UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
Filed by the
Registrant
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Filed by a Party other than the
Registrant
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Check the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive
Proxy Statement
o
Definitive
Additional Materials
o
Soliciting
Material Pursuant to
Rule 14a-12
Life Sciences Research, Inc.
(Name of Registrant as Specified In
Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy
Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and
0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Voting common stock, par value $0.01 per share, of Life Sciences
Research, Inc.
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(2)
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Aggregate number of securities to which transaction applies:
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11,022,979 shares of the voting common stock (excluding shares
owned by Lion Holdings Inc., Lion Merger Corp. or any direct or
indirect wholly owned subsidiary of Lion Holdings, Inc., which
includes 2,326,116 shares to be directly or indirectly
contributed to Lion Holdings, Inc. by Andrew H. Baker and
Focused Healthcare Partners, L.L.C., an entity controlled by
Mr. Baker); in the money options to purchase
797,540 shares of the voting common stock (excluding in
the money options to be contributed by Mr. Baker to Lion
Holdings, Inc.); and in the money warrants to
purchase 650,000 shares of the voting common stock.
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(3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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The transaction value was determined based upon the sum of: (a)
$8.50 per each of 11,022,979 shares of the voting common stock
(excluding shares owned by Lion Holdings Inc., Lion Merger Corp.
or any direct or indirect wholly owned subsidiary of Lion
Holdings, Inc., which includes 2,326,116 shares to be directly
or indirectly contributed to Lion Holdings, Inc. by
Mr. Baker and Focused Healthcare Partners, L.L.C., an
entity controlled by Mr. Baker); (b) $8.50 minus the weighted
average exercise price of $2.12 per each of 797,540 shares of
the voting common stock issuable pursuant to outstanding
in the money stock options (excluding in the
money options to be contributed by Mr. Baker to Lion
Holdings, Inc.); and (c) $8.50 minus the weighted average
exercise price of $1.58 per each of 650,000 shares of the voting
common stock issuable pursuant to outstanding in the
money warrants.
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(4)
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Proposed maximum aggregate value of transaction:
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$103,281,626.70
$5,763.12
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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LIFE
SCIENCES RESEARCH, INC.
PROPOSED
CASH MERGER YOUR VOTE IS VERY IMPORTANT
To our Stockholders:
You are cordially invited to attend a special meeting of
stockholders of Life Sciences Research, Inc., a Maryland
corporation, to be held on November 23, 2009, commencing at
9:00 A.M., local time, at 53 Street Urbanizacion
Obarrio, Panama, Republic of Panama. Life Sciences Research,
Inc. is referred to herein as the Company.
At the special meeting, you will be asked to consider and vote
upon a proposal to approve the merger of Lion Merger Corp. with
and into the Company pursuant to the terms of the Agreement and
Plan of Merger, dated as of July 8, 2009, among Lion
Holdings, Inc., Lion Merger Corp. and the Company, as amended by
Amendment No. 1 to Agreement and Plan of Merger, dated as
of October 20, 2009, among Lion Holdings, Inc., Lion Merger
Corp, and the Company.
Lion Holdings, Inc. and Lion Merger Corp. were newly formed by
Andrew H. Baker, the Chairman and Chief Executive Officer of the
Company, to engage in the proposed merger. Lion Merger Corp. is
a wholly owned subsidiary of Lion Holdings, Inc.
If the proposed merger is completed, each issued and outstanding
share of the Companys voting common stock, par value $0.01
per share, that you own (other than shares owned by Lion
Holdings, Inc., Lion Merger Corp., or any other direct or
indirect wholly owned subsidiary of Lion Holdings, Inc.
(including shares to be directly or indirectly contributed to
Lion Holdings, Inc. by Mr. Baker and his affiliate, Focused
Healthcare Partners, L.L.C., prior to the effective time of the
merger) and shares owned by any direct or indirect wholly owned
subsidiary of the Company) will be converted into the right to
receive $8.50 in cash, without interest and less any applicable
withholding taxes. This price represents a premium of
approximately 77% over the closing market price of the
Companys voting common stock of $4.79 per share on
March 3, 2009, the last trading day prior to public
announcement of Mr. Bakers initial offer to acquire
the Company for $7.50 per share. This price also represents a
premium of 13% over Mr. Bakers initial proposal and a
premium of 18% over the closing market price of the
Companys voting common stock of $7.18 per share on
July 8, 2009, the last full trading day prior to the
announcement by the Company that it had entered into the merger
agreement.
A special committee of the board of directors consisting solely
of the Companys non-employee, independent directors was
charged with evaluating strategic alternatives for the Company
and unanimously recommended approval of the merger. Based upon
this recommendation, the Companys board of directors, with
Andrew Baker and Brian Cass abstaining, has unanimously
determined that the merger and the transactions contemplated by
the merger agreement, as amended, are in the best interests of
the Company and its stockholders and that the Merger is
substantively and procedurally fair to the Companys
unaffiliated stockholders, and has unanimously approved the
merger.
The board of directors, with Messrs. Baker and
Cass abstaining, recommends that you vote
FOR
the
approval of the merger.
We encourage you to read the accompanying proxy statement
carefully as it sets forth the specifics of the proposed merger
and other important information related to the proposed merger.
In addition, you may obtain additional information about the
Company from documents filed with the Securities and Exchange
Commission.
Please read the entire proxy statement carefully,
including the appendices.
Your vote is very important. The proposed merger cannot be
completed unless the merger is approved by (1) the
affirmative vote of the holders of a majority of the outstanding
shares of the Companys voting common stock entitled to
vote on the merger, which vote is referred to in this letter as
the state law vote, and (2) a majority of the votes cast by
holders of outstanding shares of the Companys voting
common stock entitled to vote on the merger, excluding the votes
cast by Lion Holdings, Inc., Lion Merger Corp., Mr. Baker
and certain other interested parties, as described in the
accompanying proxy statement, which vote is referred to in this
letter as the neutralized vote.
Mr. Baker and his
affiliates beneficially owned as of the record date
approximately 17.7% of the Companys shares,
which shares would be counted for purposes of determining the
state law vote but would not be counted for purposes of
determining the neutralized vote. Accordingly, assuming that
Mr. Baker and his affiliates voted all of their shares in
favor of the merger, the affirmative vote of greater than
approximately 39.2% of the remaining 82.3% of the shares (or
32.3% of all outstanding shares) would be required to approve
the merger for purposes of the state law vote, and, assuming all
of the Companys stockholders voted all of their shares
with respect to the merger, the affirmative vote of a majority
of the remaining 82.3% of the shares would be required to
approve the merger for purposes of the neutralized vote.
Regardless of whether you plan to attend the special meeting, in
order to ensure the presence of a quorum at the special meeting,
we urge you to vote and submit your proxy authorization by
Internet, telephone or mail. If you are a registered
stockholder, you may authorize a proxy to vote your shares:
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By Internet at www.proxyvote.com. This will require your
12-digit
control number.
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By telephone by calling the number shown on the proxy card.
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By mail by completing, signing, dating and returning the proxy
card.
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If your shares are held in the name of a bank, broker or other
holder of record, follow the instructions you receive from the
holder of record to authorize a proxy to vote your shares.
This solicitation for your proxy is being made on behalf of the
board of directors of the Company. If you fail to vote, the
effect will be the same as a vote against the approval of the
merger for purposes of the state law vote referenced above. If
you sign and return your proxy card or complete the Internet or
telephone voting procedures, but do not specify how you want to
vote your shares, your proxy will be counted as a vote in favor
of approval of the merger. You may vote your shares at the
meeting if you attend in person, even if you previously
submitted a proxy card or authorized a proxy to vote your shares
by Internet or telephone.
On behalf of the board of directors, thank you for your
continued support.
Sincerely,
Mark L. Bibi
Secretary and General Counsel
East Millstone, New Jersey
October 28, 2009
LIFE
SCIENCES RESEARCH, INC.
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
To Be Held on November 23, 2009
Notice is hereby given that a special meeting of stockholders of
Life Sciences Research, Inc., a Maryland corporation (which is
referred to herein as the Company), will be held on
November 23, 2009, commencing at 9:00 A.M., local
time, at 53 Street Urbanizacion Obarrio, Panama, Republic
of Panama, to consider and vote upon a proposal to approve the
merger of Lion Merger Corp. with and into the Company pursuant
to the terms of the Agreement and Plan of Merger, dated as of
July 8, 2009, among Lion Holdings, Inc., Lion Merger Corp.
and the Company, as amended by Amendment No. 1 to Agreement and
Plan of Merger, dated as of October 20, 2009, among Lion
Holdings, Inc., Lion Merger Corp. and the Company.
Pursuant to the merger agreement, as amended, at the effective
time of the merger, each issued and outstanding share of the
voting common stock, par value $0.01 per share, of the Company
(other than shares owned by Lion Holdings, Inc., Lion Merger
Corp. or any other direct or indirect wholly owned subsidiary of
Lion Holdings, Inc. (including shares to be directly or
indirectly contributed to Lion Holdings, Inc. by Andrew H. Baker
and his affiliate, Focused Healthcare Partners, L.L.C., prior to
the effective time of the merger) and any shares owned by a
direct or indirect wholly owned subsidiary of the Company) will
be converted into the right to receive $8.50 in cash, without
interest, less any applicable withholding taxes.
Lion Holdings, Inc. has informed the Company that, prior to the
completion of the merger, 2,326,116 shares of the
Companys voting common stock held by Mr. Baker, the
Chairman and Chief Executive Officer of the Company, and Focused
Healthcare Partners, L.L.C., an entity controlled by
Mr. Baker, as well as in the money options held
by Mr. Baker to purchase 55,500 shares will be
directly or indirectly contributed to Lion Holdings, Inc. in
exchange for equity securities of Lion Holdings, Inc. or one of
its affiliates. The $8.50 per share merger consideration will
not be paid with respect to any shares or options to purchase
shares of the Companys voting common stock that are
exchanged for equity securities of Lion Holdings, Inc. or one of
its affiliates.
A special committee of the board of directors consisting solely
of the Companys non-employee, independent directors
unanimously recommended approval of the merger. Based upon this
recommendation, the Companys board of directors, with
Mr. Baker and Brian Cass abstaining, has unanimously
determined that the merger and the transactions contemplated by
the merger agreement, as amended, are in the best interests of
the Company and its stockholders and that the Merger is
substantively and procedurally fair to the Companys
unaffiliated stockholders, and has unanimously approved the
merger.
The board of directors, with Messrs. Baker and
Cass abstaining, recommends that you vote
FOR
the
approval of the merger.
Only holders of record of shares of the Companys voting
common stock at the close of business on October 1, 2009,
the record date, are entitled to notice of, and to vote at, the
special meeting or any adjournments or postponements thereof.
Your vote is very important regardless of the number of
shares you own. The proposed merger cannot be completed unless
the merger is approved by (1) the affirmative vote of the
holders of a majority of the outstanding shares of the
Companys voting common stock entitled to vote on the
merger, which is referred to in this notice as the state law
vote, and (2) a majority of the votes cast by holders of
outstanding shares of the Companys voting common stock
entitled to vote on the merger, excluding the votes cast by Lion
Holdings, Inc., Lion Merger Corp., Mr. Baker and certain
other interested parties, as described in the accompanying proxy
statement, which vote is referred to in this notice as the
neutralized vote.
Mr. Baker and his affiliates
beneficially owned as of the record date approximately 17.7% of
the Companys shares, which shares would be counted for
purposes of determining the state law vote but would not be
counted for purposes of determining the neutralized vote.
Accordingly, assuming that Mr. Baker and his affiliates
voted all of their shares in favor of the merger, the
affirmative vote
of greater than 39.2% of the remaining 82.3% of the shares (or
32.3% of all outstanding shares) would be required to approve
the merger for purposes of the state law vote, and, assuming all
of the Companys stockholders voted all of their shares
with respect to the merger, the affirmative vote of a majority
of the remaining 82.3% of the shares would be required to
approve the merger for purposes of the neutralized vote.
Regardless of whether you plan to attend the special meeting, in
order to ensure the presence of a quorum at the meeting, we urge
you to authorize a proxy to vote on your behalf by submitting
your proxy authorization by Internet, telephone or mail. If you
are a registered stockholder, you may authorize a proxy to vote
your shares:
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By Internet at www.proxyvote.com. This will require your
12-digit
control number.
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By telephone by calling the number shown on the proxy card.
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By mail by completing, signing, dating and returning the proxy
card.
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If your shares are held in the name of a bank, broker or other
holder of record, follow the instructions you receive from the
holder of record to authorize a proxy to vote your shares.
If you fail to vote, the effect will be the same as a vote
against the approval of the merger for purposes of the state law
vote referenced above. If you sign and return your proxy card or
complete the Internet or telephone voting procedures, but do not
specify how you want to vote your shares, your proxy will be
counted as a vote in favor of approval of the merger. You may
vote your shares at the special meeting if you attend the
special meeting in person, even if you previously submitted a
proxy card or authorized a proxy to vote your shares by Internet
or telephone. Please note, however, that if your shares are held
of record by a broker, bank or other nominee and you wish to
vote at the special meeting, you must obtain from the record
holder a proxy issued in your name. If you do not plan to attend
the special meeting, your broker, bank or other nominee that
holds your shares of record cannot vote your shares without your
instructions. If you fail to provide such instructions, and do
not complete, date, sign and return by mail the enclosed proxy
card or authorize a proxy to vote your shares by Internet or
telephone, this will have the same effect as voting against the
merger.
This solicitation for your proxy is being made on behalf of the
board of directors of the Company. A return envelope (which is
postage prepaid if mailed in the United States) is enclosed for
your convenience.
If you have any questions or need assistance in voting your
shares, please call the Companys Secretary at
(732) 649-9961.
We urge you to carefully read the accompanying proxy statement,
including the appendices, because it includes a detailed
description of the proposed merger. A copy of the merger
agreement is included as Appendix A to the accompanying
proxy statement and a copy of Amendment No. 1 to the merger
agreement is included as Appendix A-1 to the accompanying proxy
statement.
By Order of the Board of Directors
Mark L. Bibi
Secretary and General Counsel
East Millstone, New Jersey
October 28, 2009
LIFE
SCIENCES RESEARCH, INC.
PROXY
STATEMENT
INTRODUCTION
This proxy statement and the accompanying proxy card are first
being mailed to stockholders of Life Sciences Research,
Inc., which is referred to herein as the Company, on or about
October 30, 2009, in connection with the solicitation of
proxies by the board of directors of the Company for a special
meeting of stockholders to be held on November 23, 2009,
commencing at 9:00 A.M., local time, at 53 Street
Urbanizacion Obarrio, Panama, Republic of Panama, or at any
adjournment or postponement of the special meeting. Shares of
the Companys voting common stock, par value $0.01 per
share, represented by properly executed proxies received by the
Company or proxies properly submitted via telephone or Internet
will be voted at the special meeting or any adjournment or
postponement of the special meeting in accordance with the terms
of those proxies, unless revoked.
At the special meeting, stockholders will be asked to consider
and vote upon a proposal to approve the merger of Lion Merger
Corp. with and into the Company pursuant to the terms of the
Agreement and Plan of Merger, dated as of July 8, 2009,
among Lion Holdings, Inc., Lion Merger Corp. and the Company, as
amended by Amendment No. 1 to Agreement and Plan of Merger,
dated as of October 20, 2009, among Lion Holdings, Inc., Lion
Merger Corp. and the Company.
At the effective time of the merger, the separate corporate
existence of Lion Merger Corp. will cease, and the Company will
survive as a wholly owned subsidiary of Lion Holdings, Inc. At
the effective time of the merger:
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each outstanding share of voting common stock, par value $0.01
per share, of the Company (other than shares owned by Lion
Holdings, Inc., Lion Merger Corp., or any other direct or
indirect wholly owned subsidiary of Lion Holdings, Inc.
(including shares to be directly or indirectly contributed to
Lion Holdings, Inc. by Andrew H. Baker and his affiliate,
Focused Healthcare Partners, L.L.C., prior to the effective time
of the merger) and shares owned by any direct or indirect wholly
owned subsidiary of the Company) will be converted into the
right to receive $8.50 in cash, without interest, less any
applicable withholding taxes;
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except as otherwise agreed to in writing by Lion Holdings, Inc.
and a holder thereof prior to the effective time of the merger
(i.e., with respect to options to be contributed by
Mr. Baker, as described below), each outstanding option to
purchase shares of the Companys voting common stock
granted under the Companys 2001 Equity Incentive Plan and
2004 Long Term Incentive Plan will become fully exercisable and
vested, will be cancelled and will be converted into the right
to receive, as soon as reasonably practicable (but in any event
no later than three business days) after the effective time of
the merger, an amount in cash equal to (a) the excess, if
any, of $8.50 over the exercise price per share under such
option, multiplied by (b) the total number of shares
subject to such option immediately prior to the effective time,
without interest, less any applicable withholding taxes;
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each outstanding share of restricted stock granted under the
Companys 2001 Equity Incentive Plan and 2004 Long Term
Incentive Plan will become fully vested, will be cancelled and
will be converted into the right to receive, as soon as
reasonably practicable (but in any event no later than three
business days) after the effective time of the merger, $8.50 in
cash, without interest, less any applicable withholding taxes;
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each outstanding warrant to purchase shares of the
Companys voting common stock will be cancelled and will be
converted into the right to receive, as soon as reasonably
practicable (but in any event no later than three business days)
after the effective time of the merger, an amount in cash equal
to (a) the excess, if any, of $8.50 over the exercise price
per share under such warrant, multiplied by (b) the total
number of shares subject to such warrant immediately prior to
the effective time, without interest, less any applicable
withholding taxes; and
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each outstanding share of common stock, par value $0.01 per
share, of Lion Merger Corp. will be converted into one share of
common stock, par value $0.01 per share, of the surviving
corporation of the merger.
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Lion Holdings, Inc. has informed the Company that, prior to the
completion of the merger, 2,326,116 shares of the
Companys voting common stock held by Mr. Baker, the
Chairman and Chief Executive Officer of the Company, and Focused
Healthcare Partners, L.L.C., an entity controlled by
Mr. Baker, as well as in the money options held
by Mr. Baker to purchase 55,500 shares will be
directly or indirectly contributed to Lion Holdings, Inc. in
exchange for equity securities of Lion Holdings, Inc. or one of
its affiliates. The $8.50 per share merger consideration will
not be paid with respect to any shares or for any options to
purchase shares of the Companys voting common stock that
are directly or indirectly contributed to Lion Holdings, Inc.
Neither the Securities and Exchange Commission nor any state
securities regulatory agency has approved or disapproved the
merger, passed upon the merits or fairness of the merger or
passed upon the adequacy or accuracy of the disclosure in this
document. Any representation to the contrary is a criminal
offense.
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SUMMARY
TERM SHEET
This summary term sheet summarizes material information
contained elsewhere in this proxy statement, but does not
contain all of the information that is important to you. You
should read the entire proxy statement carefully, including the
attached appendices. In this proxy statement, the term
the Company
refers to Life Sciences Research,
Inc., the term
Parent
refers to Lion
Holdings, Inc., the term
Merger Sub
refers to
Lion Merger Corp., the term
LAB Holdings
refers to LAB Holdings LLC, and the term
Acquiring
Parties
refers, collectively, to Andrew H. Baker,
Focused Healthcare Partners, L.L.C., Parent, Merger Sub and LAB
Holdings.
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When and where is the special meeting?
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The special meeting of the stockholders of the Company will be
held on November 23, 2009, commencing at 9:00 A.M.,
local time, at 53 Street Urbanizacion Obarrio, Panama,
Republic of Panama. See
INTRODUCTION.
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What am I being asked to consider and vote upon?
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You are being asked to consider and vote upon a proposal to
approve the merger of Merger Sub with and into the Company
pursuant to the terms of the Agreement and Plan of Merger, dated
as of July 8, 2009, among Parent, Merger Sub and the
Company, as amended by Amendment No. 1 to Agreement and
Plan of Merger, dated as of October 20, 2009, among Lion
Holdings, Inc., Lion Merger Corp. and the Company. The proposed
merger and the Agreement and Plan of Merger (as amended by
Amendment No. 1 to Agreement and Plan of Merger) are
referred to in this proxy statement as the
Merger
and the
Merger Agreement
, respectively. See
THE
MERGER Proposal to be Considered at the Special
Meeting.
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The Merger
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Who are the parties to the Merger?
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The Company is a global contract research organization, or CRO,
providing product development services to the pharmaceutical,
agrochemical and biotechnology industries. The Company brings
leading technology and capability to support its clients in
non-clinical safety testing of new compounds in early stage
development and assessment. The purpose of this work is to
identify risks to humans, animals or the environment resulting
from the use or manufacture of a wide range of chemicals that
are essential components of the products of the Companys
clients. The principal offices of the Company are located at
PO Box 2360, Mettlers Road, East Millstone New Jersey
08875-2360,
and the telephone number of the Company is
(732) 649-9961.
See
INFORMATION ABOUT THE COMPANY.
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Parent is a newly formed Delaware corporation organized in
connection with the Merger and has not carried on any activities
other than in connection with the Merger. Andrew H. Baker is the
sole director, officer and equityholder of Parent.
Mr. Baker is the Chairman and Chief Executive Officer of
the Company and currently beneficially owns approximately 17.7%
of the outstanding shares of the Companys voting common
stock, par value $0.01 per share (including Shares issuable upon
the exercise of in the money and out of the
money options that are presently exercisable within
60 days or that will fully vest as a result of the Merger).
The shares of the Companys voting common stock are
referred to in this proxy statement as the
Shares
. All of
the outstanding shares of Parents capital stock are
presently owned directly or indirectly by Mr. Baker.
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Merger Sub is a newly formed Maryland corporation organized in
connection with the Merger and has not carried on any activities
other than in connection with the Merger. All of the outstanding
shares of capital stock of Merger Sub are presently owned
directly by Parent.
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The address of Parent is
c/o Andrew
H. Baker, Life Sciences Research, Inc., 401 Hackensack Avenue,
Hackensack, NJ 07601. The address of Merger Sub is 300 East
Lombard Street, Baltimore, Maryland 21202. The telephone number
of each of Parent and Merger Sub is
(732) 649-9961.
See
INFORMATION ABOUT THE ACQUIRING PARTIES.
Parent and Merger Sub are referred to in this proxy
statement, collectively, as the
Constituent Corporations
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What will happen if the Merger is completed?
