
3.5.1 the Response indicates that the Vendors accept a Claim
set forth in the Notice of Claim, or if the Escrow Agent
does not receive a Response with respect to a Claim
within said 15 day period, the Vendors shall be deemed
to have irrevocably consented to each Claim so accepted
or in respect of which no Response is so received, as
made, and the Escrow Agent shall forthwith give written
notice thereof to Phoenix:
3.5.1.1 setting forth the total amount of all Claims
which have been consented to and the number of
shares from the Escrowed Shares to be released
from escrow for the benefit of Phoenix (the
"Released Shares"), being that number of the
Escrowed Shares which is equal in value to the
amount of the admitted Claims set forth in such
Notice of Claim, calculated on the basis of the
Escrowed Share Price for such Claim; and
3.5.1.2 surrender for cancellation to Phoenix the share
certificate(s) in its possession representing
the Released Shares, duly endorsed for transfer,
and the Escrow Agent shall retain in its
possession the other share certificate(s)
representing the balance of the Escrowed Shares,
if any, to be held by it in escrow and dealt
with in accordance with the terms hereof; or
3.5.2 the Response indicates that the Vendors (or any of them)
dispute a Claim set forth in the Notice of Claim
(whether or nor arbitration proceedings have been
instituted), the Escrow Agent shall retain in its
possession and continue to hold in escrow that number of
the Escrowed Shares which is equal in value to the
amount provided for in the disputed Claims, calculated
on the basis of the Escrowed Share Price for such Claim:
3.5.2.1 until the Escrow Agent receives a joint written
notice from Phoenix and the Vendors directing
the Escrow Agent as to the manner in which such
Escrowed Shares and the share certificate(s)
representing same are to be dealt with, in which
case the Escrow Agent shall deal with same in
accordance with such joint written instructions;
or
3.5.2.2 in the absence of such a joint written notice
within 10 business days of the Escrow Agent's
receipt of the Response, the Escrow Agent shall
deal with such Escrowed Shares and the share
certificate(s) representing same in accordance
with a final arbitration order in respect of
such disputed Claim(s) pursuant to the
arbitration contemplated by Section 12 hereof.
Any arbitration order shall be accompanied by a
legal opinion by counsel for the presenting
party satisfactory to the Escrow Agent to the
effect that the said order is final and
non-appealable.
- 7 -
3.6 If, at the time of receipt by the Escrow Agent of any Notice of
Claim as provided for in Section 3.4 hereof, the Escrowed Shares
remaining in escrow for the account of any Vendor calculated on
the basis of the Escrowed Share Price is insufficient to meet
such Vendor's pro rata portion of the number of Released Shares
to be remitted to Phoenix, the balance of such Vendor's pro rata
portion of the admitted Claims shall be satisfied by payment in
cash from the Proceeds of those Escrowed Shares sold by the
Escrow Agent at the direction of such Vendor pursuant to Section
3.2 or 3.3 hereof.
3.7 On the earlier of (i) November 6, 1999, or (ii) the date at
which the Escrow Agent receives a notice from Phoenix confirming
that the audit of the combined financial statements of Phoenix
and McKnight Laboratories GmbH has been completed, the Escrow
Agent will deliver the Escrowed Shares and all Distributions and
Proceeds to the Vendors, pro rata to their respective interests
in the Escrowed Shares, Distributions and Proceeds if any.
4. VOTING RIGHTS
4.1 The Escrow Agent shall provide to each of the Vendors a proxy
entitling such Vendor to vote those of the Escrowed Shares which
are owned by it, forthwith upon the Escrow Agent's receipt
thereof in its capacity as registered shareholder of Phoenix, in
order to allow each Vendor to vote its Escrowed Shares in the
same manner as if it were the registered owner thereof.
5. RIGHTS AND OBLIGATIONS OF THE ESCROW AGENT
5.1 The Escrow Agent is not a party to, and is not bound by, any
provisions which may be evidenced by, or arise out of, any
agreement other than as therein set forth under the express
provisions of this Agreement.
5.2 The Escrow Agent acts hereunder as a depositary only and is not
responsible or liable in any manner whatever for the
sufficiency, correctness, genuineness or validity of any
instrument deposited with it, or for the form of execution of
such instrument or for the identity or authority or right of any
person or party executing or depositing it.
5.3 The Escrow Agent shall not be under any duty to give the
Escrowed Shares, Distributions and Proceeds, if any, held by it
hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds
held hereunder except as directed in this Agreement. Uninvested
funds held hereunder shall not earn or accrue interest.