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Merger Sub will merge with and into the Company, with the
Company as the surviving corporation. After the Merger, the
Company will be a direct wholly owned subsidiary of Parent. See
THE MERGER Structure of the
Merger.
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When will the Merger be completed?
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The Merger is expected to be completed on the second business
day after the conditions to the Merger (including the approval
of the Merger by the requisite vote of the Companys
stockholders) are satisfied or waived. See
THE
MERGER Effective Time of the Merger.
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What will I receive if the Merger is completed?
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If the Merger is completed, you will receive an amount equal to
$8.50 in cash, without interest and less applicable withholding
taxes, for each Share held by you immediately prior to the
effective time of the Merger. See
THE
MERGER Payment of Merger Consideration
and
THE MERGER Proposal to be Considered at the
Special Meeting.
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As of October 27, 2009, the closing price of the Shares was
$8.39 per Share.
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When will I receive the merger consideration?
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The paying agent for the Merger (which may be the Company) will
distribute the merger consideration to you after the Merger has
been completed and you have sent to the paying agent your stock
certificate(s) (or an affidavit of loss) and a properly
completed letter of transmittal. See
THE
MERGER Payment of Merger Consideration.
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What happens to stock options in the Merger?
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At the effective time of the Merger, except as agreed to in
writing prior to the effective time by Parent and a holder
thereof (i.e., with respect to options to be contributed to
Parent by Mr. Baker, as described below), each option to
purchase Shares outstanding under the Companys 2001 Equity
Incentive Plan and 2004 Long Term Incentive Plan will become
fully exercisable and vested, will be cancelled and will be
converted into the right to receive a cash amount (without
interest and net of any applicable withholding taxes) equal to:
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the excess, if any, of $8.50 over the per Share
exercise price of the option, multiplied by
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the total number of Shares subject to the option
immediately prior to the effective time.
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In addition, prior to the completion of the Merger,
Mr. Baker will contribute to Parent in the
money options to purchase 55,500 Shares in exchange
for new options to purchase shares of Parent.
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The Companys 2001 Equity Incentive Plan and 2004 Long Term
Incentive Plan are referred to in this proxy statement as the
Stock Plans
.
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See
THE MERGER Proposal to be Considered at
the Special Meeting
and
THE MERGER
AGREEMENT Treatment of Options, Restricted Stock and
Warrants.
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What happens to restricted stock in the Merger?
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At the effective time of the Merger, each share of restricted
stock outstanding under the Stock Plans will become fully
vested, will be cancelled and will be converted into the right
to receive $8.50 in cash (without interest and net of any
applicable withholding taxes).
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See
THE MERGER Proposal to be Considered at
the Special Meeting
and
THE MERGER
AGREEMENT Treatment of Options, Restricted Stock and
Warrants.
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What happens to warrants in the Merger?
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At the effective time of the Merger, each outstanding warrant to
purchase Shares will be cancelled and will be converted into the
right to receive a cash amount (without interest and net of any
applicable withholding taxes) equal to:
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the excess, if any, of $8.50 over the per Share
exercise price of the warrant, multiplied by
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the total number of Shares subject to the warrant
immediately prior to the effective time.
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See
THE MERGER Proposal to be Considered at
the Special Meeting
and
THE MERGER
AGREEMENT Treatment of Options, Restricted Stock and
Warrants.
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What other effects will the Merger have on the Company?
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As a result of the Merger, each Share (other than Shares owned
by Parent, Merger Sub or any other direct or indirect wholly
owned subsidiary of Parent (including Shares to be directly or
indirectly contributed to Parent by Mr. Baker and his
affiliate, Focused Healthcare Partners, L.L.C., prior to the
effective time of the Merger) and Shares owned by any direct or
indirect wholly owned subsidiary of the Company) will be
cancelled. The Shares will no longer be listed on NYSE Arca or
any other securities exchange. In addition, the Shares will be
deregistered pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended (which is referred to in this
proxy statement as the
Exchange Act
), and the
Companys obligation to file reports under
Section 15(d) of
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the Exchange Act will be suspended. See
SPECIAL
FACTORS Position of the Company as to the Purposes,
Alternatives, Reasons and Effects of the Merger
and
SPECIAL FACTORS Position of the Acquiring
Parties as to the Purposes, Alternatives, Reasons and Effects of
the Merger.
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Do I have any appraisal rights?
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No. In accordance with applicable law and the
Companys charter, no stockholder of the Company will have
any statutory rights to demand and receive payment of the fair
value of the stockholders Shares as a result of the
transactions contemplated by the Merger or the Merger Agreement.
See
THE MERGER Appraisal Rights.
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What are the tax consequences of the Merger to me?
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The receipt of cash in exchange for Shares in the Merger will be
a taxable transaction for U.S. federal income tax purposes and
may also be a taxable transaction under applicable state, local,
foreign or other tax laws. Tax matters are very complex and the
tax consequences of the Merger to you will depend on the facts
of your own situation. You should consult your tax advisor for a
full understanding of the tax consequences of the Merger to you.
See
THE MERGER Material U.S. Federal Income
Tax Consequences.
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How will Parent finance the Merger?
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The total amount necessary to consummate the Merger and the
related transactions is estimated to be approximately
$192.7 million, comprised of (i) approximately
$123.4 million in cash to fund the payment of the merger
consideration and payments in respect of outstanding
in-the-money stock options, restricted stock and warrants
cancelled in connection with the Merger, (ii) approximately
$55.0 million of the Companys senior indebtedness
under its existing Financing Agreement, dated March 1,
2006, with third party lenders, as amended, which agreement is
referred to in this proxy statement as the
Existing Financing
Agreement
, and (iii) approximately $14.3 million
in cash to pay transaction fees and expenses. Following the
Merger, the Existing Financing Agreement will remain in place on
amended terms.
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It is anticipated that financing will be obtained from the
proceeds of equity and debt financing, together with available
cash of the Company of up to approximately $22.6 million
(subject to the qualified cash condition in the debt financing
commitment letters), as follows:
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equity financing in the aggregate amount of
$123.1 million (less the amount of cash on hand at the
Company available to finance the Merger) from LAB Holdings LLC,
a Delaware limited liability company controlled by
Mr. Baker, pursuant to a commitment letter addressed to
Parent from LAB Holdings, of which approximately
$20.1 million will be provided through the contribution to
Parent of Shares and options to purchase Shares held by
Mr. Baker and his affiliate, Focused Healthcare Partners,
L.L.C., and the balance will be provided in cash of not less
than $80.0 million; and
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debt financing in the aggregate amount of
$70.0 million, of which $15.0 million will be provided
in the form of a term loan
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A facility in cash and $55.0 million will be provided in
the form of a term loan B facility representing loans
outstanding under the Existing Financing Agreement, which
agreement will remain in place on amended terms following the
closing of the Merger, all pursuant to debt financing
commitments provided to Parent by Progress Funding and River
Investment Partners. River Investment Partners acquired the
existing loan to the Company and its subsidiaries that was
previously owned by Anchor Sub Funding S.a.r.L., a prior lender,
which is referred to in this proxy statement as
Anchor
,
and assumed Anchors obligations under its debt financing
commitment to Parent.
See
THE MERGER Merger Financing.
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What are the conditions to the Merger?
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The Merger must be approved by (1) the
affirmative vote of the holders of a majority of the outstanding
Shares entitled to vote on the Merger, which vote is referred to
in this proxy statement as the
State Law Vote
, and
(2) a majority of the votes cast by holders of outstanding
Shares entitled to vote on the Merger, excluding the votes cast
by Parent, Merger Sub, or any of (i) Mr. Baker,
(ii) any person or entity that beneficially owns any Shares
and has entered into an agreement, arrangement or understanding
with Parent or Merger Sub or any of their respective affiliates
to (x) provide equity financing for the Merger or
(y) vote or give any consents (or withhold any such votes
or consents) with respect to any Shares in respect of the Merger
or any similar transaction, and (iii) any officer,
director, partner, member or employee of Parent or Merger Sub;
each person or entity described in (i)
(iii) above being referred to in this proxy statement as
an
Interested Party
, which vote described in this
clause (2) is referred to herein as the
Neutralized
Vote
;
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no governmental order, injunction or law may be in
effect that restrains, enjoins or otherwise prohibits the
consummation of the Merger;
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the parties must have performed in all material
respects the obligations required to be performed by them under
the Merger Agreement at or prior to the effective time of the
Merger; and
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the representations and warranties of the parties
set forth in the Merger Agreement must be true and correct in
the manner described under the caption
THE MERGER
AGREEMENT Conditions to Completing the
Merger.
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Even if the Merger is approved by a vote of the Companys
stockholders, as described above, the Merger will not be
consummated unless all of the other conditions to the Merger
have been satisfied or waived.
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See
THE MERGER AGREEMENT Conditions to
Completing the Merger.
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Is the Merger Agreement subject to a financing condition?
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No. The obligations of the parties to consummate the Merger
pursuant to the terms of the Merger Agreement are not subject to
a
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financing condition. However, the Company may terminate the
agreement if, five business days prior to December 8, 2009,
which December 8, 2009 date is referred to in this proxy
statement as the
Outside Date
, all of the conditions to
the obligations of Parent and Merger Sub to effect the Merger
have been satisfied or waived and neither Parent nor Merger Sub
has obtained the proceeds of the debt and equity financing
sufficient to consummate the transactions contemplated under the
Merger Agreement as of such date. In that event, Parent will be
required to pay the Company a termination fee of
$2.23 million, unless the Company is in material breach of
any representation, warranty, covenant or agreement contained in
the Merger Agreement, or if any representation or warranty of
the Company contained in the Merger Agreement shall have become
untrue in any material respect, in each case such that any of
the conditions to the obligations of Parent and Merger Sub to
consummate the Merger would not be satisfied on or prior to the
Outside Date (excluding conditions that, by their terms, cannot
be satisfied until the closing of the Merger).
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Can the Company consider other takeover proposals?
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Yes, under certain circumstances. Although the Merger Agreement
provides that, subject to limited exceptions, the Company may
not directly or indirectly (i) initiate, solicit or
knowingly encourage any inquiries or the making of any inquiry,
proposal or offer that constitutes or would reasonably be
expected to lead to an Acquisition Proposal, (ii) engage in
or otherwise participate in any discussions or negotiations
regarding any proposal or offer that constitutes or would
reasonably be expected to lead to an Acquisition Proposal or
(iii) otherwise knowingly facilitate any effort or attempt
to make any proposal or offer that constitutes or would
reasonably be expected to lead to an Acquisition Proposal, the
special committee of the Companys board of directors may
consider an Acquisition Proposal that the special committee has
determined in good faith, based on the information then
available and after consultation with its financial advisors and
outside legal counsel, constitutes or could reasonably be
expected to result in a Superior Proposal. The terms
Acquisition Proposal and Superior
Proposal refer to certain proposals described under the
caption
THE MERGER AGREEMENT Limitation on
Soliciting Transactions.
The Companys board of
directors and the special committee thereof are referred to in
this proxy statement as the
Board of Directors
and the
Special Committee
, respectively.
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See
THE MERGER AGREEMENT Limitation on
Soliciting Transactions.
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The Merger Agreement further provides that the Board of
Directors may not:
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withhold, withdraw, qualify or modify (or publicly
propose or resolve to do so), in a manner adverse to Parent, its
recommendation in favor of the approval of the Merger, unless
the Board of Directors has determined in good faith (after
consultation with outside counsel) that failure to do so would
be inconsistent with the duties of the Board of Directors under
applicable law; or
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except as provided in the preceding clause and
subject to the exceptions set forth in the next succeeding
paragraph, approve or recommend (or publicly propose to do so)
an Acquisition Proposal, cause or permit the Company to enter
into an agreement or letter of intent or other similar agreement
with respect to an Acquisition Proposal or enter into an
agreement requiring the Company to abandon, terminate or fail to
consummate the transactions contemplated by the Merger
Agreement, or resolve, propose or agree to any of the foregoing.
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Notwithstanding the foregoing restrictions, if before the Merger
is approved by the Companys stockholders, the Company
receives an unsolicited bona fide Acquisition Proposal that the
Special Committee determines in good faith, after consultation
with its financial advisors and outside legal counsel,
constitutes a Superior Proposal after giving effect to all of
the adjustments to the terms of the Merger Agreement which may
be offered by Parent, then the Company may terminate the Merger
Agreement in order to enter into an agreement with respect to
such proposal.
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The Company may not terminate the Merger Agreement as described
above unless prior to such termination it:
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has not materially breached the non-solicitation
provisions of the Merger Agreement;
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has provided Parent with five days (or three days in
the event of each subsequent material revision to such Superior
Proposal) prior written notice of its intent to take action with
respect to the applicable Superior Proposal; and
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negotiates with Parent in good faith during any such
notice period to make adjustments to the terms and conditions of
the Merger Agreement so that such Acquisition Proposal ceases to
constitute a Superior Proposal.
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If the Company terminates the agreement to enter into an
agreement in respect of a Superior Proposal, the Company will be
required to pay Parent a termination fee of approximately
$1.53 million concurrently with such termination, as
described under
THE MERGER AGREEMENT
Expenses and Termination Fees.
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See
THE MERGER AGREEMENT Limitation on
Soliciting Transactions.
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Can the Merger Agreement be terminated?
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The Merger Agreement can be terminated at any time before the
effective time of the Merger by the mutual written consent of
the Company and Parent, by action of their respective boards of
directors.
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In addition, so long as the terminating party has not breached
its obligations under the Merger Agreement in any material
respect in a manner that proximately contributed to the failure
of a condition to the consummation of the Merger, either Parent
or the Company may terminate the Merger Agreement if:
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the Merger is not consummated by the Outside Date;
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the Companys stockholders do not approve the
Merger at the special meeting or any adjournment or postponement
thereof; or
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any final and non-appealable order is in effect that
permanently restrains, enjoins or otherwise prohibits the
consummation of the Merger (whether before or after the approval
of the Companys stockholders has been received).
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The Company may terminate the Merger Agreement if:
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prior to the receipt of the approval of the
Companys stockholders, the Board of Directors authorizes
the Company to enter into an agreement in respect of a Superior
Proposal in compliance with the provisions of the Merger
Agreement, and before or at the same time as such termination
the Company actually enters into such an agreement, and prior to
or concurrently with entering into such agreement, the Company
pays Parent a termination fee of approximately
$1.53 million;
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the Board of Directors changes its recommendation
with respect to the approval of the Merger and prior to or
concurrently with such change in recommendation the Company pays
Parent a termination fee of approximately $1.53 million;
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Parent or Merger Sub breaches the Merger Agreement,
or any representation or warranty of Parent or Merger Sub made
in the Merger Agreement shall have become untrue after the date
of the Merger Agreement, with the effect that the conditions to
the obligations of Parent or Merger Sub to effect the Merger are
not satisfied, and such breach or failure to perform is not
curable or cured by the earlier of (i) 30 days after
written notice thereof is given by the Company to Parent, or
(ii) two business days prior to the Outside Date, in which
case Parent will not be obligated to pay the Company a
termination fee unless such breach is a willful or intentional
breach, as described below;
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any of the conditions to the Merger are not or
cannot be satisfied on or prior to five business days prior to
the Outside Date (excluding conditions that, by their terms,
cannot be satisfied until the closing of the Merger), primarily
as a result of the compliance by the Company, Parent or Merger
Sub in all material respects with the confidentiality provisions
of the Merger Agreement described under
THE MERGER
AGREEMENT
Confidentiality,
in which
case Parent will be obligated to pay the Company a termination
fee of $1.0 million;
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Parent or Merger Sub willfully or intentionally
breaches the Merger Agreement, with the effect that the
conditions to the Companys obligation to effect the Merger
are not satisfied, and such breach is not curable or cured by
the earlier of (i) 30 days after written notice is
given by the Company to Parent or (ii) two business days
prior to the Outside Date, in which case Parent will be required
to pay the Company a termination fee of $4.46 million; or
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if five business days prior to the Outside Date all
of the conditions to the obligations of Parent and Merger Sub to
effect the
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Merger have been satisfied or waived (excluding conditions that,
by their terms, cannot be satisfied until the closing of the
Merger) and Parent or Merger Sub fail to obtain the proceeds of
the debt and equity financing sufficient to consummate the
transactions contemplated under the Merger Agreement as of such
date, in which case Parent will be required to pay the Company a
termination fee of $2.23 million.
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Parent or Merger Sub may terminate the Merger Agreement if:
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the Board of Directors either:
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(i) changes its recommendation to the Companys
stockholders with respect to the approval of the Merger;
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(ii) recommends that the stockholders approve an
Acquisition Proposal other than the Merger; or
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(iii) fails to include in this proxy statement a
recommendation that the Companys stockholders approve the
Merger, or fails to call a meeting of the Companys
stockholders to approve the Merger;
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in which case the Company will be obligated to pay Parent a
termination fee of approximately $1.53 million
promptly upon the consummation by the Company or any of its
subsidiaries of a transaction in respect of an Acquisition
Proposal (substituting 50% for 15% in the definition thereof)
within 12 months of such termination;
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the Company breaches the Merger Agreement, or any
representation or warranty of the Company made in the Merger
Agreement shall have become untrue after the date of the Merger
Agreement, with the effect that the conditions to the
obligations of Parent and Merger Sub to effect the Merger are
not satisfied, and such breach is not curable or cured by the
earlier of (i) 30 days after written notice was given
by Parent to the Company or (ii) two business days prior to
the Outside Date; or
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any of the conditions to the Merger is not or cannot
be satisfied on or prior to the date that is five business days
prior to the Outside Date, primarily as a result of the
compliance by the Company, Parent or Merger Sub with the
confidentiality provisions of the Merger Agreement described
under
THE MERGER AGREEMENT
Confidentiality,
in which case
Parent will be obligated to pay the Company a termination fee of
$1.0 million;
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the Company willfully or intentionally breaches the
Merger Agreement, with the effect that the conditions to the
obligations of Parent and Merger Sub to effect the Merger were
not satisfied, and such breach was not curable or cured by the
earlier of (i) 30 days after written notice is given
by Parent to the Company or (ii) two business days prior to
the Outside Date, in which case the Company will be obligated to
pay Parent a termination fee of $4.46 million; or
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the Company inadvertently breaches in any material
respect the confidentiality provisions of the Merger Agreement
described under
THE MERGER AGREEMENT
Confidentiality,
in
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which case the Company will be obligated to pay Parent a
termination fee of $1.0 million.
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In addition, the Merger Agreement will automatically terminate
immediately prior to any compelled disclosure in violation of
the confidentiality provisions contained in (i) the equity
commitment letter addressed to Parent from LAB Holdings,
(ii) the debt commitment provided to Parent by Progress
Funding and (iii) the debt commitment provided to Parent by
River Investment Partners, which letters and commitments,
collectively, are referred to in this proxy statement as the
Parent Confidentiality Documents
, unless such information
is accorded confidential treatment pursuant to a protective
order or other confidentiality arrangement reasonably acceptable
to Parent. In case of an automatic termination, Parent will be
obligated to pay the Company a termination fee of
$1.0 million.
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See
THE MERGER AGREEMENT
Termination.
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Who must pay the fees and expenses relating to the Merger?
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Each party is generally responsible for its own fees and
expenses, provided that Parent will be required to reimburse the
Company for all reasonable out-of-pocket costs incurred by the
Company or its subsidiaries in connection with their providing
to Parent all reasonable cooperation requested by Parent in
connection with the financing for the Merger. In addition,
Parent has agreed to pay the Company a termination fee of either
$1.0 million, $2.23 million or $4.46 million in
certain circumstances upon a termination of the Merger
Agreement, and the Company has agreed to pay Parent a
termination fee of either $1.0 million,
approximately $1.53 million or $4.46 million in
certain circumstances upon a termination of the Merger Agreement.
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See
THE MERGER Estimated Fees and Expenses
of the Merger, THE MERGER AGREEMENT
Termination
and
THE MERGER
AGREEMENT Expenses and Termination Fee.
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Questions
About the Fairness of the Merger and Conflicts of
Interest
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What did the Board of Directors do to make sure that the merger
consideration is fair?
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The Board of Directors formed the Special Committee to explore
strategic alternatives available to the Company to enhance
stockholder value, including (i) maintaining its status quo
as an independent public company, (ii) paying a special
dividend, repurchasing Shares or recapitalizing the Company,
(iii) engaging in smaller acquisitions,
(iv) participating in a strategic merger and
(v) selling the Company. The Special Committee is comprised
of the Companys non-employee, independent directors,
namely: Gabor Balthazar, Afonso Junqueiras and Yaya Sesay. The
Special Committee engaged in an exhaustive process to determine
whether it was advisable to engage in a strategic transaction
and, if so, to consider the various strategic alternatives
available to the Company. As part of this process, the Special
Committee, with the assistance and advice of its advisors,
conducted an extensive market check process
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involving over 50 potential bidders and negotiated with
Mr. Baker to obtain the highest price reasonably attainable
for the Companys stockholders in a merger or other
acquisition transaction. See
SPECIAL
FACTORS Background of the Merger and Special
Committee Proceedings.
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Did the Special Committee receive any independent advice
regarding the Merger?
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Yes. The Special Committee independently selected and retained a
financial advisor and outside legal counsel. In connection with
the Merger, the financial advisor to the Special Committee,
Plymouth Partners LLC, which, together with its affiliates, is
referred to in this proxy statement as
Plymouth Partners
,
delivered to the Special Committee an oral opinion on
July 7, 2009, subsequently confirmed in writing, to the
effect that, as of the date of the opinion and based on and
subject to the various assumptions and limitations described in
the opinion, the $8.50 per Share merger consideration to be
received by holders of Shares (other than Parent, any Interested
Party, and their respective affiliates) was fair from a
financial point of view to such holders. The full text of
Plymouth Partners written opinion, dated July 7,
2009, which describes, among other things, the assumptions made,
procedures followed, factors considered and limitations on the
review undertaken, is attached as Appendix B to this proxy
statement and is incorporated by reference herein in its
entirety.
Plymouth Partners provided its opinion to the
Special Committee for the benefit and use of the Special
Committee in evaluating the fairness of the $8.50 per Share
merger consideration from a financial point of view. Plymouth
Partners opinion does not address any other aspect of the
Merger and does not constitute a recommendation to any
stockholder as to how to vote or act in connection with the
proposed Merger.
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See
SPECIAL FACTORS Opinion of Financial
Advisor to the Special Committee.
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What do the Companys Board of Directors and its Special
Committee recommend?
|
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The Special Committee determined that a sale of the Company is
the best strategic alternative available to the Company and is
in the best interests of the Company and its stockholders, and
that the Merger Agreement and the transactions contemplated
thereby represent the best value reasonably achievable for the
stockholders of the Company, other than Parent, any Interested
Party, and any of their respective affiliates, and that the
Merger is substantively and procedurally fair to the
Companys unaffiliated stockholders. The Special Committee
unanimously recommended that the Board of Directors approve the
Merger and recommend to the stockholders of the Company approval
of the Merger.
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The Board of Directors (with Messrs. Baker and Cass
abstaining from voting) unanimously determined that the Merger
and the transactions contemplated by the Merger Agreement are in
the best interests of the Company and its stockholders and that
the Merger is substantively and procedurally fair to the
Companys unaffiliated stockholders; approved the Merger
Agreement and the transactions contemplated by the Merger
Agreement; and unanimously recommends that the stockholders of
the Company vote
FOR
the approval of the Merger at the
special meeting.
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See
SPECIAL FACTORS Background of the
Merger and Special Committee Proceedings, SPECIAL
FACTORS Position of the Company as to the Fairness
of the Merger
and
SPECIAL FACTORS
Approval and Recommendation of the Board of Directors.
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Did Messrs. Baker or Cass participate in any deliberations
of the Board of Directors regarding the Merger?
|
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Messrs. Baker and Cass attended the meeting of the Board of
Directors during which the recommendation of the Special
Committee was presented, but abstained from deliberating or
voting on the Merger. Neither Mr. Baker nor Mr. Cass
participated in any deliberations of the Special Committee
during which the market check, strategic alternatives, the
Merger or the Merger Agreement were discussed, except to the
extent invited by the Special Committee to provide relevant
information.
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What do the Acquiring Parties think of the Merger?
|
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The Acquiring Parties believe that the Merger is substantively
and procedurally fair to the Companys stockholders (other
than Parent, any Interested Party or any of their affiliates),
including without limitation all of the Companys
unaffiliated stockholders. See
SPECIAL
FACTORS Position of the Acquiring Parties as to the
Fairness of the Merger.
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What is Mr. Bakers current relationship with the
Company?
|
|
Mr. Baker is the Chairman and Chief Executive Officer of
the Company. As of the latest information available to the
Company, Mr. Baker beneficially owns approximately 17.7% of
the outstanding Shares (including Shares issuable upon the
exercise of in the money and out of the
money options that are presently exercisable within
60 days or that will fully vest as a result of the Merger).
Parent has informed the Company that it expects Mr. Baker
to directly or indirectly contribute (or cause to be
contributed) those Shares (and options) to Parent in exchange
for equity securities of Parent or one of its affiliates prior
to the completion of the Merger. Through entities controlled by
Mr. Baker, it is expected that Mr. Baker will have
beneficial ownership of all of the shares of Parent, other than
shares and options, if any, issued to executive officers and the
warrants issued to the lenders at the closing of the Merger.
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Do the Companys directors and executive officers have
interests in the Merger that are different from, or in addition
to, mine?
|
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Yes. The following constitute the material interests:
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Mr. Baker beneficially owns approximately 17.7%
of the outstanding Shares (including Shares issuable upon the
exercise of in the money and out of the
money options that are presently exercisable within
60 days or that will fully vest as a result of the Merger),
and is expected to directly or indirectly contribute (or cause
to be contributed) those Shares (and in the money
options) to Parent in exchange for equity securities of Parent
or one of its affiliates prior to the completion of the Merger.
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Mr. Baker is expected to serve as Chairman and
Chief Executive Officer of both the surviving corporation and
Parent, which will be the surviving corporations parent
company.
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Management employees and directors hold options to
purchase Shares, many of which options have exercise prices
below $8.50 per Share. As a result of the Merger, each such
option (excluding options to be contributed to Parent by
Mr. Baker) will be accelerated and converted into the right
to receive a cash payment equal to the excess of $8.50 over the
exercise price per Share of the option, multiplied by the number
of Shares subject to such option. Non-employee directors also
hold shares of restricted stock each of which will be
accelerated, cancelled and converted into the right to receive
$8.50 in cash as a result of the Merger.
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Parent has informed the Company that it intends to
create an incentive compensation program for certain employees
of the Company, including executive officers, that will be
adopted and implemented following the Merger. The program may
provide cash or equity-based incentive compensation arrangements
tied to individual or company performance targets. No decision
concerning the program will be made by Parent prior to the
Merger.
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In the Merger Agreement, Parent and the surviving
corporation have agreed to certain indemnification provisions
for the benefit of the Companys present and former
directors and officers, have agreed to maintain for a period of
six years from the effective time of the Merger, officers
and directors liability insurance covering the directors
and officers of the Company as of July 8, 2009, on policies
with terms not less favorable than those in effect on
July 8, 2009 in terms of coverage and amounts, subject to
certain limitations stated in the Merger Agreement; and have
agreed to continue in effect the indemnification provisions
contained in the Companys charter and bylaws, as in effect
on the date of the Merger Agreement, for a period of six years
from the effective time of the Merger.
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Pursuant to employment agreements between the
Company, or a subsidiary thereof, and each of Mr. Baker
(through Focused Healthcare Partners, L.L.C., an entity
controlled by Mr. Baker), Mr. Cass, Mark L. Bibi,
Julian Griffiths and Richard Michaelson, each such executive
officer of the Company may be entitled to certain severance
payments if, within twelve months following a change of control
of the Company (which includes the consummation of the Merger),
he (i) is terminated by the Company (or such affiliate)
without cause (as defined in the agreement) or (ii) resigns
for good reason (as defined in the agreement). Such severance
payments may also be subject to a modified cutback to the extent
they trigger an excise tax under certain Federal tax laws.
See THE MERGER Interests of Certain Persons
in the Merger; Potential Conflicts of Interest
-
Change in
Control Severance Payments
.
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15
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The following officers of the Company will be
entitled to the following payments pursuant to the
Companys 2007 Long Term Incentive Plan (which is referred
to in this proxy statement as the
LTIP
) within
30 days following the completion of the Merger:
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Andrew Baker, Chairman and CEO*
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$
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1,147,000
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Brian Cass, President and Managing Director*
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$
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1,147,000
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Richard Michaelson, CFO
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$
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560,000
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Julian Griffiths, Director of Operations*
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$
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496,000
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Mark Bibi, Secretary and General Counsel
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$
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420,000
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(* Payments to Messrs. Baker, Cass and Griffiths are made
in U.K. pounds sterling. For purposes of estimating these
payments in U.S. dollars, an exchange rate of £1.00 = $1.55
has been used, which was the average exchange rate during the
second fiscal quarter of 2009. However, the actual payments to
be received by Messrs. Baker, Cass and Griffiths will be
made in U.K. pounds sterling based on the exchange rate in
effect at that time and, accordingly, the actual U.S. dollar
amount paid to such persons may differ from the U.S. dollar
amount set forth above.)
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Parent has informed the Company that it intends to
enter into an arrangement fee letter pursuant to which the
Company will pay an arrangement fee equal to $4.5 million
to LAB Holdings, an entity controlled by Mr. Baker, or its
designee(s), in connection with structuring and arranging the
debt and equity financing for the Merger.
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Parent has informed the Company that it intends to
enter into, or cause the Company to enter into, a services
agreement with LAB Holdings, an entity controlled by
Mr. Baker, or its designees, pursuant to which, following
the Merger, the Company will be provided strategic oversight and
advice (including with respect to potential M&A activity,
joint ventures and financing options), financial advice and such
other services as shall be agreed upon between the parties, in
consideration of an aggregate annual monitoring fee of
$1.25 million.
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Mr. Baker controls Alconbury Estates Inc. and
certain other affiliated entities that are the landlords under
the lease agreements pursuant to which the Company leases its
operating facilities located in Huntingdon and Eye in England,
and East Millstone in New Jersey. As a result, Mr. Baker
stands to benefit from the surviving corporations
continued use of those operating facilities under the terms of
such leases.
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See
THE MERGER Interests of Certain Persons
in the Merger; Potential Conflicts of Interest
.
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Voting and Proxy Procedures
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Who may vote at the special meeting?
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You are entitled to vote at the special meeting in person or by
proxy if you owned Shares at the close of business on
October 1, 2009, which is the record date for the special
meeting. As of the record date, there were
13,899,095 Shares issued and outstanding
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and entitled to be voted at the special meeting. You will have
one vote for each Share you hold on the record date. See
THE MERGER Voting Rights; Quorum; Vote
Required for Approval.
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How do I vote my Shares held in the Huntingdon Life Sciences,
Inc. Savings and Investment Plan?
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Participants in the Huntingdon Life Sciences, Inc. Savings and
Investment Plan are entitled to instruct the trustee of the plan
how to vote the Shares allocated to each such participants
account. The trustee will vote Shares allocated to a
participants account for which it receives no instructions
and any unallocated Shares in the same proportion that the
trustee votes Shares for which it receives instructions. See
THE MERGER Voting Rights; Quorum; Vote
Required for Approval.
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Are you Householding for stockholders sharing the
same address?
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Yes. The Securities and Exchange Commissions rules
regarding the delivery to stockholders of proxy statements,
annual reports, prospectuses and information statements permit
the Company to deliver a single copy of these documents to an
address shared by two or more of its stockholders. This method
of delivery is referred to as Householding, and can
significantly reduce the Companys printing and mailing
costs. It also reduces the volume of mail you receive. The
Company will deliver only one copy of this notice and proxy
statement to multiple registered stockholders sharing an address
who request a hard copy of those materials, unless it receives
instructions to the contrary from one or more of the
stockholders. The Company will still be required, however, to
send you and each other stockholder at your address upon request
an individual proxy voting card. If you nevertheless would like
to receive more than one copy of this notice and proxy
statement, the Company will promptly send you additional copies
upon written or oral request directed to the Company.
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What vote is required to approve the Merger?
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The Merger must be approved by (1) the affirmative vote of
the holders of a majority of the outstanding Shares entitled to
vote on the Merger and (2) a majority of the votes cast by
holders of outstanding Shares entitled to vote on the Merger,
excluding the votes cast by Parent, Merger Sub or any Interested
Party. Mr. Baker and his affiliates beneficially owned as
of the record date approximately 17.7% of the Shares, which
Shares would be counted for purposes of determining the State
Law Vote but would not be counted for purposes of determining
the Neutralized Vote. Accordingly, assuming that Mr. Baker
and his affiliates voted all of their Shares in favor of the
Merger, the affirmative vote of greater than 39.2% of the
remaining 82.3% of the Shares (or 32.3% of all outstanding
Shares) would be required to approve the Merger for purposes of
the State Law Vote, and, assuming all of the Companys
stockholders voted all of their Shares with respect to the
Merger, the affirmative vote of a majority of the remaining
82.3% of the Shares would be required to approve the Merger for
purposes of the Neutralized Vote.
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Because a broker, bank or other nominee cannot vote without
instructions, your failure to give instructions will result in
your Shares not being voted for the Merger and therefore will
have the same effect as a vote against the Merger for purposes
of the State Law Vote. Holders of stock options and warrants
outstanding on the record date may not vote the Shares issuable
upon the exercise of such options or warrants. See
THE
MERGER Voting Rights; Quorum; Vote Required for
Approval.
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Who is soliciting my proxy?
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The Board of Directors is soliciting proxies to be voted at the
special meeting.
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See
THE MERGER Proxy Solicitation.
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What do I need to do now?
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You should read this proxy statement carefully, including its
appendices, and consider how the Merger affects you. Then, mail
your completed, dated and signed proxy card in the enclosed
return envelope as soon as possible, or authorize a proxy to
vote your Shares by Internet or telephone, so that your Shares
can be voted at the special meeting. See
THE
MERGER Voting Rights; Quorum; Vote Required for
Approval.
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May I change my vote after I have mailed my signed proxy card or
authorized a proxy to vote my Shares by Internet or telephone?
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Yes. You may change your vote at any time before the polls are
closed at the special meeting. You can do this in one of three
ways:
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first, you can send a written notice to the
Companys corporate secretary, stating that you would like
to revoke your proxy;
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second, you can complete and submit a new
subsequently dated proxy card or authorize your vote again by
Internet or telephone; and
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third, you can attend the meeting and vote in
person. Your attendance at the special meeting will not revoke
your proxy unless you vote at the meeting.
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If you have instructed a broker to vote your Shares, you must
follow directions received from your broker to change those
instructions. See
THE MERGER Voting and
Revocation of Proxies.
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Should I send in my stock certificates now?
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No. After the Merger is completed, you will receive written
instructions for exchanging your Shares for the merger
consideration. See
THE MERGER Payment of
Merger Consideration.
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Getting More Information
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Are there other documents relating to the Merger of which I
should be aware?
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The Securities and Exchange Commission requires all affiliated
parties involved in transactions such as the Merger to file with
it a transaction statement on
Schedule 13E-3.
The Company, Parent, Merger Sub, Andrew Baker, Focused
Healthcare Partners, L.L.C. and LAB Holdings have filed a
transaction statement on
Schedule 13E-3
with the Securities and Exchange Commission, copies of
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which are available without charge at its website, www.sec.gov.
See
OTHER MATTERS Available
Information.
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How can I learn more about the Merger?
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The Merger Agreement, including the conditions to the closing of
the Merger, is described under the caption
THE MERGER
AGREEMENT
and is attached as Appendix A to this
proxy statement and Amendment No. 1 to the Merger Agreement
is attached as Appendix A-1 to this proxy statement. You
should carefully read the entire Merger Agreement (and Amendment
No. 1 thereto) because it is the legal document that
governs the Merger. See
THE MERGER AGREEMENT
and Appendices A and A-1 to this proxy statement.
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Who can help answer my questions?
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If you would like additional copies of this proxy statement
(which copies will be provided to you without charge) or if you
have questions about the Merger, including the procedures for
voting your Shares, you should contact the Companys
Secretary at (732) 649-9961.
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19
TABLE OF
CONTENTS
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1
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APPENDIX A: Agreement and Plan of
Merger, dated as of July 8, 2009, among Lion Holdings,
Inc., Lion Merger Corp. and Life Sciences Research, Inc.
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APPENDIX A-1: Amendment No. 1 to Agreement and Plan of
Merger, dated as of October 20, 2009, among Lion Holdings, Inc.,
Lion Merger Corp. and Life Sciences Research, Inc.
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APPENDIX B: Opinion of Plymouth
Partners LLC, dated July 7, 2009.
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21
This proxy statement incorporates important business and
financial information about the Company from documents filed
with the Securities and Exchange Commission that are not
included in, or delivered with, this document. This information
is available without charge at the Securities and Exchange
Commissions website,
http://www.sec.gov
,
as well as from other sources. See
OTHER
MATTERS Available Information
below.
Parent has supplied all information in this proxy statement
relating to Parent, Merger Sub, Focused Healthcare Partners,
L.L.C. and LAB Holdings, and the Company has not independently
verified any of the information relating to Parent, Merger Sub,
Focused Healthcare Partners, L.L.C. or LAB Holdings. The Company
has supplied all information in this proxy statement relating to
the Company, and Parent, Merger Sub, Focused Healthcare
Partners, L.L.C. and LAB Holdings have not independently
verified any of the information relating to the Company. No
person has been authorized to give any information or to make
any representation other than those contained in this proxy
statement.
SPECIAL
NOTE ON FORWARD LOOKING STATEMENTS
This proxy statement, and the documents referred to in this
proxy statement, contain forward-looking statements based on
estimates and assumptions. Forward-looking statements include
information regarding the expected completion, timing and
effects of the Merger and other information relating to the
Merger. There are forward-looking statements throughout this
proxy statement, including, without limitation, under the
headings Summary Term Sheet, and in statements
containing the words believes, plans,
expects, anticipates,
intends, estimates, may,
seeks or other similar expressions. Stockholders
should be aware that forward-looking statements are based on the
Companys current estimates and assumptions and involve
known and unknown risks and uncertainties. Although the Company
believes that the expectations reflected in these
forward-looking statements are reasonable, the Company cannot
assure you that the actual results or developments it
anticipates will be realized, or even if realized, that such
results will have the expected effects on the Merger and the
transactions contemplated by the Merger Agreement. These
forward-looking statements speak only as of the date on which
the statements were made and, except as required by law, the
Company does not undertake an obligation to publicly update or
revise any forward-looking statements made in this proxy
statement or elsewhere as a result of new information, future
events or otherwise. In addition to other factors and matters
contained or incorporated by reference in this proxy statement,
the Company believes the following factors could cause actual
results to differ materially from those discussed in the
forward-looking statements:
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the occurrence of any event, change or other circumstances that
could give rise to the termination of the Merger Agreement and
the payment of a termination fee by the Company;
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the inability to complete the Merger due to the failure to
obtain stockholder approval, the inability to satisfy the
confidentiality provisions of the Merger Agreement or the
failure to satisfy other conditions to the Merger;
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the failure of Parent to obtain the necessary debt and equity
financing set forth in commitment letters received by Parent in
connection with the Merger, which would result in a termination
fee payable by Parent to the Company (unless the Company is in
material breach of the Merger Agreement);
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the failure of the Merger to close for any other reason;
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the risk that the proposed Merger may disrupt the Companys
current plans and operations, and the potential difficulties in
employee retention as a result of the Merger;
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the effect of the announcement of the Merger on the
Companys customer relationships, operating results and
business generally;
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the amount of the costs, fees, expenses and charges related to
the Merger;
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the impact of the indebtedness incurred to finance the
consummation of the Merger;
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22
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the obligation of the Company to pay a $5.0 million fee to
the lenders under the Existing Financing Agreement if the
Company does not consummate the Merger, or a transaction in
respect of a Superior Proposal satisfactory to the lenders, by
the Outside Date;
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the risk of unforeseen material adverse changes to the
Companys business or operations;
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and other risks detailed in the Companys filings with the
Securities and Exchange Commission, including the Companys
most recent filings of Quarterly Reports on
Form 10-Q
and Annual Reports on
Form 10-K.
See
OTHER MATTERS Available
Information
. Many of the factors that will determine
whether or when the Merger will be consummated are beyond the
Companys ability to control or predict. In light of the
significant uncertainties inherent in the forward-looking
statements contained herein, readers should not place undue
reliance on forward-looking statements, which reflect the views
of the Companys management only as of the date hereof. The
Company cannot guarantee any future results, levels of activity,
performance or achievements. The statements made in this proxy
statement represent the Companys views as of the date of
this proxy statement, and it should not be assumed that the
statements made herein remain accurate as of any future date.
Moreover, the Company does not assume an obligation to update
forward-looking statements or update the reasons that actual
results could differ materially from those anticipated in
forward-looking statements, except as required by law.
The safe harbor from liability for forward-looking statements
contained in Section 21E of the Exchange Act and
Section 27A of the Securities Act of 1933, as amended, do
not apply to forward-looking statements made in connection with
a going-private transaction, including statements made in a
proxy statement or documents incorporated by reference therein.
SPECIAL
FACTORS
Background
of the Merger and Special Committee Proceedings
Formation of the Special Committee of the Board of Directors and
Actions Preceding the Initial Baker Offer. At a regularly
scheduled Board of Directors meeting held on August 29,
2008, the Board of Directors considered the creation of a
special committee of the Board of Directors to explore strategic
alternatives for the Company, based on market and industry
conditions highlighted by Mr. Baker, the Chairman of the
Board of Directors and Chief Executive Officer of the Company,
including (a) the rise in the Companys stock price
over the prior year and since 2002 when the Companys stock
initially began trading in the U.S. at a price of $1.50 per
Share, (b) the consensus of participants in the CRO
industry that consolidation would accelerate and that the
largest CROs would have a competitive advantage in serving large
pharmaceutical companies, and (c) the rapid growth of the
Companys two main competitors, Covance Inc. and Charles
River Laboratories, Inc. In light of these factors, the Board of
Directors determined that it was the right time to consider
whether to adopt a similar growth strategy or to attempt a sale
of the Company. After a discussion, the Board of Directors
unanimously appointed a special committee comprised solely of
the Companys non-employee, independent directors, Gabor
Balthazar (chairman), Afonso Junqueiras and Yaya Sesay to, among
other things, explore strategic alternatives available to the
Company and make recommendations to the Board of Directors
regarding strategic alternatives.
As further described below, the Special Committee engaged in an
exhaustive process over many months, including 18 meetings for a
total of more than 40 hours, to determine whether it was
advisable to engage in a strategic transaction and, if so, to
consider the various strategic transactions available to the
Company.
At an in-person meeting of the Special Committee held on
September 8, 2008, the Special Committee interviewed and
retained as independent legal advisors a large national law firm
that had previously provided advice to the Company and the
Companys independent directors from time to time as
special counsel on matters of corporate law. The Special
Committee also discussed its retaining a well-qualified
independent financial advisor that would be willing to continue
in its role in the event that animal rights groups were to
pressure the advisor to sever ties with the Special Committee.
Mr. Balthazar reported on his favorable impressions of one
prominent international investment bank based on discussions
with one of its investment
23
bankers during the prior week. On September 9, 2008, at an
in-person meeting of the Special Committee, two representatives
of this international investment bank made a detailed
presentation to the Special Committee, and the Special Committee
questioned these representatives at length on: any potential
conflicts the investment bank might have with the Company; the
investment banks experience and knowledge of the Company
and the CRO industry in general; the assistance the investment
bank would be prepared to provide to the Special Committee
during its engagement; fees and terms of the engagement; and
various other matters. Following this presentation and further
discussion, the Special Committee selected this prominent
international investment bank as its financial advisor.
Thereafter and through December 2008, as part of its evaluation
of strategic alternatives available to the Company, the Special
Committees financial advisor contacted at least eight CROs
and one private equity firm, which owned a CRO, regarding each
partys interest in a transaction with the Company. Based
on the absence of interest in a transaction with the Company and
market conditions at the time (including the likelihood that
adequate financing would not be available to a potential
acquiror of the Company), as reported to the Special Committee
by its financial advisor, the Special Committee determined that
the strategic review process should be placed on hold.
Mr. Bakers Offer and Engagement of a New Financial
Advisor.
On February 17, 2009, the Board of
Directors received a letter from Mr. Baker regarding his
interest in exploring the feasibility of financing an
acquisition of the Company and requesting the permission of the
Board of Directors to share confidential information concerning
the Company with potential financing sources, subject to the
execution by such financing sources of confidentiality
agreements reasonably satisfactory to the Company. On
February 19, 2009, a telephonic meeting of the Special
Committee was convened to discuss Mr. Bakers letter.