5.4 The Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct and, except with respect to
claims based upon such gross negligence or willful misconduct
that are successfully asserted against the Escrow Agent, the
other parties hereto shall solidarily indemnify and hold
harmless the Escrow Agent (and any successor Escrow Agent) from
and against any and all losses, liabilities, claims, actions,
damages and expenses, including reasonable attorney's fees and
disbursements, arising out of and in connection with this
Agreement. Without limiting the foregoing, the Escrow Agent
shall
- 8 -
in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in
accordance with the terms hereof.
5.5 The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other
writing delivered to it hereunder without being required to
determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of the service thereof. The
Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that the
person purporting to give receipt or advice or make any
statement or execute any document in connection with the
provisions hereof has been duly authorized to do so. The Escrow
Agent may conclusively presume that the undersigned
representative of any party hereto which is an entity other than
a natural person has full power and authority to instruct the
Escrow Agent on behalf of that party unless written notice to
the contrary is delivered to the Escrow Agent.
5.6 The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Agreement and shall not
be liable for any action taken or omitted by it in good faith in
accordance with such advice.
5.7 The Escrow Agent makes no representation as to the validity,
value, genuineness or the collectability of any security or
other document or instrument held by or delivered to it.
5.8 The Escrow Agent shall not be called upon to advise any party as
to the wisdom in selling or retaining or taking or refraining
from any action with respect to any securities or other property
deposited hereunder.
5.9 The Escrow Agent (and any successor Escrow Agent) may at any
time resign as such by delivering the Escrowed Shares,
Distributions and Proceeds, if any, to any successor Escrow
Agent jointly designated by the other parties hereto in writing,
or to any court of competent jurisdiction, whereupon Escrow
Agent shall be discharged of and from any and all further
obligations arising in connection with this Agreement. The
resignation of Escrow Agent will take effect on the earlier of
(a) the appointment of a successor (including a court of
competent jurisdiction) or (b) the day which is 30 days after
the date of delivery of its written notice of resignation to the
other parties hereto. If at that time Escrow Agent has not
received a designation of a successor Escrow Agent, Escrow
Agent's sole responsibility after that time shall be to retain
and safeguard the Escrowed Shares and Proceeds, if any, until
receipt of a designation of successor Escrow Agent or a joint
written disposition instruction by the other parties hereto or a
final non-appealable order of a court of competent jurisdiction.
5.10 Phoenix and the Vendors shall pay Escrow Agent compensation (as
payment in full) for the services to be rendered by Escrow Agent
hereunder in the amount of $1,500 at the time of execution of
this Agreement and agree to reimburse Escrow Agent for all
reasonable expenses, disbursements and advances incurred or made
by Escrow Agent in performance of its duties hereunder
(including reasonable fees, expenses and disbursements of its
counsel).
- 9 -
6. LIMITED RESPONSIBILITY
This Agreement expressly sets forth all the duties of Escrow Agent with
respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this Agreement against the Escrow Agent.
The Escrow Agent shall not be bound by the provisions of any agreement
among the other parties hereto except this Agreement. No trust is
created by this Agreement and the Escrow Agent does not act in any
capacity as a trustee. In the event of any disagreement between any of
the parties to this Agreement, or between them or either of them and any
other person, resulting in demands or adverse claims being made in
connection with or for any asset involved herein or affected hereby, the
Escrow Agent shall be entitled, at its discretion, to refuse to comply
with any demands or claims on it, as long as such disagreement shall
continue, and in so refusing the Escrow Agent may make no delivery or
other disposition of any asset involved herein or affected hereby, and
in so doing the Escrow Agent shall not be or become liable in any way or
to any person or party for its failure or refusal to comply with such
conflicting demands or adverse claims, and it shall be entitled to
continue so to refrain from acting and so to refuse to act until the
right of person or party shall have been finally settled as provided in
Section 12 hereof, or all differences shall have been adjusted by
agreement and the Escrow Agent shall have been notified thereof in
writing signed by all persons and parties interested.
7. NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt) provided that
a copy is mailed by registered mail, return receipt requested, or (c)
when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case the
appropriate addresses and telecopier numbers set forth below (or to such
other addresses and telecopier numbers as a party may designate by
notice to the other parties):
7.1 To Phoenix:
Phoenix International Life Sciences Inc.