By invitation of the Special Committee, Brian Cass, the
Companys President and Managing Director, Richard
Michaelson, the Companys Chief Financial Officer, Julian
Griffiths, the Companys Vice President of Operations, Mark
Bibi, the Companys General Counsel and Secretary, the
Special Committees legal advisors and the Companys
outside counsel were present at the meeting. The members of the
Special Committee reconfirmed their independence and willingness
to serve on the Special Committee. The Special Committee
determined that responding to the letter was in the best
interests of the Company and its stockholders and directed its
legal advisors and the Companys outside counsel to respond
to Mr. Bakers counsel that the Special Committee was
willing to allow Mr. Baker to share confidential
information with his potential financing sources, subject to the
Special Committees further approval of (a) a
confidentiality agreement between the Company and each potential
financing source and (b) a standstill agreement with
Mr. Baker. The Special Committee requested that its legal
advisors contact the Special Committees financial advisor
to inform it of Mr. Bakers February 17 letter.
On February 21, 2009, the Special Committees
financial advisor communicated to the Special Committees
legal advisors that it would be terminating its engagement with
the Special Committee due to, among other things, the
substantial change in the circumstances surrounding its
engagement, including the decline of the Companys stock
price, the possibility that the Company may consummate a
going-private transaction and the increased publicity and
scrutiny that are typically associated with a going-private
transaction. The Special Committee therefore directed its legal
advisors to compile a list of recommended investment banking
firms in order to assist the Special Committee in selecting
another financial advisor. On February 27, 2009, the
Special Committee held a telephonic meeting with its legal
advisors to review a list of potential financial advisors. At
that meeting, the Special Committee directed its legal advisors
to contact up to seven prospective financial advisors on behalf
of the Special Committee, with a view towards scheduling
meetings between the financial advisor candidates and the
Special Committee during the following week. Over the next
several days, the Special Committees legal advisors
contacted these investment banking firms to determine each
firms willingness to be engaged as a financial advisor to
the Special Committee and scheduled three firms to present to
the Special Committee at its next meeting. One of these three
investment banking firms subsequently withdrew from
consideration by the Special Committee due to concerns regarding
animal rights activists.
On March 3, 2009, Mr. Baker called the Companys
General Counsel to inform him that Mr. Baker would be
delivering a written offer for the Company after the close of
business that day. Shortly thereafter, Mr. Baker
24
delivered a letter to the Board of Directors in which he
proposed to acquire, through an entity controlled by him, all of
the outstanding Shares for a price of $7.50 per Share (which
offer is referred to in this proxy statement as the
Initial
Baker Offer
). The closing price for the Shares on
March 3, 2009, the last trading day prior to the date of
the Initial Baker Offer, was $4.79. The average closing price
for the Shares from February 18, 2009 through March 3,
2009, the 10 trading days prior to the date of the Initial Baker
Offer, was $5.89. The average closing price for the Shares from
March 4, 2009 through March 17, 2009, the 10 trading
days after the date of the Initial Baker Offer, was $6.73.
Mr. Baker also publicly disclosed his offer by attaching a
copy of his letter to the Board of Directors as an exhibit to a
Schedule 13D/A filed with the Securities and Exchange
Commission on March 4, 2009. The Initial Baker Offer was
conditioned on the satisfactory completion of due diligence,
negotiation of definitive transaction documents, receipt of
requisite financing commitments and receipt of necessary board
approval. On March 4, 2009, the Company issued a press
release announcing the Initial Baker Offer and that the Special
Committee was considering the Initial Baker Offer and other
strategic alternatives.
On March 5, 2009, the Special Committee met in person and
by video conference with the Special Committees legal
advisors and two investment banking firms. Each of the two
investment banking firms made a detailed presentation to the
Special Committee and was questioned at length by the Special
Committee regarding: its prior dealings with the Company; any
potential conflicts the firm might have with the Company or its
management; its experience in similar special committee
engagements; its knowledge of the Company and the CRO industry;
the assistance it would be prepared to provide to the Special
Committee during its engagement; fees and fee structures; and
various other matters. At this meeting, the Special Committee
also reviewed the details of the Initial Baker Offer, the
execution of a confidentiality agreement with a potential source
of equity financing for the Initial Baker Offer, the
Companys takeover defenses and the duties of directors
under applicable law. During the weeks of March 8, 2009 and
March 15, 2009, Mr. Balthazar and the other members of
the Special Committee conducted further interviews of three
additional investment banking firms.
At a telephonic meeting of the Special Committee on
March 24, 2009, after discussion, the Special Committee
indicated its desire to engage Plymouth Partners as its
financial advisor. Plymouth Partners is a boutique investment
banking firm that specializes in mergers and acquisition advice,
as well as providing other financial services and investment
advice. The founding member of Plymouth Partners who advised the
Special Committee has had a decades-long career in investment
banking, specializing in mergers and acquisitions advice, at
prominent international investment banks prior to founding
Plymouth Partners. The Special Committees legal advisors
then reviewed with the Special Committee the terms of Plymouth
Partners proposed engagement letter. The Special Committee
also discussed obtaining a standstill agreement from
Mr. Baker and confidentiality agreements with standstill
provisions from any other potential bidder for the Company, as
well as from potential financing sources for the Initial Baker
Offer.
At a telephonic meeting of the Special Committee on
March 30, 2009, the Special Committees legal advisors
reviewed the revised terms of Plymouth Partners engagement
letter with the Special Committee. The Special Committee
considered the material terms of Plymouth Partners
engagement letter, including the fee provisions that provided
for a significant portion of Plymouth Partners fee to be
contingent upon the closing of the Merger, determined that such
terms were customary and appropriate for this type of
engagement, and authorized the engagement of Plymouth Partners
as its financial advisor. Also present at this meeting, at the
request of the Special Committee, were the Companys
outside legal counsel as well as Mark Bibi, the Companys
General Counsel and Secretary, and Richard Michaelson, the
Companys Chief Financial Officer. The Companys
outside counsel reported on the negotiations of confidentiality
agreements with potential sources of financing for the Initial
Baker Offer, including the Companys existing lenders. The
Special Committee confirmed its desire to obtain a broad
standstill agreement from Mr. Baker and authorized
Mr. Balthazar, as the Special Committees chairman, to
approve any final decisions with respect to the confidentiality
and standstill agreements to be entered into with
Mr. Baker, his potential financing sources and any other
potential bidders. The Special Committees legal advisors
also provided advice as to the appropriate role and
responsibilities of the Companys management team during
the strategic review process.
25
In considering and negotiating the proposed transaction,
Mr. Baker and the entities controlled by him that were
formed to effect the proposed transaction were assisted by, and
consulted with, legal counsel, consultants, and financing
sources, some of whom acted as representatives for these
entities in discussions with the Special Committee, the Company
and their advisors. Shortly after the March 30, 2009
meeting, Plymouth Partners reviewed with the Special
Committees legal advisors certain relationships that
Plymouth Partners had in common with a potential financing
source that had previously provided assistance to the Company on
financing matters. The Special Committees legal advisors
were also advised that Mr. Balthazar had contacted the
Companys Chief Financial Officer for recommendations of
qualified boutique investment banks and that several of those
recommendations had resulted from discussions between the Chief
Financial Officer and such potential financing source. On
April 7, 2009, the Special Committee met to reassess the
independence of Plymouth Partners and its retention of Plymouth
Partners in light of this information. The Special Committee
reviewed the process by which it had obtained recommendations of
financial advisors, including the list of approximately 28
investment banking firms compiled by the Special
Committees legal advisors based on recommendations from
internal and external sources. After lengthy inquiry and
discussion and the receipt of appropriate assurances from
Plymouth Partners concerning its ability to provide independent
advice to the Special Committee, the Special Committee concluded
that these historical relationships were not material and
unanimously re-approved the engagement of Plymouth Partners as
its financial advisor and the execution of a new engagement
letter dated April 7, 2009.
The Strategic Review Process.
Promptly
following Plymouth Partners engagement, at the Special
Committees request, the Company began the process of
delivering to Plymouth Partners due diligence items for
inclusion in an electronic data room to be accessible to
potential financing sources for the Initial Baker Offer and any
parties that executed confidentiality agreements in connection
with each such partys consideration of whether to enter
into a transaction with the Company. The Special Committee
decided that, in light of the fact that it had not at this point
made a determination that a sale of the Company was in the best
interests of the Company and its stockholders, and to ensure
that the value of the Company would not be impaired should the
Special Committee decide not to sell the Company, the most
competitively sensitive information would be not be shared with
interested parties until later rounds in the process. Based on
the data room materials and additional information requested and
received from management of the Company and other sources,
Plymouth Partners began its preliminary financial analysis of
the Company and the Initial Baker Offer. In addition, Plymouth
Partners met with the Companys management in Huntingdon,
U.K., to discuss the Companys operations and business,
trends in the industry, the future prospects and direction of
the Company, including managements forecasts of the
Companys performance through 2012, and experience with
animal rights activists. In addition, Plymouth Partners toured
the Companys Princeton, New Jersey, facilities. Plymouth
Partners also met with Mr. Baker to discuss financing and
other matters related to the Initial Baker Offer.
At the Special Committees request, Plymouth Partners
initiated a market check process, in which the
managing director of Plymouth Partners began personally
contacting over 50 parties, including CROs, healthcare firms and
private equity and venture capital firms in the United States,
Europe and Asia, in order to determine whether third-party
bidders were interested in pursuing a transaction with the
Company. The form of transaction was not specified. The parties
contacted included all the parties contacted earlier by the
Special Committees previous financial advisor as well as
many other parties. Plymouth Partners also responded to
inquiries by several parties that had contacted the Company,
after the announcement of the Initial Baker Offer, to express an
interest in pursuing alternatives to the Initial Baker Offer.
At a telephonic meeting of the Special Committee held on
May 7, 2009, the Special Committees legal advisors
reviewed the details of a letter agreement and management
memorandum prepared by the legal advisors regarding certain
rules of the road with respect to the duties and
responsibilities of Mr. Baker and members of management
during the Special Committees review of the Initial Baker
Offer and the strategic alternatives available to the Company,
each of which had been delivered to a representative of
Mr. Baker and to other executive officers of the Company.
The purposes of the rules of the road letter agreement and
management memorandum were to facilitate the Special
Committees and managements effective discharge of
their duties to the Company during the strategic review process
as well as to maintain a fair process and a
26
level playing field for other potential bidders. At the same
meeting, Plymouth Partners reviewed the CRO industry, including
trends, growth rates, capacity issues and research and
development spending. Plymouth Partners also provided an update
on the strategic review process, including the status of
negotiating confidentiality and standstill agreements with
several interested entities and Mr. Bakers financing
sources and the population of an electronic data room with
information concerning the Company, including a confidential
information memorandum describing the Company and its operations
and financial forecasts through 2012. Plymouth Partners
described its work with the Companys senior management to
include in the data room and in such memorandum meaningful
information about the Company without unduly disclosing
competitively sensitive information at such an early stage of
the process, when the interest level of third parties was
uncertain. Plymouth Partners also reviewed historical trading
data and its preliminary financial analysis of the Company as
well as its contacts with over 50 potential bidders, including
CROs, healthcare firms and private equity and venture capital
firms in the United States, Europe and Asia and whether any
third party was interested in pursuing a transaction with the
Company. Plymouth Partners then discussed with the Special
Committee strategic alternatives available to the Company,
including (i) maintaining its status quo as an independent
public company, (ii) paying a special dividend,
repurchasing Shares or recapitalizing the Company,
(iii) engaging in smaller acquisitions,
(iv) participating in a strategic merger and
(v) selling the Company. Plymouth Partners indicated that
its preliminary financial analysis was still in process. The
Special Committee requested that its legal advisors and Plymouth
Partners continue their work.
Following discussion with the Special Committee and at the
Special Committees request, Plymouth Partners then
notified all bidding parties that had executed confidentiality
agreements with the Company, or were in the process of
negotiating the same, that preliminary non-binding indications
of interest in consummating a transaction with the Company were
to be submitted to Plymouth Partners by 6:00 pm,
Eastern Time, on May 20, 2009.
On May 15, 2009, Plymouth Partners updated
Mr. Balthazar and the Special Committees legal
advisors, via telephone, on the status of the market check
process.
On May 22, 2009, the Board of Directors of the Company
convened a telephonic meeting to consider approving an exemption
from the Maryland Business Combination Act (which is referred to
in this proxy statement as the
MBCA
) to permit the
Special Committee to continue to explore various strategic
alternatives and potential transactions without a potential
bidder inadvertently triggering the application of the MBCA. The
Board of Directors unanimously approved an exemption from the
definition of interested stockholder (as defined in
the MBCA) for any person that would be deemed an interested
stockholder by virtue of any agreement, arrangement or
understanding entered into for the purpose of proposing a
business combination with the Company, subject to the
requirement that any proposed business combination be consistent
with the Special Committees guidelines and subject to the
right of the Special Committee to reject any proposed business
combination, in which case such person would then be subject to
the MBCA.
At a telephonic meeting of the Special Committee on May 22,
2009, Plymouth Partners updated the Special Committee on the
status of the strategic review process and discussed with the
Special Committee various strategic alternatives available to
the Company. Plymouth Partners reported on each contacted
partys potential interest in a strategic transaction with
the Company and the responses of such parties. At that time,
seven potential bidders had been provided access to the data
room and several other parties were still in the process of
negotiating confidentiality agreements with the Company.
Plymouth Partners also reported on parties that affirmatively
responded that they were not interested in pursuing a
transaction with the Company and parties that had withdrawn from
the process. Plymouth Partners reviewed the range of reasons
that parties gave for not being interested in pursuing a
transaction with the Company, including (a) a desire to
avoid the risks associated with animal rights activists,
(b) concerns about their ability to further leverage the
Company, (c) concerns over the effect of foreign currency
fluctuations on Company earnings, (d) lack of interest in
expanding into the preclinical space, (e) the size of the
Company (
i.e.
, too large or too small for the contacted
party), (f) interest in expanding the partys
U.S. rather than U.K. presence and (g) price
considerations, including not believing their bid would be
competitive. Plymouth Partners noted that it had extensively
canvassed the market of potential bidders on behalf of the
Special Committee. As of May 22, 2009, the Special
Committee had received two preliminary indications of interest
in addition to the Initial Baker Offer,
27
one from an industry bidder and one from a private equity firm
that had prior investments in CROs. These preliminary
indications of interest proposed acquisitions of the Company at
prices ranging between $7.50 per Share and $8.00 per Share. Each
of these preliminary indications of interest was subject to the
respective bidders due diligence review of the Company,
among other things. Plymouth Partners reviewed these preliminary
indications of interest with the Special Committee. Plymouth
Partners indicated that it was continuing its financial analysis
of the Company and reviewed its preliminary financial analysis
of the Company at prices of $7.50 and $8.00 per Share. The
Special Committee unanimously approved the continuation of the
strategic review process and directed Plymouth Partners to
provide the industry bidder, the financial bidder and the
potential financing sources for the Initial Baker Offer with
access to the second level of information in the data room. The
Special Committee also directed its legal advisors to instruct
the Companys outside legal counsel, on behalf of the
Special Committee, to begin drafting, in consultation with the
Special Committees legal advisors, a proposed merger
agreement, which agreement would be distributed to potential
bidders for comment so that the Special Committee would have
additional information, including detailed terms and conditions
of any proposed transaction, available to it in evaluating
proposals to acquire the Company.
On May 22, 2009, Plymouth Partners distributed the Special
Committees initial second round bid procedures letter to
each of the bidders participating in the second round of the
process. The Special Committees second round bid
procedures letter indicated that firm proposals along with
mark-ups
of
the draft merger agreement should be received by Plymouth
Partners no later than 12:00 pm, Eastern Time, on June 9,
2009. Following its May 22, 2009 meeting, the Special
Committee and its advisors began coordinating presentations by
Company management to the bidders, which commenced on
June 1, 2009 and continued through June 4, 2009.
On May 31, 2009, Plymouth Partners once again updated the
Special Committee on the status of the strategic review process.
Plymouth Partners informed the Special Committee that, on
May 28, 2009, an additional private equity firm had
submitted a fourth preliminary indication of interest to acquire
the Company for $7.50 to $8.50 per Share, subject to due
diligence by the bidder, among other things. This private equity
firm subsequently informed Plymouth Partners that it planned to
form a group, consisting of itself, another private equity firm
and a competitor of the Company, to pursue a transaction with
the Company. Plymouth Partners also reported to the Special
Committee that another private equity firm had executed a
confidentiality agreement with the Company and indicated that it
would confirm by June 1, 2009 whether it would be
submitting an indication of interest to the Special Committee.
Plymouth Partners also reviewed for the Special Committee the
ownership interest in the Companys stock, including
options and warrants to purchase Shares, held by Mr. Baker
and officers and employees of the Company. The Special Committee
discussed ways to further level the playing field among
Mr. Bakers bidding entity and third-party bidders in
a transaction with the Company in light of Mr. Bakers
significant ownership interest in the Companys stock,
including (a) neutralized voting, in which any merger would
require approval by a majority of the votes cast by stockholders
that are not affiliated with the acquiror, (b) an agreement
with Mr. Baker not to exercise his stock options and
(c) other members of the Companys management agreeing
to vote on any strategic transaction along the lines of the
Special Committees recommendation. The Special Committee
then authorized its legal and financial advisors to seek one or
more means of balancing the voting power in the current process
and to ensure that Mr. Baker and his affiliate would not be
able to block a transaction with a third-party bidder. The
Special Committee further authorized its legal and financial
advisors to condition the Special Committees continued
review of the Initial Baker Offer, as part of its review of
strategic alternatives, on acceptance of one or more of the
above noted provisions by Mr. Baker and other interested
parties.
At a telephonic meeting of the Special Committee on June 5,
2009, Plymouth Partners reported on the Companys
management presentations for bidders, which included one
presentation per day to representatives of each of the four
parties that had submitted indications of interest, including a
presentation to potential financing sources for the Initial
Baker Offer. Plymouth Partners reported that the other private
equity firm that had initially intended to submit an indication
of interest was not scheduled for a management presentation
because the firm had determined not to pursue the opportunity.
Plymouth Partners further reported that, due to concerns
regarding animal rights activists and difficulty in finding
financing sources willing to finance a
28
transaction with the Company, it appeared that the two private
equity firms that had submitted first round indications of
interest were not likely to submit formal second round bids for
the Company. The Special Committees legal advisors then
reviewed with the Special Committee the form of merger agreement
that had been posted to the data room for use by all bidders in
submitting a proposal to acquire the Company. The legal advisors
also noted that the form of merger agreement incorporated a
neutralized voting provision, whereby any merger would require
approval by a majority of the votes cast by stockholders that
are not affiliated with the acquiror, in addition to the
statutory vote required under applicable law, in order to help
level the playing field among all potential bidders. The Special
Committee also discussed the consents required from certain
entities controlled by Mr. Baker that are the landlords
under certain of the Companys existing leases in the event
of a change of control of the Company, and the legal standard
applicable to such entities right to withhold their
consent. The Special Committee considered whether to condition
its continued consideration of the Initial Baker Offer on the
receipt of an advance consent from such entities, in order to
prevent Mr. Baker from blocking a transaction between the
Company and a third-party bidder. The Special Committee reserved
judgment on this issue. The Special Committee then requested
that Plymouth Partners communicate to all potential bidders that
firm proposals should be submitted by 12:00 pm, Eastern Time, on
June 9, 2009, and that the Special Committee intended to
narrow the Companys available strategic alternatives at
its meetings on June 10 and June 11, 2009, although the
Special Committee did not intend to select a specific course of
action at that time.
After the Special Committee meeting on June 5, 2009,
Plymouth Partners distributed the Special Committees
updated second round bid procedures letter to each of the
bidders participating in the second round of the process. The
Special Committees updated second round bid procedures
letter reiterated that firm proposals along with
mark-ups
of
the merger agreement should be received no later than 12:00 pm,
Eastern Time, on June 9, 2009, and that the Special
Committee intended to meet on or about June 10, 2009 to
continue its review of strategic alternatives, with a view
toward narrowing the available alternatives, including entering
into negotiations with a limited number of parties to determine
with greater certainty the best terms they might offer.
On June 9, 2009, the date on which formal bids were due,
the Special Committee received two bids, one from Parent, which
is controlled by Mr. Baker, and one from an industry
bidder. Parent submitted a bid of $7.50 per Share and included a
mark-up
of
the proposed merger agreement and draft financing commitment
letters. Parents formal bid indicated that no further due
diligence would be required to proceed with execution of a
merger agreement. The industry bidder submitted a bid that was
characterized as in excess of $7.50 per Share
without a
mark-up
of
the merger agreement. The industry bidder indicated that it
intended to structure the acquisition of the Company as a
two-step transaction commencing with a tender offer for the
Companys stock. The bid from the industry bidder was
conditioned on the completion of further due diligence on the
Company, including a request that the Companys management
visit the industry bidders headquarters to further discuss
operational integration opportunities and potential management
team combinations. Immediately following the receipt of these
bids, Plymouth Partners and the Special Committees legal
advisors began reviewing the bids together with the related
merger agreement
mark-up
and
financing commitment letters received from Parent. The closing
price for the Shares on June 8, 2009, the last trading day
prior to the receipt of these bids, was $7.02. The average
closing price for the Shares from May 26, 2009 through
June 8, 2009, the 10 trading days prior to the receipt of
these bids, was $6.89. The average closing price for the Shares
from June 10, 2009 through June 23, 2009, the 10
trading days after the date of these bids, was $7.08.
At in-person meetings of the Special Committee held on June 10
and June 11, 2009, Plymouth Partners reviewed each bid that
had been received. Plymouth Partners confirmed that two private
equity firm bidders that had submitted preliminary indications
of interest had communicated to Plymouth Partners that they were
dropping out of the process due to difficulty financing a
transaction and concerns by their investors and management
regarding animal rights activists. Plymouth Partners reviewed
and discussed with the Special Committee, in detail, strategic
alternatives available to the Company, including
(i) maintaining its status quo as an independent public
company, (ii) paying a special dividend, repurchasing
Shares or recapitalizing the Company, (iii) engaging in
smaller acquisitions, (iv) participating in a strategic
merger and (v) selling the Company. Plymouth Partners
described certain potential advantages and disadvantages of each
alternative.
29
Plymouth Partners and the Special Committee discussed the
condition of the financial markets and the CRO industry,
historical trading in the stock of the Company and other
companies in the CRO industry, growth rates and profit margins
of the Company and its competitors and certain unique
characteristics and issues experienced by the Company. Plymouth
Partners also discussed its preliminary financial analysis of
the Company. Plymouth Partners and the Special Committee also
reviewed the Companys internal financial forecasts through
2012. Following this discussion, the Special Committee
preliminarily determined that paying a special dividend,
repurchasing Shares of the Companys stock or
recapitalizing the Company were not prudent alternatives in the
current environment because they would further reduce the
liquidity of the Companys stock, had the potential to
further concentrate ownership and would add risk to the Company
due to the Companys difficulty in securing financing as a
result of animal rights activists and poor current credit market
conditions. The Special Committee also preliminarily determined
that engaging in smaller acquisitions was not an attractive
alternative because the Special Committee believed that the
Company had better expertise than other smaller CROs, that
smaller acquisitions would not add considerable scale and would
likely require the management of additional facilities due to
the difficulty and expense of consolidating laboratories with
active studies. The Special Committee also noted that, after
Plymouth Partners had extensively canvassed the market for
interested parties, no one expressed an interest in a strategic
stock-for-stock merger with the Company, and only Parent and one
industry bidder were interested in acquiring the Company. The
Special Committee decided to continue to evaluate the
above-mentioned strategic alternatives, but noted that it would
likely ultimately need to decide between the following two
strategic alternatives: (a) maintaining its status quo as
an independent public company and (b) selling the Company.
After considerable discussion, the Special Committee directed
Plymouth Partners to communicate to Parent and the industry
bidder that the Special Committee was not inclined to recommend
an offer of $7.50 per Share to the Board of Directors. The
Special Committee further directed Plymouth Partners to ask the
industry bidder what additional due diligence information the
industry bidder required and to cooperate in providing such
information to the industry bidder, except that the Special
Committee would not require the Companys management team
to visit the industry bidders headquarters, unless the
industry bidder raised its bid and provided a firmer proposal.
At the same time, the Special Committee also directed its legal
advisors and Plymouth Partners to work with the Companys
outside legal counsel and Parents representatives to
negotiate the terms of a merger agreement and to firm up
Parents financing commitments. The Special Committee also
authorized the engagement of special U.K. counsel to provide
advice to the Special Committee with respect to the
Companys U.K. leases and the legal standards by which
entities controlled by Mr. Baker that were landlords under
the Companys U.K. leases, could withhold consent to a
change of control of the Company and, therefore, potentially
block a transaction between a third-party bidder and the Company.
At the direction of the Special Committee, Plymouth Partners
contacted the industry bidder and a representative of Parent to
seek an increase in the price of the bids proposed by both
bidders and, in the case of the industry bidder, to determine
what additional information the industry bidder required.
Parents representative informed Plymouth Partners that
Parent was prepared to consider increasing its bid up to
$8.50 per Share, subject to obtaining additional financing
and negotiating a satisfactory merger agreement. During the
course of multiple communications between Plymouth Partners and
the industry bidder or its representatives, the industry bidder
clarified that it would not increase its bid above $7.50 per
Share. On June 15, 2009, the industry bidder delivered a
letter to the Special Committee, which stated that, in the event
the Special Committee was no longer pursuing other alternatives,
the industry bidder would be interested in continuing its
discussions regarding the Company.
From the Special Committee meeting on June 11, 2009 and
over the next few weeks, the Special Committees advisors
and the Companys outside legal counsel had discussions
with representatives of Parent to clarify and negotiate aspects
of Parents bid, the draft merger agreement and
Parents draft financing commitment letters.
On June 19, 2009, the Special Committee met to discuss the
status of negotiations with Parent and the industry bidder.
Plymouth Partners informed the Special Committee that a
representative of Parent had orally conveyed to Plymouth
Partners that Parent was willing to increase its bid to $8.50
per Share from $7.50 per Share, subject to satisfactory
negotiation of the other terms and conditions of the merger
agreement, which
30
offer is referred to in this proxy statement as the
Revised
Baker Offer
. Plymouth Partners also reviewed the details of
its conversations with the industry bidder, including the letter
received on June 15, 2009. The Special Committee directed
Plymouth Partners to reiterate to the industry bidder that the
Special Committee believed the industry bidder should increase
its bid. The Special Committees advisors also reviewed the
status of the merger agreement negotiations with Parent and the
status of Parents financing commitments. In addition, the
Special Committees legal advisors, having consulted with
special U.K. counsel, reported on the consent required from the
landlords under the Companys U.S. and U.K. leases
(which landlords are controlled by Mr. Baker), and the
legal standard by which such landlords could withhold their
consent for the Company to engage in a change-of-control
transaction.
Over the next two weeks, the Special Committees advisors
and the Companys outside legal counsel continued to
negotiate the terms and conditions of the merger agreement with
Parents representatives and Mr. Bakers legal
counsel, including, among other provisions, the representations
and warranties, the non-solicitation covenant, the conditions to
closing and the termination and break up fee provisions.
On June 29, 2009, the Special Committee met in executive
session and with Plymouth Partners, in person, to discuss the
strategic review process, the Revised Baker Offer and the agenda
for the following days meeting. The Special Committee met
in person on June 30, 2009, at which time Plymouth Partners
and the Special Committee engaged in further discussion
regarding strategic alternatives for the Company, and Plymouth
Partners reviewed its preliminary financial analysis of the
Revised Baker Offer. Plymouth Partners reported that it had
informed the industry bidder that the Special Committee desired
to continue to work with the industry bidder if it increased its
bid, but that the industry bidder had not responded. The Special
Committee and its advisors discussed at length the alternatives
of maintaining its status quo as an independent public company
and pursuing a sale of the Company.
At the Special Committees invitation, the Companys
outside legal counsel participated in a portion of the
June 29, 2009 meeting to review the terms of, and open
issues related to, the draft merger agreement and the terms of
Parents financing commitment letters. The Companys
outside legal counsel, as previously reported to the Special
Committee, noted that the Company was at risk of breaching
certain of the financial covenants for the second and third
fiscal quarters of 2009 under the Existing Financing Agreement.
They advised the Special Committee that, since the lenders under
the Companys Existing Financing Agreement are, or are
affiliates of, the debt financing sources for the Revised Baker
Offer, it would be prudent for the Company to modify the terms
of its Existing Financing Agreement prior to the execution of
any merger agreement with Parent because the obligation to fund
under the debt financing commitments would be subject to the
requirement that there be no defaults under the Companys
Existing Financing Agreement.
The Companys outside legal counsel also highlighted
certain transaction-specific confidentiality provisions in the
draft merger agreement. The Companys outside legal counsel
noted that the draft merger agreement would terminate
automatically if there were a compelled disclosure of any
information in violation of a Parent Confidentiality Document
and such information were not accorded confidential treatment
pursuant to a protective order or other confidentiality
arrangement reasonably acceptable to the acquiror or the other
party to such applicable Parent Confidentiality Document. The
Companys outside legal counsel further noted that the
draft merger agreement also provided that the acquiror could
terminate the merger agreement, at its option, if there were a
breach of the confidentiality provisions of the merger agreement
by the Company, in which case the Company would be required to
pay Parent a termination fee of $1.0 million in case of an
Inadvertent Breach (as defined below) and $4.46 million in
case of an intentional breach. In evaluating these
confidentiality provisions, the Special Committee determined
that each other bidder
and/or
its
funding sources would also likely require confidentiality
protections in light of the actions of animal rights activists
that have targeted the Company and the Companys lenders
and investors, among others, and noted that several bidders had
in fact withdrawn from the process because of concerns regarding
animal rights activists.
The Special Committee instructed the Companys outside
legal counsel and its legal advisors to attempt to finalize the
terms of the merger agreement, financing commitment letters and
financing agreement modification on terms acceptable to the
Special Committee prior to the meeting of the Special Committee
31
scheduled for July 7, 2009. The Special Committee also
instructed Plymouth Partners to seek a further increase in price
from Parent.
Over the course of the next week, the Special Committees
advisors and the Companys outside legal counsel continued
to negotiate the terms of the merger agreement, including the
price per Share of Parents offer, and financing commitment
letters, with representatives of Parent. On July 6, 2009,
representatives of Parent communicated to Plymouth Partners that
Parent would not increase the price of its offer above
$8.50 per Share.
At the July 7, 2009 meeting of the Special Committee,
Plymouth Partners and the Special Committees legal
advisors again reviewed the terms of the Revised Baker Offer and
various strategic alternatives. The Special Committees
legal advisors reviewed the duties of the directors under
applicable law. Plymouth Partners summarized its discussions
with the Special Committee at prior meetings and then reviewed
with the Special Committee its financial analysis of the Revised
Baker Offer and delivered an oral opinion, which was
subsequently confirmed in writing, to the effect that, as of
July 7, 2009 and based on and subject to the various
assumptions and limitations in such opinion, the $8.50 per Share
merger consideration to be received by holders of Shares
pursuant to the proposed definitive merger agreement with the
Constituent Corporations was fair from a financial point of view
to the holders of Shares, other than Shares held by Parent, any
Interested Party or any of their respective affiliates (which
other Shares are referred to in this proxy statement,
collectively, as the Excluded Shares), as to which Plymouth
Partners expressed no view. No unaffiliated stockholder of the
Company holds Excluded Shares. At the Special Committees
invitation, the Companys outside legal counsel
participated in a portion of the meeting to review the terms of,
and any open issues related to, the draft merger agreement with
the Constituent Corporations and the terms of the modification
of the Companys Existing Financing Agreement. The Special
Committee discussed at length the foregoing matters and the
extensive process undertaken by the Special Committee and its
advisors. The Special Committee then unanimously determined,
subject to the immediately following sentence, (i) that the
sale of the Company is the best strategic alternative available
to the Company and is in the best interests of the Company and
its stockholders, (ii) that the proposed definitive merger
agreement with the Constituent Corporations and the transactions
contemplated thereby represent the best value reasonably
achievable for the stockholders of the Company (other than the
holders of Excluded Shares), including without limitation all
unaffiliated stockholders of the Company, and that the Merger is
substantively and procedurally fair to the Companys
unaffiliated stockholders, and (iii) to recommend that the
Board of Directors approve the proposed Merger and recommend to
the stockholders of the Company approval of the Merger. The
Special Committee conditioned its approval of the Merger on
(a) the satisfactory confirmation to the Special Committee
or its advisors that LAB Holdings, the guarantor under the
Merger Agreement (which is referred to herein, in such capacity,
as the Guarantor), had been funded with sufficient funds to
cover the maximum termination fee potentially payable by the
Constituent Corporations under the proposed merger agreement and
(b) the modification of the Companys Existing
Financing Agreement. The proposed amendment to the Existing
Financing Agreement provided that, in the event that the Company
shall not have paid in cash all amounts then due under its
Existing Financing Agreement (excluding the amendment fee
described below), or if the Company shall not have entered into
the proposed Merger, or a transaction in respect of a Superior
Proposal reasonably acceptable to the lenders, within five
months of the effective date of such amendment, the Company will
be required to pay its existing lenders an amendment fee of
$5.0 million. The Special Committee took into account that
this amendment fee is consistent with the range of fees paid by
the Company in connection with previous amendments to its
Existing Financing Agreement.
At a special meeting of the Board of Directors immediately
following the Special Committee meeting, the chairman of the
Special Committee reported to the Board of Directors that the
Special Committee had unanimously determined to recommend that
the Board of Directors approve the proposed Merger between the
Company and Merger Sub. The Special Committee noted that its
recommendation was conditioned on (a) the satisfactory
confirmation to the Special Committee or its advisors that the
Guarantor had been funded with sufficient funds to cover the
maximum termination fee under the proposed merger agreement and
(b) the modification of the Companys Existing
Financing Agreement. The Special Committee then, subject to the
satisfaction of the conditions described in the preceding
sentence, recommended that the Board of Directors
32
approve the proposed Merger with Merger Sub and recommend to the
stockholders of the Company approval of the Merger. The Board of
Directors (other than Messrs. Baker and Cass, who abstained
from deliberating or voting), having considered the
recommendation of the Special Committee regarding the proposed
Merger with Merger Sub, the terms of the Merger, alternatives to
the Merger, and the risks and benefits of the Merger, in
addition to various other factors, including the Plymouth
Partners fairness opinion, then unanimously (i) approved
the modification of the Companys Existing Financing
Agreement, (ii) determined that the Merger with Merger Sub
and the transactions contemplated by the proposed merger
agreement with the Constituent Corporations are in the best
interests of the Company and its stockholders and that the
Merger is substantively and procedurally fair to the
Companys unaffiliated stockholders, (iii) approved
the Merger with Merger Sub and the transactions contemplated by
the proposed merger agreement and (iv) resolved to
recommend that the stockholders of the Company vote
FOR
the approval of the Merger at a special meeting of stockholders
to be held for such purpose. The Board of Directors
recommendation was conditioned on (a) the satisfactory
confirmation to the Special Committee or its advisors that the
Guarantor had been funded with sufficient funds to cover the
maximum termination fee under the proposed merger agreement and
(b) the modification of the Companys Existing
Financing Agreement, which conditions were satisfied on
July 8, 2009.
Following this meeting, the modification of the Companys
Existing Financing Agreement and the Merger Agreement were
finalized and executed on July 8, 2009. On the morning of
July 9, 2009, the Company issued a press release announcing
that it had entered into the loan modification with the
Companys existing lenders and the Merger Agreement with
the Constituent Corporations.
Position
of the Special Committee as to the Fairness of the
Merger
In evaluating the fairness and advisability of the Merger
Agreement and the Merger, the Special Committee considered the
following factors, each of which the Special Committee believes
supports its determination as to fairness:
Extensive Market Check Process.
The Special
Committee conducted an extensive, multi-stage market check
involving over 50 potential bidders, including CROs, healthcare
companies and private equity and venture capital firms in the
United States, Europe and Asia. The potential bidders were given
the opportunity to perform comprehensive due diligence on the
Company, including through detailed individual management
presentations and access to an extensive due diligence data
room. After completing the market check process, the Special
Committee considered that no party had offered to pay, and
believed it was unlikely that any party would offer to pay, a
higher price than the Constituent Corporations had offered. In
addition, the Special Committee considered that no firm offers
to acquire the Company, a substantial part of its assets or a
controlling interest of the Companys outstanding Shares
had been received by the Company in the prior two years, other
than the Revised Baker Offer. See
Background of the Merger and Special
Committee Proceedings.
Alternative Strategies.
The Special Committee
considered the following alternative strategies: maintaining its
status quo as an independent public company; paying a special
dividend; repurchasing Shares; and recapitalizing the Company.
The Special Committee concluded that none of these alternatives
would be reasonably likely to provide greater value to
stockholders than that available in the Merger and that any
alternative involving maintaining the Company as an independent
public company would be subject to the risks and uncertainties
associated with the Companys future performance.
Furthermore, the Special Committee rejected the strategic
alternative of maintaining the Companys status quo as an
independent public company because the Special Committee
believed, among other factors, that such alternative was
unlikely to address the historical discount of the Shares (based
upon stock market multiples) to the Companys competitors,
the limited liquidity of the Shares and the risks to public
shareholders from animal rights activists. During the course of
the Special Committees consideration of alternative
strategies, the level of extremist activity throughout the UK
decreased dramatically as a result of the imprisonment of some
key members of certain animal rights groups; nevertheless, such
activities in other parts of the world continued and indeed
began to intensify during the time of the Special
Committees deliberations, and continued to have an adverse
effect on the Company, its shares and public stockholders.
Therefore, the Special Committee continued to consider the
effect of such activities as a significant factor in determining
the possible alternatives available to the Company.
Additionally, the Special Committee, in rejecting the
alternative of maintaining the Companys
33
status quo as an independent public company, considered the
potential risk to the price of the Shares in the event that the
Revised Baker Offer was rejected or withdrawn and determined
that there did not appear to be any near-term catalyst that
would support a meaningful increase in the trading price of the
Shares absent a significant rise in the overall market. See
Background of the Merger and Special
Committee Proceedings.
Merger Consideration.
The Special Committee
concluded, based on negotiations with representatives of Parent
and the other information available to it, including Plymouth
Partners discussions with representatives of Parent, that
it was unlikely that the Constituent Corporations would be
willing to pay more than $8.50 per Share and, in light of
the lack of competing proposals at higher valuations, that $8.50
per Share was likely the highest price reasonably attainable for
the Companys stockholders in a merger or other acquisition
transaction.
Animal Rights Activists.
The Special Committee
considered the effects of animal rights activists on the
Company. Specifically, the Special Committee noted that the
Company, and its employees, directors, stockholders, customers,
suppliers and advisors, and financial firms directly or
indirectly associated with the Company, the stock exchange on
which the Shares are listed for trading, and the market makers
in the Shares, had for many years been the targets of actions by
animal rights activists, including physical violence,
harassment, vandalism, bomb and death threats, protests and
demonstrations, and considered the effects that these actions
have historically had on the Companys ability to obtain
financing from sources and on terms available to other publicly
traded companies of similar size and leverage or to refinance
its existing debt, either upon the maturity thereof or a default
thereunder, and the effect of such difficulties in obtaining
financing on the liquidity, market price and trading multiples
of the Shares, as compared to other publicly traded companies in
the CRO industry.
Opinion of Plymouth Partners.
The Special
Committee considered the opinion of Plymouth Partners to the
effect that, as of July 7, 2009, and based upon and subject
to the various assumptions and limitations set forth in such
opinion, the $8.50 per Share merger consideration to be received
by holders of Shares pursuant to the Merger Agreement (other
than the holders of Excluded Shares, as to which Plymouth
Partners expressed no view), including without limitation all
unaffiliated stockholders of the Company, was fair from a
financial point of view to such holders. In connection with the
Special Committees consideration of the Plymouth Partners
opinion, it took note of the fact that Plymouth Partners will
receive an additional payment contingent on the closing of the
Merger and that such a fee structure could create a potential
conflict of interest insofar as Plymouth Partners could be
viewed as having an incentive to provide an opinion that would
not impede the closing of the Merger, and determined that such
potential conflict would not interfere with Plymouth
Partners independence. The Special Committee noted that
such payments are customary in financial advisor engagement
letters. The Special Committee adopted Plymouth Partners
analyses and opinion. See
Opinion of
Financial Advisor to the Special Committee.
The full
text of the written opinion of Plymouth Partners, dated
July 7, 2009, which sets forth assumptions made, procedures
followed, matters considered and limitations on the review
undertaken in connection with the opinion, is attached as
Appendix B to this proxy statement and is incorporated
herein by reference. The Companys stockholders should read
the opinion carefully and in its entirety. Plymouth Partners
provided its opinion to the Special Committee for the benefit
and use of the Special Committee in evaluating the fairness of
the $8.50 per Share merger consideration from a financial point
of view. The opinion of Plymouth Partners referenced above is
not a recommendation as to how any of the Companys
stockholders should vote or act with respect to the Merger. See
Opinion of Financial Advisor to the Special
Committee.
Negotiations.
The Special Committee considered
the fact that the Merger Agreement and the Merger were the
product of active negotiations between Mr. Baker and the
Constituent Corporations and the Special Committee, which
resulted in a 13% increase in the merger consideration from the
Initial Baker Offer to $8.50 per Share. The Special
Committee believed that the competitive circumstances of the
market check process assisted the Special Committee in its
negotiations with Mr. Baker and the Constituent
Corporations.
Market Price and Premium.
The Special
Committee considered the historical market prices over the prior
five year period and recent trading activity of the Shares,
including the fact that the proposed consideration of $8.50 per
Share in cash to be received by stockholders in the Merger
represents a premium of
34
approximately 77% to the closing market price of the Shares on
March 3, 2009, the last trading day prior to public
announcement of the Initial Baker Offer, a premium of
approximately 13% over the Initial Baker Offer and a premium of
approximately 19% over the closing market price of $7.15 per
Share on July 6, 2009, the last full trading day prior to
the Special Committees determination to recommend that the
Board of Directors approve the Merger. While the Special
Committee recognized that the Shares had traded at levels
significantly higher than the proposed consideration of $8.50
per Share over the preceding five years, the Special Committee
did not believe that those higher prices were indicative of the
current value of the Shares. In formulating this view, the
Special Committee took into account, among other things, the
extensive market check that it had conducted, the highly
uncertain nature of any meaningful increase in the market price
in the near term and the substantial downside risk for
stockholders in maintaining the status quo.
Likelihood of a Higher Trading Price.
The
Special Committee also considered the historically volatile
nature of the price of the Shares and historical discount (based
upon stock market multiples) to its competitors of as much as
40% to 50% over the last five years. The Special Committee,
based on discussions with Plymouth Partners, considered that
there did not appear to be any near-term catalyst that would
support a meaningful increase in the trading price absent a
significant rise in the overall market. The Special Committee
determined that, while it was possible that at some time in the
future the Shares could trade in excess of the price offered in
the Merger, that prospect was highly uncertain and subject to
substantial downside risk. In reaching this conclusion, the
Special Committee considered the fact that, even if the trading
price for the Shares were to rise above $8.50 per Share for a
period of time, the liquidity and historical trading volume of
the Shares would not necessarily permit all stockholders to sell
Shares at that price, whereas the Merger would provide liquidity
for stockholders at $8.50 per Share. The Special Committee also
considered the fact that the Special Committees exhaustive
market check process did not result in a price of higher than
$8.50 per Share. Accordingly, the Special Committee determined
that the relative certainty of capturing enhanced value through
the Merger could be of significant benefit to the Companys
stockholders as compared to the mere possibility that at some
undetermined future date the Shares might trade at a comparable
or higher level.
Historical and Projected Financial Performance and Related
Risks and Uncertainties.
The Special Committee
considered the Companys current and anticipated business,
financial condition, results of operations and prospects,
including the prospects of the Company if it were to remain a
public company. The Special Committee noted that the
Companys internal projected 2009 forecast, although not
necessarily indicative of future operations, forecasted lower
revenue, operating income and net income than the prior
years results. Further, the Special Committee considered
that although management forecasted a return to growth between
2010 to 2012, this forecast depended largely on conditions in
the CRO industry and several other factors, including foreign
exchange rates, and was therefore subject to the risks and
uncertainties associated with the Companys future
performance. The Special Committee also considered the
Companys relatively weak performance in the first fiscal
quarter of 2009, forecasted relatively weak performance in the
second fiscal quarter of 2009 and potentially weak performance
in the third fiscal quarter of 2009, including the fact that the
Company was at risk of breaching the financial covenants in its
Existing Financing Agreement and was seeking a modification of
those covenants in order to avoid a default under such agreement.