2350, Cohen Street
Saint-Laurent, Quebec
H4R 2N6 Canada
Telecopier No.: (514) 333-7306
ATTENTION: JEAN-YVES CALOZ
7.2 To the Vendors:
TO BUHRENS
Prof. Dr. Klaus-Georg Buhrens
Buchtallee 4a
21465 Reinbek, Germany
- 10 -
TO GEIST:
Dr. Martin Geist
Georgiweg 43
22453 Hamburg, Germany
TO BLOHM:
Dr. Bernk Blohm
Buchtallee 23
21465 Reinbek, Germany
TO HILGENSTOCK:
Dr. Christian Hilgenstock
Gronenweg 73
22549 Hamburg, Germany
TO HEMKER:
Dr. Claus Hemker
Feldblick 2
22397 Hamburg, Germany
TO KOZAK:
Dr. Ivan Kozak
Kopeniker Str. 15
22045 Hamburg, Germany
TO VENS-CAPPELL:
Dr. Bernhard Vens-Cappell
Wurtkamp 12
22527 Hamburg, Germany
TO TETZLOFF:
Dr. Wolfgang Tetzloff
Friedenstrasse 56
82194 Grobenzell, Germany
TO J. HENKE:
Dr. Jurgen J. Henke
Hohenzollernring 57
50672 Koln, Germany
- 11 -
TO L. HENKE:
Dr. L. Henke J. Henke
Hohenzollernring 57
50672 Koln, Germany
TO TREND:
TREND Finanzanalysen GmbH
Berliner Allee 21
40212 Dusseldorf, Germany
ATTENTION: PETER MARTIN
7.3 To the Escrow Agent:
Montreal Trust Company
1800 McGill College Avenue
Montreal (Quebec)
H3A 3K9
Telecopier No.: (514) 982-7677
7.4 To Dr. Ulrike Schafer:
Schafer Pott
Berlinerallee 26
40212 Dusseldorf, Germany
8. GOVERNING LAW
This Agreement shall be governed by the laws of the Province of Quebec
and the laws of Canada applicable therein.
9. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original and all of which, when taken
together, will be deemed to constitute one and the same.
10. SECTION HEADINGS
The headings of sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation.
11. WAIVER
- 12 -
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such
right, power or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise
of such right, power, or privilege or the exercise of any other right,
power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole
or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other parties; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party
giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in
this Agreement.
12. ARBITRATION
All disputes arising out of or in connection with the present Agreement
shall be finally settled under the Rules of Arbitration of the
International Chamber of Commerce by one or more arbitrators appointed
in accordance with the said Rules. The place of arbitration shall be
Montreal. The language of the arbitration shall be English.
13. CONFIDENTIALITY
The parties agree to treat this Agreement as confidential and not to
disclose its contents to third parties other than their advisers, except
to the extent necessary to enforce performance of obligations hereunder,
or as is required to comply with applicable laws or regulations,
including regulations of any stock exchange on which the securities of
Phoenix are listed.
14. FURTHER ASSURANCES
The parties shall, with all reasonable diligence, do all such things and
provide all such reasonable assurances as may be required to consummate
the transactions contemplated hereby, and each party shall provide such
further documents or instruments required by another party as may be
reasonably necessary or desirable to give effect to the purpose of this
Agreement and to carry out its provisions.
15. GENERAL
The invalidity or unenforceability of any term or provision hereof shall
not affect the validity or enforceability of any other term or provision
hereof. This Agreement and the other documents and instruments referred
to herein constitute the entire understanding of the parties hereto with
respect to the subject matter hereof and thereof and supersede all
present and prior agreements, whether written or oral. This Agreement
shall bind and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, personal representatives,
successors and assigns.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
- 13 -
PHOENIX INTERNATIONAL LIFE
SCIENCES INC.
By: /s/ John Hooper /s/ Klaus-Georg Buhrens
--------------------------------------------- -----------------------------
John Hooper, Ph.D. PROF. DR. KLAUS-GEORG BUHRENS
Title: Chairman and Chief Executive Officer
/s/ Martin Geist /s/ Bernd Blohm
- ------------------------------------ ---------------------------------------
DR. MARTIN GEIST DR. BERND BLOHM
/s/ Christian Hilgenstock /s/ Claus Hemker
- ------------------------------------ ---------------------------------------
DR. CHRISTIAN HILGENSTOCK DR. CLAUS HEMKER
/s/ Ivan Kozak /s/ Bernhard Vens-Cappell
- ------------------------------------ ---------------------------------------
DR. IVAN KOZAK DR. BERNHARD VENS-CAPPELL
/s/ Wolfgang Tetzloff /s/ Ulrike Schafer
- ------------------------------------ ---------------------------------------
DR. WOLFGANG TETZLOFF DR. JURGEN HENKE, by Ulrike Schafer
TREND FINANZANALYSEN GMBH
/s/ Ulrike Schafer By: /s/ Ulrike Schafer
- ------------------------------------ -----------------------------------
DR. L. HENKE, by Ulrike Schafer Ulrike Schafer
MONTREAL TRUST COMPANY
By: /s/ Rose Marie Labbe
-----------------------------------
Rose Marie Labbe
Title: Trust Officer
By: /s/ Guy L'Esperance
-----------------------------------
Guy L'Esperance
Title: Manager, Client Servicing