Approval of Stockholders.
Consistent with the
requirements of applicable law and the Companys charter,
the Merger Agreement explicitly requires the approval of the
holders of at least a majority of the outstanding Shares
entitled to vote on the Merger.
Neutralized Voting.
In addition, the Special
Committee believed that, due to Mr. Bakers
significant ownership of the Companys stock, as well as
Mr. Bakers options and warrants to purchase Shares,
it was important to require that the Merger be approved by the
affirmative vote of a majority of the votes cast by holders of
the outstanding Shares, other than holders of Excluded Shares.
Mr. Baker and his affiliates beneficially owned as of the
record date approximately 17.7% of the Shares, which Shares
would be counted for purposes of determining the State Law Vote
but would not be counted for purposes of determining the
Neutralized Vote. Accordingly, assuming all of the
Companys stockholders voted all of their Shares with
respect to the Merger, the affirmative vote of a majority of the
remaining 82.3% of the Shares would be required to approve the
Merger for purposes of the Neutralized Vote. The Special
Committee insisted that this neutralized voting provision be
included in the Merger Agreement.
35
Unaffiliated Representative.
The Special
Committee believed that there was no need to incur the added
expenses of retaining any additional unaffiliated
representatives to act on behalf of the unaffiliated
stockholders because the independence of the member of the
Special Committee and the retention by the Special Committee of
its own legal and financial advisors permitted the Special
Committee to effectively represent the interests of the
unaffiliated stockholders and because the Merger Agreement
explicitly requires approval of the Merger by the affirmative
vote of a majority of the votes cast by holders of the
outstanding Shares, other than holders of Excluded Shares.
Terms of the Merger Agreement.
The Special
Committee also considered the terms and conditions of the Merger
Agreement, including the provisions of the Merger Agreement
permitting the Company to receive unsolicited inquiries and
proposals from, and under certain circumstances, to negotiate
and give non-public information to, third-party bidders. The
Special Committee also considered, based, in part, on the advice
of its advisors and the Companys outside legal counsel,
that the termination fees of $2.23 million and
$4.46 million included in the Merger Agreement were within
the range of reasonable termination fees payable in comparable
transactions. The Special Committee believed that the
termination fees would not, in and of themselves, preclude
potential third-party bidders, particularly in light of the
lower fee of $2.23 million applicable to the acceptance of
a Superior Proposal. Pursuant to a Memorandum of Understanding,
which is referred to in this proxy statements as the
MOU
,
entered into in connection with the settlement of the
consolidated class action lawsuit brought with respect to the
Merger, Parent agreed to reduce the termination fee payable by
the Company in certain instances from $2.23 million to $1.53
million. See
THE MERGER Certain Legal
Matters Merger Related Litigation.
Positive and Negative Factors Considered.
In
addition to the positive factors mentioned above, the Special
Committee considered the other terms and conditions of the
Merger Agreement, the present economic environment, the
likelihood of consummation of the Merger and other relevant
facts and circumstances pertaining to the proposed transaction.
The Special Committee also considered, as potential negative
factors, that: (i) the Merger Agreement could be terminated
if there is a compelled disclosure of any information in
violation of a Parent Confidentiality Document, and such
information is not accorded confidential treatment pursuant to a
protective order or other confidentiality arrangement reasonably
acceptable to Parent or the other party to such applicable
Parent Confidentiality Document, and the fact that any such
compelled disclosure would be beyond the Companys control;
(ii) Parent could terminate the Merger Agreement, at its
option, if there is a breach of the confidentiality provisions
of the Merger Agreement by the Company; (iii) if the
Company consummates the Merger, the unaffiliated stockholders of
the Company will not be able to participate in any resulting
long-term benefits, including potential increase in the value of
the Company, if the Company were able to successfully implement
its business plan after the Merger; (iv) the Constituent
Corporations, as financial buyers, will not have any significant
assets unless the Merger is consummated and, therefore, the
Companys remedy for any breach of the Merger Agreement by
the Constituent Corporations will be effectively limited to its
termination rights; (v) the Merger is subject to the risk
that the Constituent Corporations financing falls through,
which is beyond its or the Companys control;
(vi) potential disruption to the Companys business
might result from undertaking the Merger process; (vii) the
perceptions of the Companys stockholders, customers,
suppliers and employees concerning the Merger are uncertain;
(viii) the cash consideration to be received by the
Companys stockholders will generally be subject to
taxation; and (ix) the unavailability to the Companys
stockholders of appraisal rights under applicable law. However,
the Special Committee determined that these negative factors
were substantially outweighed by the positive factors discussed
above. The Special Committee did not consider that it was
practicable or useful to quantify or otherwise assign relative
weights to the various factors considered by it, and therefore
did not do so.
Prior Stock Purchases.
During the prior two
years, the only purchases by the Company or Mr. Baker
relating to Shares involved warrants or options to acquire
Shares. Since the consideration paid by the Company or
Mr. Baker in connection with the purchase or exercise of
such warrants or options, as applicable, was determined by
reference to the market price of the Shares at the time of such
transactions (and the exercise prices of such warrants or
options, which were determined with reference to the market
price at the time such warrants or options were originally
issued), the Special Committee did not give these transactions
any additional consideration above and beyond current and
historical market prices.
36
Net Book Value; Liquidation Value; Going Concern
Value.
The Special Committee did not specifically
consider the net book value or the liquidation value of the
Company during its deliberation process. The Special Committee
was advised that the net book value and liquidation value
methodologies would result in lower valuations than those that
the Special Committee was already considering. The Special
Committee did not establish a pre-merger going concern value for
the equity of the Company to determine the fairness of the
merger consideration to the Companys stockholders. The
Special Committee does not believe there is a single method of
determining going concern value. The Special Committees
exploration of a possible sale of the Company contemplated the
sale of the Company as a going concern.
The Special Committees
Determination.
After considering these factors,
the other information available to it and after many meetings
and discussions, the Special Committee unanimously determined,
subject to the immediately following sentence, (i) that a
sale of the Company is the best strategic alternative available
to the Company and is in the best interests of the Company and
its stockholders, (ii) that the proposed definitive Merger
Agreement with the Constituent Corporations and the transactions
contemplated thereby represent the best value reasonably
achievable for the stockholders of the Company (other than the
holders of Excluded Shares), including without limitation all
unaffiliated stockholders of the Company, and that the Merger is
substantively and procedurally fair to the Companys
unaffiliated stockholders, and (iii) to recommend that the
Board of Directors approve the proposed Merger with Merger Sub
and recommend to the stockholders of the Company approval of the
Merger. The Special Committee conditioned the approval of the
Merger on (a) the satisfactory confirmation to the Special
Committee or its advisors that the Guarantor had been funded
with sufficient funds to cover the maximum termination fee
payable by the Constituent Corporations under the Merger
Agreement and (b) the modification of the Companys
Existing Financing Agreement.
Approval
and Recommendation of the Board of Directors
At a meeting held on July 7, 2009, the Board of Directors
(with Messrs. Baker and Cass abstaining from voting)
unanimously:
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approved the modification of the Companys Existing
Financing Agreement;
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determined that the Merger with Merger Sub and the transactions
contemplated by the Merger Agreement are in the best interests
of the Company and its stockholders and that the Merger is
substantively and procedurally fair to the Companys
unaffiliated stockholders;
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approved the Merger Agreement and the transactions contemplated
by the Merger Agreement; and
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resolved to recommend that the stockholders of the Company vote
FOR
the approval of the Merger at the special meeting of
stockholders;
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subject to (a) the satisfactory confirmation to the Special
Committee or its advisors that the Guarantor had been funded
with sufficient funds to cover the maximum termination fee
payable by the Constituent Corporations under the Merger
Agreement and (b) the execution of the modification of the
Companys Existing Financing Agreement. These conditions
were satisfied on July 8, 2009.
In reaching these conclusions, the Board of Directors considered
the unanimous recommendation and analysis of the Special
Committee, as described above, and, upon satisfaction of the
above-described conditions, expressly adopted such
recommendation and analysis in reaching the decision to approve
the Merger.
Opinion
of Financial Advisor to the Special Committee
On July 7, 2009, at a meeting of the Special Committee held
to evaluate the Merger, Plymouth Partners delivered to the
Special Committee an oral opinion, subsequently confirmed in
writing, to the effect that, as of the date of the opinion and
based on and subject to various assumptions and limitations
described in the opinion, the $8.50 per Share merger
consideration to be received by holders of Shares (other than
the holders of Excluded Shares), including without limitation
all unaffiliated stockholders of the Company, was fair, from a
financial point of view, to such holders.
37
The full text of Plymouth Partners written opinion to
the Special Committee, which describes, among other things, the
assumptions made, procedures followed, factors considered and
limitations on the review undertaken, is attached as
Appendix B to this proxy statement and is incorporated by
reference herein in its entirety. The Companys
stockholders are urged to carefully read the full text of
Plymouth Partners opinion, which is attached as
Appendix B to this proxy statement. Plymouth Partners
provided its opinion to the Special Committee for the benefit
and use of the Special Committee in evaluating the fairness of
the $8.50 per Share merger consideration from a financial point
of view. Plymouth Partners opinion does not address any
other aspect of the Merger and does not constitute a
recommendation to any stockholder as to how to vote or act in
connection with the proposed Merger.
In connection with rendering its opinion, Plymouth Partners:
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reviewed a substantially final draft, dated July 2, 2009,
of the Merger Agreement (which is referred to herein as the
Draft Agreement
), and related documents;
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reviewed certain publicly available business and financial
information relating to the Company;
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reviewed internal financial and operating information of a broad
nature with respect to the business, operations and prospects of
the Company that is customarily reviewed by financial advisors
to companies and certain internal financial forecasts relating
to the Company prepared by the management of the Company, which
forecasts are referred to herein as the
Company
Forecasts
, in each case that was furnished to or discussed
with Plymouth Partners by the management of the Company;
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discussed the past and current business, operations, financial
condition and prospects of the Company with members of senior
management of the Company;
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reviewed the trading history for the Shares and a comparison of
that trading history with the trading histories of other
companies that Plymouth Partners deemed relevant;
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compared certain financial and stock market information of the
Company with similar information of other companies that
Plymouth Partners deemed relevant;
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compared certain financial terms of the Merger to financial
terms, to the extent publicly available, of other transactions
that Plymouth Partners deemed relevant;
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considered the results of Plymouth Partners efforts to
solicit, at the direction of the Special Committee, indications
of interest from third parties with respect to a possible
transaction with the Company; and
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performed such other analyses and studies and considered such
other information and factors as Plymouth Partners deemed
appropriate.
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Plymouth Partners assumed, based on its discussions with the
Companys management and with the Special Committees
consent, certain facts relating to the Company as of
July 7, 2009, which are set forth in the full text of
Plymouth Partners opinion attached as Appendix B to
this proxy statement and which include the following:
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Since December 1999, the Company has been, and employees,
directors, stockholders, customers, suppliers and advisors of
the Company and financial firms directly or indirectly
associated with the Company, in each case on account of such
relationship with the Company, have been, the target of actions
by animal rights activists, such actions including physical
violence, harassment, vandalism, bomb and death threats,
protests and demonstrations. No other publicly traded company in
the CRO industry has been affected by the actions of animal
rights activists to a similar extent.
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On account of pressure by animal rights activists, the Company
has historically had limited access to debt financing and other
banking services, has no commercial bank lenders and has
existing financing that is more expensive than financing
currently available to other publicly traded companies of
similar size and leverage, including those in the CRO industry.
The Company may have difficulty refinancing its existing debt,
either upon the maturity thereof or a default thereunder, or
obtaining other sources of debt financing, in each case, that
may be necessary to fund the Companys ongoing, independent
operations. Absent an agreement with its lenders, the Company
was at risk of breaching certain of the financial covenants for
the second and third fiscal quarters of 2009 under the Existing
Financing Agreement. In addition, the liquidity, market price
and trading multiples of the Shares are adversely
|
38
|
|
|
|
|
affected by the limited and more expensive financing available,
currently and prospectively, to the Company, as compared to
other publicly traded companies in the CRO industry.
|
|
|
|
|
|
Animal rights activists have harassed and caused the fear of
harassment to individuals and entities in the financial
community associated with the trading of the Shares, including
stockholders of the Company, the New York Stock Exchange, market
makers, stockbrokers, research analysts, auditors, and trading
platforms. In addition, the liquidity, market price and trading
multiples of the Shares are adversely affected by such actions
and circumstances, as compared to other publicly traded
companies in the CRO industry.
|
|
|
|
Animal rights activists have harassed and caused the fear of
harassment to other third parties that do business with the
Company, including customers, suppliers and advisors, and the
liquidity, market price and trading multiples of the Shares are
adversely affected by such actions, as compared to other
publicly traded companies in the CRO industry.
|
|
|
|
Trading multiples of the Shares have historically reflected a
significant discount to the trading multiples of other publicly
traded companies in the CRO industry that Plymouth Partners
deemed relevant, and the intrinsic value of the Company reflects
a similar discount, which discounts are referred to in this
proxy statement, collectively, as the
Company Discount
.
|
At the direction of the Special Committee, Plymouth Partners
took into account, among other things, the foregoing facts and
assumptions (together with the other facts and assumptions set
forth in its opinion) when determining the meaning of
fairness for purposes of its opinion.
In arriving at its opinion, Plymouth Partners assumed and relied
upon, without independent verification, the accuracy and
completeness of the financial and other information and data
publicly available or provided to or otherwise reviewed by or
discussed with it and relied upon the assurances of the
management of the Company that it was not aware of any facts or
circumstances that would make such information or data
inaccurate or misleading in any material respect. With respect
to the Company Forecasts, Plymouth Partners was advised by the
Company, and assumed, that such forecasts were reasonably
prepared on bases reflecting the best currently available
estimates and good faith judgments of the management of the
Company as to the future financial performance of the Company.
Plymouth Partners did not make and was not provided with any
independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of the Company, nor did it make any
physical inspection of the properties or assets of the Company.
Plymouth Partners did not evaluate the solvency of the Company
or Parent under any state or federal laws relating to
bankruptcy, insolvency or similar matters. Plymouth Partners
assumed, at the Special Committees direction, that the
Merger would be consummated in accordance with its terms,
without waiver, modification or amendment of any material term,
condition or agreement and that, in the course of obtaining the
necessary governmental, regulatory and other approvals,
consents, releases and waivers for the Merger, no delay,
limitation, restriction or condition would be imposed that would
have an adverse effect on the Company or the contemplated
benefits of the Merger. Plymouth Partners also assumed, at the
Special Committees direction, that the final executed
Merger Agreement would not differ in any material respect from
the Draft Agreement reviewed by Plymouth Partners.
Plymouth Partners expressed no view or opinion in its written
opinion as to any terms or other aspects of the Merger (other
than the $8.50 per Share merger consideration to the extent
expressly specified in its opinion), including, without
limitation, the form or structure of the Merger. Plymouth
Partners opinion was limited to the fairness, from a
financial point of view, of the $8.50 per Share merger
consideration to be paid to the holders of Shares (other than
the holders of Excluded Shares), including without limitation
all unaffiliated stockholders of the Company, and no opinion or
view was expressed with respect to any consideration received in
connection with the Merger by the holders of any other class of
securities, creditors or other constituencies of the Company. In
addition, no opinion or view was expressed with respect to the
fairness of the amount, nature or any other aspect of the
compensation to any of the officers, directors or employees of
any party to the Merger, or class of such persons, relative to
the $8.50 per Share merger consideration. Furthermore, no
opinion or view was expressed in Plymouth Partners opinion
as to the relative merits of the Merger in comparison to other
strategies or transactions that might be available to the
Company or in which the Company might engage or as to the
underlying business decision of the Company to proceed
39
with or effect the Merger. In addition, Plymouth Partners
expressed no opinion or recommendation as to how any stockholder
should vote or act in connection with the Merger. Except as
described above, the Special Committee imposed no other
limitations on the investigations made or procedures followed by
Plymouth Partners in rendering its opinion.
Plymouth Partners opinion was necessarily based on
financial, economic, monetary, market and other conditions and
circumstances as in effect on, and the information made
available to Plymouth Partners as of, the date of Plymouth
Partners opinion, including the unique factors relating to
the Company described in Plymouth Partners opinion. It
should be understood that subsequent developments may affect
Plymouth Partners opinion, and Plymouth Partners does not
have any obligation to update, revise or reaffirm its opinion.
The issuance of Plymouth Partners opinion was approved by
an authorized opinion committee.
The following represents a brief summary of the material
financial analyses presented by Plymouth Partners to the Special
Committee in connection with its opinion.
The financial
analyses summarized below include information presented in
tabular format. In order to fully understand the financial
analyses performed by Plymouth Partners, the tables must be read
together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses
performed by Plymouth Partners. Considering the data set forth
in the tables below without considering the full narrative
description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of the financial analyses
performed by Plymouth Partners.
Financial
Analyses Concerning the Company
The following terms have the meanings set forth below with
respect to certain financial metrics used by Plymouth Partners
in its analyses:
Aggregate Equity Value
generally, the
relevant companys closing share price, as of the specified
date, multiplied by the number of such companys diluted
shares outstanding as of such date.
Enterprise Value
generally, the
relevant companys Aggregate Equity Value plus debt and
minority interest, less cash, as of the last reported period
prior to the specified date. Generally, debt includes
capitalized leases and excludes unamortized warrants and
issuance costs, and cash includes cash equivalents and
marketable securities. In the case of the Company, its reported
pension liability, $33.6 million as of March 31, 2009,
is included in the Companys debt. In the case of
Enterprise Values calculated at future dates for the Company,
debt and cash are estimated as of the relevant date, as
estimated in the Base Case of the Company Forecasts.
EBITDA
generally, the amount of the
relevant companys earnings before interest, taxes,
depreciation and amortization, adjusted to exclude non-recurring
items.
EPS
generally, the relevant
companys diluted earnings per share, adjusted to exclude
non-recurring items.
Selected Publicly Traded Companies
Analysis.
Plymouth Partners reviewed publicly
available financial and stock market information for the Company
and the companies listed below. These companies were selected
because their business is largely focused in the same sector of
the CRO industry as the Company (generally, performing
and/or
managing pre-clinical and clinical studies for regulatory
approval of pharmaceutical products), with operations primarily
in North America and Europe, and their market capitalization
exceeded $75 million. The companies in the Primary Peer
Group have a significant presence in the pre-clinical research
sector of the CRO industry, while the companies in the Secondary
Peer group do not.
|
|
|
Primary Peer Group
|
|
Secondary Peer Group
|
|
Charles River Laboratories, Inc.
|
|
ICON plc
|
Covance Inc.
|
|
Kendle International Inc.
|
|
|
PAREXEL International Corporation
|
|
|
Pharmaceutical Product Development, Inc.
|
40
Plymouth Partners reviewed, among other things, Enterprise
Values of the selected publicly traded companies, as of
July 6, 2009, as a multiple of EBITDA for the twelve-month
period ended March 31, 2009 and estimated EBITDA for
calendar years 2009 and 2010. Plymouth Partners also reviewed
per share closing stock prices on July 6, 2009 of the
selected publicly traded companies as a multiple of EPS for the
twelve-month period ended March 31, 2009 and estimated EPS
for calendar years 2009 and 2010. The following table indicates
the implied mean, median (where applicable), high and low
multiples for the selected publicly traded companies in the
Primary Peer Group and the Secondary Peer Group:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary Peer Group
|
|
Secondary Peer Group
|
|
|
Mean
|
|
High
|
|
Low
|
|
Mean
|
|
Median
|
|
High
|
|
Low
|
|
Enterprise Value as Multiple of EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Last Twelve Months
|
|
|
7.8
|
x
|
|
|
8.9
|
x
|
|
|
6.6
|
x
|
|
|
6.4
|
x
|
|
|
6.0
|
x
|
|
|
9.4
|
x
|
|
|
4.2
|
x
|
Calendar Year 2009E
|
|
|
8.7
|
x
|
|
|
9.4
|
x
|
|
|
7.9
|
x
|
|
|
6.7
|
x
|
|
|
6.0
|
x
|
|
|
9.2
|
x
|
|
|
5.6
|
x
|
Calendar Year 2010E
|
|
|
7.5
|
x
|
|
|
8.0
|
x
|
|
|
7.0
|
x
|
|
|
5.9
|
x
|
|
|
5.4
|
x
|
|
|
8.1
|
x
|
|
|
4.7
|
x
|
Closing Stock Price as Multiple of EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Last Twelve Months
|
|
|
14.0
|
x
|
|
|
16.4
|
x
|
|
|
11.7
|
x
|
|
|
11.9
|
x
|
|
|
13.2
|
x
|
|
|
15.5
|
x
|
|
|
5.7
|
x
|
Calendar Year 2009E
|
|
|
15.9
|
x
|
|
|
18.5
|
x
|
|
|
13.3
|
x
|
|
|
12.8
|
x
|
|
|
14.1
|
x
|
|
|
15.5
|
x
|
|
|
7.4
|
x
|
Calendar Year 2010E
|
|
|
13.6
|
x
|
|
|
15.6
|
x
|
|
|
11.6
|
x
|
|
|
11.3
|
x
|
|
|
12.1
|
x
|
|
|
14.0
|
x
|
|
|
7.0
|
x
|
To reflect the Company Discount, Plymouth Partners then applied
a discount ranging from 35% to 45% to the average multiple of
estimated EBITDA for calendar year 2009 of the Primary Peer
Group (the resulting multiples are referred to in this proxy
statement as the Discounted EBITDA Multiples) and applied a
discount ranging from 45% to 55% to the average multiple of
estimated EPS for calendar year 2009 of the Primary Peer Group
(the resulting multiples are referred to in this proxy statement
as the Discounted EPS Multiples). Such discount was determined
based on the applicable historical trading multiples of the
Company relative to the Primary Peer Group over the five year
period ended December 31, 2008, the twelve month period
ended March 31, 2009, and as of July 6, 2009. The
following table indicates the implied trading multiples for the
selected publicly traded companies in the Primary Peer Group as
compared to the Company:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company
|
|
|
The
|
|
vs.
|
|
|
Company
|
|
Primary Peer Group
|
|
|
Historical 2004 - 2008
|
|
Average Trailing Twelve Months EBITDA
|
|
|
8.8
|
x
|
|
|
12.8
|
x
|
|
|
(32
|
%)
|
Average Trailing Twelve Months EPS
|
|
|
14.7
|
x
|
|
|
24.0
|
x
|
|
|
(39
|
%)
|
|
|
Historical 1Q2009
|
Trailing Twelve Months EBITDA
|
|
|
4.0
|
x
|
|
|
6.3
|
x
|
|
|
(37
|
%)
|
Trailing Twelve Months EPS
|
|
|
5.0
|
x
|
|
|
11.4
|
x
|
|
|
(56
|
%)
|
|
|
07/06/09
|
Last Twelve Months EBITDA
|
|
|
4.1
|
x
|
|
|
7.8
|
x
|
|
|
(47
|
%)
|
2009E EBITDA
|
|
|
5.6
|
x
|
|
|
8.7
|
x
|
|
|
(36
|
%)
|
Last Twelve Months EPS
|
|
|
5.0
|
x
|
|
|
14.0
|
x
|
|
|
(64
|
%)
|
2009E EPS
|
|
|
8.0
|
x
|
|
|
15.9
|
x
|
|
|
(50
|
%)
|
Plymouth Partners then applied the range of Discounted EBITDA
Multiples to the Companys estimated EBITDA for calendar
year 2009 and applied the range of Discounted EPS Multiples to
the estimated EPS of the Company for calendar year 2009. This
analysis indicated the following approximate implied per share
equity reference ranges for the Company, as compared to the
$8.50 per Share merger consideration:
|
|
|
|
|
|
|
|
|
Implied Per Share Equity Reference Ranges for the Company
|
|
Per Share
|
2009E EBITDA
|
|
2009E EPS
|
|
Merger Consideration
|
|
$5.20 - $7.00
|
|
$
|
6.40 - $7.90
|
|
|
$
|
8.50
|
|
Estimated financial data of the selected publicly traded
companies were based on publicly available research
analysts estimates. Estimated financial data of the
Company were based on the Base Case of the Company Forecasts. No
company used in this analysis is identical or directly
comparable to the Company.
41
Accordingly, an evaluation of the results of this analysis is
not entirely mathematical. Rather, this analysis involves
complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that
could affect the public trading or other values of the companies
to which the Company was compared.
Selected Precedent Transactions
Analysis.
Plymouth Partners reviewed, among other
things, to the extent available, financial information relating
to the following transactions, which were selected because they
represent all reported acquisitions since 2003 of companies
primarily in the CRO industry, with a total consideration in
excess of $75 million:
|
|
|
|
|
Announcement Date
|
|
Target
|
|
Acquiror
|
|
February 3, 2009
|
|
PharmaNet Development Group, Inc.
|
|
JLL Partners, Inc.
|
June 13, 2008
|
|
ClinPhone plc
|
|
PAREXEL International Corporation
|
March 15, 2008
|
|
Premier Research Group plc
|
|
ECI Partners LLP
|
January 2, 2008
|
|
AppTec Laboratory Services, Inc.
|
|
WuXi PharmaTech (Cayman) Inc.
|
July 25, 2007
|
|
PRA International
|
|
Genstar Capital, LLC
|
July 18, 2007
|
|
WIL Research Laboratories, Inc.
|
|
American Capital, Ltd.
|
February 13, 2007
|
|
BioReliance Corporation
|
|
Avista Capital Holdings, LP
|
June 19, 2006
|
|
Pharma Bio-Research Group B.V.
|
|
PRA International
|
May 9, 2006
|
|
Phase II-IV Clinical Services
|
|
Kendle International Inc.
|
|
|
Business of Charles River
|
|
|
|
|
Laboratories, Inc.
|
|
|
July 19, 2005
|
|
Pre-Clinical, Pharmaceutical
|
|
Aptuit, Inc.
|
|
|
Sciences and Clinical Trials
|
|
|
|
|
Supplies Business of Quintiles
|
|
|
|
|
Transnational Corp.
|
|
|
November 3, 2004
|
|
PharmaNet, Inc.
|
|
SFBC International, Inc.
|
September 30, 2004
|
|
WIL Research Laboratories, Inc.
|
|
Behrman Capital
|
July 1, 2004
|
|
Inveresk Research Group, Inc.
|
|
Charles River Laboratories, Inc.
|
December 24, 2003
|
|
BioReliance Corporation
|
|
Invitrogen Corporation
|
April 10, 2003
|
|
Quintiles Transnational Corp.
|
|
Pharma Services Holding, Inc.
|
For each selected transaction, Plymouth Partners reviewed the
transaction value, calculated as the Enterprise Value implied
for the target company based on the consideration paid by the
acquiror in the selected transaction, as well as the transaction
value less any subsequent write-off or impairment of goodwill
reported by the acquiror, in each case, as a multiple of the
target companys EBITDA in the last twelve months (which
EBITDA is referred to in this proxy statement as the
LTM
EBITDA
) preceding the announcement of the selected
transaction. For each selected transaction, Plymouth Partners
also reviewed the LTM EBITDA multiples referred to above as
adjusted to reflect the change from the announcement date of the
42
selected transaction to July 6, 2009 in the average LTM
EBITDA multiples for the Primary Peer Group. The following table
indicates the implied mean, median, high and low multiples for
the selected transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LTM EBITDA Multiples
|
|
Adjusted
|
|
|
As Reported
|
|
Exclude Write-Offs
|
|
As Reported
|
|
Exclude Write-Offs
|
|
All Selected Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean
|
|
|
15.1
|
x
|
|
|
12.5
|
x
|
|
|
9.6
|
x
|
|
|
8.4
|
x
|
Median
|
|
|
16.2
|
x
|
|
|
10.3
|
x
|
|
|
9.3
|
x
|
|
|
7.9
|
x
|
High
|
|
|
24.0
|
x
|
|
|
24.0
|
x
|
|
|
18.4
|
x
|
|
|
14.0
|
x
|
Low
|
|
|
5.9
|
x
|
|
|
5.8
|
x
|
|
|
3.2
|
x
|
|
|
3.2
|
x
|
Pre-Clinical Selected Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mean
|
|
|
17.4
|
x
|
|
|
11.0
|
x
|
|
|
11.0
|
x
|
|
|
7.9
|
x
|
Median
|
|
|
19.4
|
x
|
|
|
9.9
|
x
|
|
|
10.8
|
x
|
|
|
6.5
|
x
|
High
|
|
|
23.3
|
x
|
|
|
21.2
|
x
|
|
|
18.4
|
x
|
|
|
13.0
|
x
|
Low
|
|
|
9.7
|
x
|
|
|
5.8
|
x
|
|
|
5.9
|
x
|
|
|
5.9
|
x
|
To reflect the Company Discount, Plymouth Partners then applied
a discount of 40% to the 7.0x to 9.0x range of LTM EBITDA
multiples derived, in part by considering the mean multiple of
approximately 8.0x LTM EBITDA for pre-clinical transactions, as
adjusted to exclude write-offs and the change in the average LTM
EBITDA multiples of the Primary Peer Group, as described in the
preceding sentence, observed in the selected transactions. Such
discount was determined based on applicable historical trading
multiples of the Company relative to the Primary Peer Group over
the period from January 2, 2003 to March 31, 2009, and
as of July 6, 2009. Plymouth Partners then applied the
range of such discounted EBITDA multiples to the Companys
LTM EBITDA for the period ended March 31, 2009. This
analysis indicated the following approximate implied per share
equity reference range for the Company, as compared to the $8.50
per Share merger consideration:
|
|
|
|
|
Implied per Share Equity
|
|
|
Reference Range for the Company
|
|
Per Share
|
LTM EBITDA
|
|
Merger Consideration
|
|
$7.20 - $10.70
|
|
$
|
8.50
|
|
Estimated financial data of the selected transactions were based
on publicly available information. No company, business or
transaction used in this analysis is identical or directly
comparable to the Company or the Merger. Accordingly, an
evaluation of the results of this analysis is not entirely
mathematical. Rather, this analysis involves complex
considerations and judgments concerning differences in financial
and operating characteristics and other factors that could
affect the acquisition or other values of the companies,
business segments or transactions to which the Company and the
Merger were compared.
Discounted Cash Flow Analysis.
Plymouth
Partners performed, among other things, a discounted cash flow
analysis of the Company to calculate the estimated present value
of the standalone unlevered, after-tax free cash flows that the
Company could generate during the last three months of calendar
year 2009 and calendar years 2010 through 2012 based on the
Company Forecasts. Plymouth Partners calculated terminal values
for the Company by applying terminal multiples of 6.7x to 8.7x
to the Companys estimated EBITDA for calendar year 2012,
which terminal multiples were derived from the selected publicly
traded companies in the Primary Peer Group. The cash flows and
terminal values were then discounted to present value as of
September 30, 2009 using discount rates ranging from 10.5%
to 12.5%, which discount rate range was derived based on the
weighted average cost of capital estimated for the selected
publicly traded companies in the Primary Peer Group and the
Secondary Peer Group. To reflect the Company Discount, Plymouth
Partners then applied a discount of 50% to the implied per share
prices calculated by treating such present value as the
Companys Enterprise Value as of September 30, 2009.
Such discount was based on applicable historical trading
multiples of the Company relative to the Primary Peer Group over
the period from January 2, 2003 to
43
March 31, 2009, and as of July 6, 2009. This analysis
indicated the following approximate implied per share equity
reference range for the Company as compared to the $8.50 per
Share merger consideration:
|
|
|
|
|
Implied per Share Equity
|
|
|
Reference Range for the Company
|
|
Per Share Merger Consideration
|
|
$8.00 - $11.20
|
|
$
|
8.50
|
|
Estimated financial information used in this analysis was based
on the Base Case of the Company Forecasts. Such estimates of the
future performance of the Company in or underlying this analysis
are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than
those estimates.
Illustrative Leveraged Buyout
Analysis.
Plymouth Partners performed, among
other things, an illustrative analysis of the range of internal
rates of return that a hypothetical financial buyer might earn
if the Company were acquired in a leveraged buyout transaction
that used leverage equal to 2.3x estimated calendar year 2009
EBITDA and that closed as of December 31, 2009 at a
purchase price of $8.50 per Share. Based on a range of
illustrative exit multiples of estimated calendar year 2012
EBITDA of 5.3x to 6.3x, derived from the multiple of the
Companys estimated EBITDA for calendar year 2009
represented by the transaction value for the Merger for the
assumed exit at the end of 2012, which reflect illustrative
implied prices at which a hypothetical financial buyer might
exit its investment through a sale transaction, this analysis
indicated a range of illustrative internal rates of return on
equity to a hypothetical financial buyer from 23.6% to 31.7%,
with an internal rate of return on equity of 27.8% for the
midpoint exit multiple. Plymouth Partners also ran sensitivity
cases by increasing or decreasing the purchase price per Share
so as to yield internal rates of return on equity of
approximately 25% and 35% for the midpoint exit multiple. The
purchase prices which produced illustrative internal rates of
return on equity of 25% and 35%, using the midpoint exit
multiple for the Companys estimated EBITDA for calendar
year 2012, indicated the following approximate implied per Share
equity reference range for the Company, as compared to the $8.50
per Share merger consideration:
|
|
|
|
|
Implied per Share Equity
|
|
|
Reference Range for the Company
|
|
Per Share Merger Consideration
|
|
$7.20 - $9.00
|
|
$
|
8.50
|
|
Estimated financial information used in this analysis was based
on the Base Case of the Company Forecasts. Such estimates of the
future performance of the Company in or underlying this analysis
are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than
those estimates.
In addition, Plymouth Partners reviewed, for acquisition
transactions since January 2004 with a transaction value of
between $50.0 million and $1.0 billion, the premiums
paid, calculated as the consideration paid over the share price
one day, one week and four weeks prior to transaction
announcement, in such transactions. This analysis indicated
average premiums of 28%, 29% and 31% over the share prices one
day, one week and four weeks prior to announcement,
respectively. Plymouth Partners also reviewed the
volume-weighted average closing price for the Shares for the
one-day,
one-month and three-month periods, respectively, ending
March 3, 2009, the day prior to the Initial Baker Offer.
Further, Plymouth reviewed such volume-weighted average prices
for the Shares as adjusted based on the trading performance
since March 3, 2009 and through July 6, 2009 of
(a) the Standard & Poors (S&P) 500
index and (b) the average of the volume-weighted average
prices of the companies in the Primary Peer Group. The
volume-weighted average prices for the Shares and the Shares as
adjusted are set forth in the table below. The results of these
analyses were noted for informational purposes only and were not
compared to the $8.50 per Share merger consideration.
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reference Period Prior to March 3, 2009
|
|
|
1 Day Prior
|
|
1 Month Prior
|
|
3 Months Prior
|
|
Companys Share Price
|
|
$
|
4.79
|
|
|
$
|
6.61
|
|
|
$
|
8.01
|
|
As Adjusted to Reflect S&P 500 Performance from Start of
Reference Period to July 6, 2009
|
|
$
|
6.13
|
|
|
$
|
7.41
|
|
|
$
|
8.43
|
|
As Adjusted to Reflect Primary Peer Group Performance from Start
of Reference Period to July 6, 2009
|
|
$
|
6.59
|
|
|
$
|
8.03
|
|
|
$
|
9.87
|
|
Miscellaneous
As noted above, the discussion set forth above is a summary of
the material financial analyses presented by Plymouth Partners
to the Special Committee in connection with its opinion. The
preparation of such an opinion is a complex analytical process
involving various determinations as to the most appropriate and
relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis
or summary description. Plymouth Partners believes that its
analyses summarized above must be considered as a whole.
Plymouth Partners did not form an opinion or recommendation as
to whether any individual analysis or factor, considered in
isolation, supported or failed to support its opinion. Plymouth
Partners further believes that selecting portions of its
analyses and the factors considered or focusing on information
presented in tabular format, without considering all analyses
and factors or the narrative description of the analyses, could
create a misleading or incomplete view of the processes
underlying Plymouth Partners analyses and opinion. The
fact that any specific analysis has been referred to in the
summary above is not meant to indicate that such analysis was
given greater weight than any other analysis referred to in the
summary.
In performing its analyses, Plymouth Partners considered
industry performance, general business and economic conditions
and other matters, many of which are beyond the control of the
Company and Parent. The estimates of the future performance of
the Company and Parent in or underlying Plymouth Partners
analyses are not necessarily indicative of actual values or
actual future results, which may be significantly more or less
favorable than those estimates or those suggested by Plymouth
Partners analyses. These analyses were prepared solely as
part of Plymouths analysis of the fairness, from a
financial point of view, of the $8.50 per Share merger
consideration and were provided to the Special Committee in
connection with the delivery of Plymouth Partners opinion.
The analyses do not purport to be appraisals or to reflect the
prices at which a company might actually be sold or the prices
at which any securities have traded or may trade at any time in
the future. Accordingly, the estimates used in, and the ranges
of valuations resulting from, any particular analysis described
above are inherently subject to substantial uncertainty and
should not be taken to be Plymouth Partners view of the
actual values of the Company or Parent.
The type and amount of consideration payable in the Merger was
determined through negotiations between representatives of the
Special Committee and representatives of the Company, in each
case acting at the direction of the Special Committee, on the
one hand, and representatives of Parent, on the other hand, and
was recommended for approval by the Special Committee and
approved by the Board of Directors. The decisions to recommend
the entry into and to enter into the Merger Agreement were
solely those of the Special Committee and the Board of
Directors, respectively. As described above, Plymouth
Partners opinion and analyses were only one of many
factors considered by the Special Committee in its evaluation of
the proposed Merger and should not be viewed as determinative of
the views of the Special Committee or the Board of Directors
with respect to the Merger or the $8.50 per Share merger
consideration.
Plymouth Partners provided financial advisory services to the
Special Committee in connection with the Merger and Plymouth
Partners will receive for such services an aggregate fee
currently estimated to be approximately $3.05 million.
Under the terms of the engagement letter between the Company and
Plymouth Partners, $250,000 of such fee was payable upon
execution of the engagement letter on or about April 7,
2009, $500,000 of such fee was payable upon execution of the
Merger Agreement, an additional $250,000 of such fee is payable
upon each 3 month anniversary of the date of the engagement
letter and the balance of
45
such fee is payable upon consummation of the Merger.
Accordingly, assuming the Merger is consummated after
October 7, 2009 and prior to January 7, 2010, the
payment of approximately $1.8 million of the
$3.05 million fee (approximately 59%) payable to Plymouth
Partners will be contingent upon the consummation of the Merger.
In addition, the Company agreed to reimburse Plymouth Partners
for its reasonable out-of-pocket expenses incurred in connection
with its engagement and to indemnify Plymouth Partners against
certain liabilities arising out of its engagement.
During the two years preceding the date of Plymouth
Partners opinion, neither Plymouth Partners nor its
affiliates were engaged by, performed any services for or
received any compensation from the Company, Parent, Merger Sub
or any of their respective affiliates (other than from the
Company in connection with the Merger).
The Special Committee retained Plymouth Partners to act as the
Special Committees financial advisor in connection with
the review of strategic alternatives available to the Company,
including the Initial Baker Offer. Plymouth Partners is a
boutique investment banking firm that specializes in mergers and
acquisition advice, as well as providing other financial
services and investment advice. The founding member of Plymouth
Partners, who advised the Special Committee, has had a
decades-long career in investment banking, specializing in
mergers and acquisitions advice, at prominent international
investment banks prior to founding Plymouth Partners. The
Special Committee selected Plymouth Partners to act as the
Special Committees financial advisor in connection with
the evaluation of strategic alternatives available to the
Company on the basis of Plymouth Partners experience with
transactions in the healthcare industry and the high level of
personal involvement by Plymouth Partners managing
director in the process. References to Plymouth Partners in this
proxy statement refer to Plymouth Partners and employees or
representatives of Plymouth Partners
and/or
its
affiliates.
Position
of the Company as to the Purposes, Alternatives, Reasons and
Effects of the Merger
Purposes.
If the Merger is approved by the
Companys stockholders, the Company intends to effect the
Merger and the transactions contemplated by the Merger Agreement
to allow its stockholders to realize the value of their
investment in the Company in cash at a price that represents a
substantial premium over the closing market price of the Shares
on March 3, 2009, the last trading day prior to public
announcement of the Initial Baker Offer, as well as a premium
over the Initial Baker Offer and over the closing market price
of the Shares on July 6, 2009, the last full trading day
prior to the Board of Directors approval of the Merger and
the other transactions contemplated by the Merger Agreement. The
Special Committee considered various alternative strategies, but
concluded that none of these alternatives would be reasonably
likely to provide greater value to stockholders than that
available in the Merger and that any alternative involving
keeping the Company as a public company would be subject to,
among other things, the risks and uncertainties associated with
the Companys future performance.
Alternatives.
The Special Committee considered
various alternatives to Mr. Bakers proposal, as
described above under
Background of the
Merger and Special Committee Proceedings.
Reasons.
The Special Committee recommended
approval of the Merger at this time because it concluded that
the Merger would be reasonably likely to provide greater value
to the Companys stockholders than any of the other
strategic alternatives considered by the Special Committee, and
for the other reasons described under
Background of the Merger and Special
Committee Proceedings
and
Position of the Special Committee as to the
Fairness of the Merger.
Effects.
As a result of the Merger, Parent
will own the entire equity interest in the Company. If the
Merger occurs, the Companys stockholders (other than
Mr. Baker and his affiliate, Focused Healthcare Partners,
L.L.C.) will no longer have any equity interest in the Company
and instead will have only the right to receive the $8.50 cash
consideration per Share provided under the Merger Agreement. See
THE MERGER Payment of Merger
Consideration.
Therefore, except as described under
the caption
THE MERGER Interests of Certain
Persons in the Merger; Potential Conflicts of
Interest,
former stockholders of the Company will not
receive any benefits from the Companys business after the
Merger, nor will they bear the risk of any decrease in the value
of the Company after the Merger.
46
The Company expects that the Shares will continue to be listed
and traded on NYSE Arca, an all-electronic U.S. trading
platform, until the Merger is completed. However, after the
Merger, the Shares will no longer be listed or traded on NYSE
Arca or any other securities exchange. In addition, the Company
thereafter will be permitted to deregister the Shares under the
Exchange Act. As a private company, the Companys officers,
directors and the owners of more than 10% of the Shares will no
longer be subject to the short-swing profit provisions of
Section 16(b) of the Exchange Act. After the effective time
of the Merger, the Company will no longer be required to file
periodic reports with the Securities and Exchange Commission.
If the Merger occurs, all of the Companys stockholders
(other than Parent, Merger Sub, any other direct or indirect
wholly owned subsidiary of Parent, any direct or indirect wholly
owned subsidiary of the Company, Mr. Baker and his
affiliate, Focused Healthcare Partners, L.L.C.), including
without limitation all of the Companys unaffiliated
stockholders, will receive $8.50 in cash per Share. This amount
represents a premium of approximately 77% over the closing
market price of the Shares on March 3, 2009, the last
trading day prior to public announcement of the Initial Baker
Offer, a premium of 13% over the Initial Baker Offer and a
premium of 18% over the closing market price of $7.18 of the
Shares on July 8, 2009, the last full trading day prior to
the Companys announcement that it had entered into the
Merger Agreement. The Merger will therefore:
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|
|
|
|
provide a source of liquidity that might not otherwise be
available to the stockholders of the Company;
|
|
|
|
eliminate the stockholders exposure to fluctuations, up or
down, in market value of the Shares; and
|
|
|
|
allow the stockholders to pursue other investment alternatives
with the cash proceeds from the Merger.
|
At the effective time of the Merger:
|
|
|
|
|
except as otherwise agreed to in writing by Parent and a holder
thereof prior to the effective time of the Merger (i.e., with
respect to options to be contributed to Parent by
Mr. Baker), each option to purchase Shares outstanding
under the Stock Plans will become fully exercisable and vested,
will be cancelled and will be converted into the right to
receive, as soon as reasonably practicable (but in any event no
later than three business days) after the effective time of the
Merger, an amount in cash equal to (a) the excess, if any,
of $8.50 over the exercise price per Share under such option,
multiplied by (b) the total number of Shares subject to
such option immediately prior to the effective time, without
interest and less any applicable withholding taxes;
|
|
|
|
each outstanding share of restricted stock granted under the
Stock Plans will become fully vested, will be cancelled and will
be converted into the right to receive, as soon as reasonably
practicable (but in any event no later than three business days)
after the effective time of the Merger, $8.50 in cash, without
interest, less any applicable withholding taxes; and
|
|
|
|
each outstanding warrant to purchase Shares will be cancelled
and will be converted into the right to receive, as soon as
reasonably practicable (but in any event no later than three
business days) after the effective time of the Merger, an amount
in cash equal to (a) the excess, if any, of $8.50, over the
exercise price per Share under such warrant, multiplied by
(b) the total number of Shares subject to such warrant
immediately prior to the effective time, without interest and
less any applicable withholding taxes.
|
Parent has informed the Company that, prior to the completion of
the Merger, 2,326,116 Shares held by Mr. Baker and
Focused Healthcare Partners, L.L.C., an entity that is
controlled by Mr. Baker, as well as in the
money options held by Mr. Baker to purchase
55,500 Shares will be directly or indirectly contributed to
Parent in exchange for equity securities of Parent or one of its
affiliates. The $8.50 per Share merger consideration will not be
paid for Shares and options to purchase Shares that are directly
or indirectly contributed to Parent.
Position
of the Acquiring Parties as to the Fairness of the
Merger
The Acquiring Parties believe that the terms and conditions of
the Merger are substantively and procedurally fair to the
Company and to its stockholders (other than the holders of
Excluded Shares), including
47
without limitation all unaffiliated stockholders of the Company.
In reaching this determination, the Acquiring Parties reviewed
or considered the following substantive and procedural factors:
Substantive
Factors
Historical Financial Performance.
The
Acquiring Parties reviewed the historical financial performance
of the Company and considered the Companys current and
anticipated business, financial condition, results of operations
and prospects, including the prospects of the Company if it were
to remain a public company. The Acquiring Parties also
considered the Companys relatively weak performance in the
first fiscal quarter of 2009, forecasted relatively weak
performance in the second fiscal quarter of 2009 and potentially
weak performance in the third fiscal quarter of 2009, and the
fact that other companies in the CRO industry have experienced
similar declines.
Historical Market Prices and Premium.
The
Acquiring Parties considered the historical market prices and
recent trading activity of the Shares prior to the announcement
of the Merger, including the fact that the price of $8.50 per
Share to be paid in the Merger represents a premium of
approximately 77% over the closing Share price of $4.79 on
March 3, 2009, the last trading day prior to public
announcement of the Initial Baker Offer. The $8.50 per Share
purchase price also represents a premium of 13% over the Initial
Baker Offer, and a premium of 18% over the Companys
closing Share price of $7.18 on July 8, 2009, the last full
trading day prior to the announcement of the execution of the
Merger Agreement. The Acquiring Parties also considered the fact
that in 2008 the Shares had traded at prices significantly
higher than $8.50 per share, however, the Acquiring Parties did
not believe that such prices were reflective of the
Companys intrinsic value. The Acquiring Parties also
considered the fact that prior to the announcement of the
Initial Baker Offer the Shares had traded at prices
significantly lower than $8.50 per Share and did not foresee a
near term catalyst that would support a meaningful increase in
the trading price.
Cash Consideration and Liquidity.
The Merger
will provide consideration to the Companys stockholders
entirely in cash, which will allow them to pursue other
investment alternatives. The Acquiring Parties also considered
the fact that the Companys Shares are very thinly-traded
and that the Merger would provide liquidity for stockholders at
$8.50 per Share.
Financing.
The Acquiring Parties considered
the Companys historical difficulties in obtaining
financing from sources and on terms available to other publicly
traded companies of similar size and leverage and its ability to
refinance its existing debt, either upon the maturity thereof or
a default thereunder, and the effect of such difficulties in
obtaining financing on the liquidity, market price and trading
multiples of the Shares, as compared to other publicly traded
companies in the CRO industry.
Opinion of Plymouth Partners.
Without adopting
the opinion, the fact that the Special Committee received the
opinion of Plymouth Partners, its independent financial advisor,
to the effect that, as of July 7, 2009, and based upon and
subject to the various considerations set forth in such opinion,
the $8.50 per Share merger consideration to be received by
holders of Shares (other than holders of Excluded Shares, as to
which Plymouth Partners expressed no view), including without
limitation all unaffiliated stockholders of the Company, was
fair from a financial point of view to such stockholders.
Recommendation of Special Committee; Approval of Board of
Directors.
Although the Acquiring Parties did not
participate in any deliberations of the Special Committee during
which the market check, strategic alternatives, the Merger or
the Merger Agreement, or the fairness thereof, were discussed
(except to the extent that Mr. Baker was invited by the
Special Committee to provide relevant information and except for
Mr. Bakers presence at the meeting of the Board of
Directors during which the recommendation of the Special
Committee was presented), the Acquiring Parties found persuasive
the conclusions of the Board of Directors and the Special
Committee as to the fairness of the Merger to the Companys
stockholders (other than the holders of Excluded Shares),
including without limitation all unaffiliated stockholders of
the Company.
Prior Stock Purchases.
During the prior two
years, the only purchases by the Company or Mr. Baker
relating to Shares involved warrants or options to acquire
Shares. Since the consideration paid by the Company
48
or Mr. Baker in connection with the purchase or exercise of
such warrants or options, as applicable, was determined by
reference to the market price of the Shares at the time of such
transactions (and the exercise prices of such warrants or
options, which were determined with reference to the market
price at the time such warrants or options were originally
issued), the Acquiring Parties did not give these transactions
any additional consideration above and beyond current and
historical market prices.
Other Considerations.
The Acquiring Parties
did not specifically consider the net book value or the
liquidation value of the Company during its deliberation
process. The Acquiring Parties believed that the net book value
and liquidation value methodologies would result in lower
valuations than those that the Acquiring Parties were already
considering. The Acquiring Parties did not seek to establish a
pre-merger going concern value for the equity of the Company to
determine the fairness of the merger consideration to the
Companys stockholders. The Acquiring Parties do not
believe there is a single method of determining going concern
value, but the Acquiring Parties note that the Special
Committees exploration of a possible sale of the Company
contemplated the sale of the Company as a going concern.
Procedural
Factors
Formation and Authority of Special
Committee.
The Board of Directors established a
Special Committee which consisted solely of directors who are
not, and have not been, officers or employees of the Company,
the Acquiring Parties or any of their respective affiliates and
was not otherwise affiliated with the Acquiring Parties, and
which was represented by its own experienced independent legal
advisors, and advised by its own experienced independent
financial advisor, Plymouth Partners, to evaluate strategic
alternatives. Furthermore, the Special Committee and its
advisors had the exclusive authority to conduct a market check
and negotiate the terms of the Merger Agreement, and the Special
Committee and its advisors extensively negotiated the terms of
the Merger Agreement.
Recommendation of Special Committee; Approval of Board of
Directors.
The Special Committee unanimously
determined (i) that the sale of the Company is the best
strategic alternative available to the Company and is in the
best interests of the Company, (ii) that the Merger
Agreement with the Constituent Corporations and the transactions
contemplated thereby represent the best value reasonably
achievable for the stockholders of the Company (other than the
holders of Excluded Shares), including without limitation all
unaffiliated stockholders of the Company, and that the Merger is
substantively and procedurally fair to the Companys
unaffiliated stockholders, and (iii) to recommend that the
Board of Directors approve the proposed Merger with Merger Sub
and recommend that the stockholders of the Company approve the
Merger.
Extensive Strategic Review, Solicitation of Third Party
Proposals and Market Check Process.
The Special
Committee conducted an extensive, multi-stage market check
involving over 50 potential bidders, including CROs, healthcare
companies and private equity and venture capital firms in the
United States, Europe and Asia. The potential bidders were given
the opportunity to perform comprehensive due diligence on the
Company, including through detailed individual management
presentations and access to an extensive due diligence data
room. After completing the market check process, the Special
Committee considered that no party had offered to pay, and
believed, based on discussions with its advisors, among other
things, that it was unlikely that any party would offer to pay,
a higher price than the Acquiring Parties had offered. The
Acquiring Parties are also unaware of any firm offers for the
Company made in the prior two years by any unaffiliated person
for (i) the merger or consolidation of the Company with or
into another company, or vice versa; (ii) the sale or other
transfer of all or any substantial part of the assets of the
Company; or (iii) the purchase of the Companys
securities that would enable the holder to exercise control of
the Company.
Negotiations.
The Merger Agreement was the
result of active negotiations in which the Special
Committees advisors and representatives of the Company,
acting at the direction of the Special Committee, on the one
hand, negotiated with representatives of Parent, on the other
hand, the terms and conditions of the Merger, including, without
limitation, the merger consideration, the representations and
warranties, the acquisition proposals (non-solicitation)
covenant, the conditions to closing and the termination and
termination fee provisions. These negotiations, among other
things, resulted in a 13% increase in the merger consideration
from the Initial Baker Offer.
49
Unaffiliated Representative.
The Acquiring
Parties did not take a view as to, and did not believe it was
appropriate to influence, whether there was a need to retain any
additional unaffiliated representatives to act on behalf of the
stockholders. In any event, they believe that the independence
of the members of the Special Committee and the retention by the
Special Committee of its own legal counsel and financial advisor
permitted the Special Committee to effectively represent the
interests of such stockholders. The Acquiring Parties did
consider the fact that the Merger Agreement requires both
(x) the approval of the holders of at least a majority of
the outstanding Shares entitled to vote on the Merger and
(y) the vote of a majority of the votes cast by holders of
the outstanding Shares, other than holders of Excluded Shares.
No Participation in the Special Committees Deliberative
Process.
Neither Mr. Baker nor Mr. Cass
participated in any deliberations of the Special Committee
during which the market check, strategic alternatives, the
Merger or the Merger Agreement were discussed, except to the
extent invited by the Special Committee to provide relevant
information. Messrs. Baker and Cass attended the meeting of
the Board of Directors during which the recommendation of the
Special Committee was presented, but abstained from deliberating
or voting on the Merger.
Opinion of Plymouth Partners.
The Special
Committee received from its financial advisor, Plymouth
Partners, an oral opinion, subsequently confirmed in writing, to
the effect that, as of July 7, 2009, and based on and
subject to the various conditions set forth in such opinion, the
$8.50 per Share merger consideration to be received by holders
of Shares (other than holders of Excluded Shares, as to which
Plymouth Partners expressed no view), including without
limitation all unaffiliated stockholders of the Company, was
fair from a financial point of view to such holders.
Opportunity to Change Recommendation.
The
Acquiring Parties also considered the fact that while the Merger
Agreement requires the Company to stop seeking other proposals,
it permits the Special Committee to consider an unsolicited
Acquisition Proposal that the Special Committee has determined
in good faith, based on the information then available and after
consultation with its financial advisors and outside legal
counsel, constitutes or could reasonably be expected to result
in a Superior Proposal, subject to certain limitations and the
payment of a termination fee and expense reimbursement. See
The Merger Agreement Limitation on Soliciting
Transactions.
Approval of Stockholders.
The Merger Agreement
explicitly requires (1) the approval of the Merger by the
holders of a majority of the outstanding Shares entitled to vote
on the Merger and (2) the approval of the Merger by a
majority of the votes cast by holders of outstanding Shares
entitled to vote on the Merger, excluding the votes cast by
Parent, Merger Sub or any Interested Party. Mr. Baker and
his affiliates beneficially owned as of the record date
approximately 17.7% of the Shares, which Shares would be counted
for purposes of determining the State Law Vote but would not be
counted for purposes of determining the Neutralized Vote.
Accordingly, assuming that Mr. Baker and his affiliates
voted all of their Shares in favor of the Merger, the
affirmative vote of greater than 39.2% of the remaining 82.3% of
the Shares (or 32.3% of all outstanding Shares) would be
required to approve the Merger for purposes of the State Law
Vote, and, assuming all of the Companys stockholders voted
all of their Shares with respect to the Merger, the affirmative
vote of a majority of the remaining 82.3% of the Shares would be
required to approve the Merger for purposes of the Neutralized
Vote.
Vote of Unaffiliated Stockholders.
The Merger
Agreement explicitly requires the approval of the Merger by a
majority of the votes cast by holders of outstanding Shares
entitled to vote on the Merger, excluding the votes cast by
Parent, Merger Sub or any Interested Party. While the Merger is
not structured so that approval of at least a majority of
unaffiliated security holders is required in order to approve
the Merger, by excluding the votes cast by Parent, Merger Sub
and Interested Parties, the vote required under the Merger
Agreement takes into account only the votes cast by the
Companys unaffiliated stockholders and the Companys
officers and directors (other than Mr. Baker), each of whom
will receive the $8.50 per Share merger consideration for
each Share that they hold on the effective date of the Merger.
50
Position
of the Acquiring Parties as to the Purposes, Alternatives,
Reasons and Effects of the Merger
Purposes.
The Acquiring Parties intend to
effect the Merger and the transactions contemplated by the
Merger Agreement to acquire control of the Company and to
operate it as a private company. If the Merger is completed, the
Company will become a wholly owned subsidiary of Parent.
Alternatives.
The Acquiring Parties did not
consider any alternative means to accomplish the stated purposes.
Reasons.
For the reasons stated below, the
Acquiring Parties believe that it is best for the Company to
operate as a privately held entity. They believe that the
Company will have greater operating flexibility to focus on
enhancing long-term value if freed of the constraint of the
public markets shorter-term focus on matters such as
quarterly earnings growth, and the public markets reaction
to developments impacting the Company. The Acquiring Parties
believe that as a privately held entity, the Company will have
greater flexibility to make decisions that may negatively affect
quarterly earnings but increase the value of the Companys
assets or earnings over the long-term. In a public company
setting, decisions that negatively affect earnings could
significantly reduce the per share price of a company if
analysts short-term earnings expectations for such company
are not met or exceeded. Furthermore, the general level of
confidence (or lack thereof) in the stock markets will no longer
affect the Companys stock price.
The Acquiring Parties also believe that, as a private company,
the Company will have greater flexibility to attract new
business and capital than have been available to the Company as
a public company. This view is based on Mr. Bakers
long-standing involvement with the Company and his experiences
with prospective sources of capital. In fact, the Acquiring
Parties experienced difficulties in raising financing for the
Merger for reasons specific to the Company in the context of a
going-private transaction.
The Acquiring Parties also note that the trading volume for the
Shares has been relatively low, reflecting an illiquidity
relative to alternative investment opportunities that has
adversely impacted stockholders and which they believe cannot be
readily improved given the Companys scale, the state of
capital markets for companies such as the Company and the
Companys capital needs.
Going-private will reduce certain costs which relate
to being a public company, including legal costs, insurance
costs, the costs of certain accounting and auditing activities
and internal controls, the cost of annual meetings, the cost of
preparing, printing and mailing corporate reports and proxy
statements and the cost of investor relations activities.
Elimination of the publicly traded equity securities listed on
NYSE Arca will result in a saving of regulatory expenses,
including listing fees. In addition, the Company will be able to
eliminate a good portion of the time devoted by its management
and some of its other employees to matters that relate
exclusively to the Company being a publicly held company. As a
result, the Acquiring Parties believe that the Company will be
better able to focus its resources on the Companys
business and operations as a private company rather than as a
public company. The Acquiring Parties believe that the Merger
advances these objectives. While the Acquiring Parties believe
that there will be significant opportunities associated with
their investment in the Company, there are also substantial
risks that such opportunities may not be fully realized. In
addition, the Acquiring Parties will bear the particular risks
of an investment in the Company, which include changes in the
customer base from industry consolidation, risks of cancelled
contracts, foreign exchange risk associated with the
predominantly
non-U.S. revenue
sources, the risk of the capital intensive nature of the
business, the substantial financing cost that the Company will
bear following the Merger and the impact of animal rights
activists. The Acquiring Parties also understand that their
investment in the Company will be illiquid.
In considering the reasons for the Merger at this time, the
Acquiring Parties also considered the increased uncertainty in
the financial markets generally and the fact that the Company
was at risk of potentially breaching the financial covenants in
its Existing Financing Agreement due to forecasted relatively
weak performance in the second fiscal quarter of 2009 and
potentially weak performance in the third fiscal quarter of 2009
and was expected to seek a modification of those covenants in
order to avoid a potential default under such agreement. The
Acquiring Parties also considered the fact that the Company had
recently conducted an extensive, multi-stage market check
involving over 50 potential bidders, in which no party had
offered to pay
51
a higher price than the Constituent Corporations had offered.
See Background of the Merger and Special
Committee Proceedings.
The transaction was structured as a cash merger to provide the
stockholders of the Company (other than Parent, Merger Sub, any
direct or indirect wholly owned subsidiary of Parent or any
direct or indirect wholly owned subsidiary of the Company) with
a cash payment for all of the Shares they hold. This cash merger
structure provides for a prompt and orderly transfer of
ownership from the Companys stockholders to Parent in a
single step with minimal disruption to the Companys
operations and reduced transaction costs relative to alternative
transaction structures.
Effects.
If the Merger is consummated,
existing stockholders of the Company, including without
limitation all of the Companys unaffiliated stockholders,
will no longer have an equity interest in the Company, will not
participate in future earnings growth, if any, of the Company
and instead will have only the right to receive cash
consideration pursuant to the Merger Agreement (other than
Mr. Baker, his affiliate, Focused Healthcare Partners,
L.L.C., and any members of management who may be granted equity
based incentives, if any, following the Merger). See
THE MERGER Payment of Merger
Consideration
. Similarly, following the Merger, such
stockholders of the Company, including without limitation all of
the Companys unaffiliated stockholders, will not bear the
risk of any decrease in the earnings or stock price of the
Company. As a result of the Merger, the surviving corporation
will be a privately held corporation and there will be no public
market for the Shares. The Shares will cease to be traded on
NYSE Arca or any other securities exchange. In addition, the
Company will become entitled to deregister its Shares under the
Exchange Act. Termination of registration will make certain
provisions of the Exchange Act, such as the requirement of
furnishing a proxy statement in connection with
stockholders meetings and some of the requirements under
the Sarbanes Oxley Act of 2002, no longer applicable to the
Company. After the effective time of the Merger, the Company
will no longer be required to file periodic reports with the
Securities and Exchange Commission.
Immediately after the closing of the Merger, all of
Parents shares are expected to be beneficially owned by
the Acquiring Parties, other than the warrants issued to the
lenders at the closing of the Merger. Accordingly, immediately
following consummation of the Merger, the Acquiring Parties
expect to beneficially own approximately 95.5% of the fully
diluted outstanding shares of Parent. Based on the foregoing,
the Acquiring Parties interests in the net book value and
net income of the Company as of June 30, 2009, would go
from 14.8%, or $(1,139,000) and $1,475,000, respectively, prior
to the Merger to 95.5%, or $(7,353,000) and $9,516,000,
respectively, following the Merger.
If the Merger becomes effective, all stockholders will receive
$8.50 per Share in cash, without interest and subject to
applicable withholding taxes (other than Mr. Baker and his
affiliate, Focused Healthcare Partners, L.L.C.). See
THE MERGER AGREEMENT Conversion of Common
Stock
. This will provide a source of liquidity not
otherwise available, and will eliminate such stockholders
exposure to fluctuations in market value of their Shares. In
addition, it will allow such stockholders to pursue other
investment alternatives. Receipt by the stockholders of the
Company of the merger consideration will be a taxable
transaction for U.S. federal income tax purposes and also
may be a taxable transaction under applicable state, local,
foreign or other tax laws. See
THE MERGER
Material U.S. Federal Income Tax Consequences
.
Merger Agreement.
The Merger Agreement is the
result of extensive negotiation among the Special Committee, its
counsel and the financial advisor and the Acquiring Parties and
their counsel. See Background of the Merger
and Special Committee Proceedings.
Parents
Plans for the Company
Following the Merger, Parent expects to operate the Company
consistent with past practices. Except as set forth elsewhere in
this proxy statement relating to the financing of the Merger
(see
THE MERGER Merger
Financing
), Parent does not have any present plans or
proposals which relate to, or would result in, an extraordinary
corporate transaction, such as a merger, reorganization or
liquidation involving the Company or any of its subsidiaries,
purchase, sale or transfer of a material amount of assets of the
Company or any of its subsidiaries, or any other material
changes in capitalization, dividend rate or policy,
indebtedness, corporate structure, business or composition of
the Board of Directors or the management of the Company. Parent
52
expects, following the Merger, to seek to reduce its cost of
capital by seeking sources of financing not presently available
to it as a public company. Parent will, from time to time
following the Merger, evaluate and review the businesses,
operations and properties of the Company and its subsidiaries
and make such changes as are deemed appropriate subject to any
required corporate approvals.
As disclosed in the item captioned
SPECIAL
FACTORS Position of the Company as to the Purposes,
Alternatives, Reasons and Effects of the Merger
,
following the completion of the Merger, the Shares will cease to
be listed on NYSE Arca and, following the delisting, such Shares
will no longer be traded on NYSE Arca. In addition, thereafter
the Company will be entitled to deregister its Shares under the
Exchange Act upon application by the Company to the Securities
and Exchange Commission, and, after the effective time of the
Merger, the Company will no longer be required to file periodic
reports and other statements with the Securities and Exchange
Commission.
THE
MERGER
Proposal
to be Considered at the Special Meeting
At the special meeting, you will be asked to consider and vote
upon a proposal to approve the Merger.
At the effective time of the Merger, the separate corporate
existence of Merger Sub will cease, and the Company will survive
as a wholly owned subsidiary of Parent. At the effective time of
the Merger:
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each outstanding Share (other than Shares owned by Parent,
Merger Sub or any other direct or indirect wholly owned
subsidiary of Parent (including Shares to be directly or
indirectly contributed to Parent by Mr. Baker and his
affiliate, Focused Healthcare Partners, L.L.C., prior to the
effective time of the Merger) and Shares owned by any direct or
indirect wholly owned subsidiary of the Company) automatically
will be converted into the right to receive $8.50 in cash,
without interest and less any applicable withholding taxes;
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except as otherwise agreed to in writing by Parent and a holder
thereof prior to the effective time of the Merger (i.e., with
respect to options to be contributed to Parent by
Mr. Baker), each outstanding option to purchase Shares
under the Stock Plans will become fully exercisable and vested,
will be cancelled and will be converted into the right to
receive, as soon as reasonably practicable (but in any event no
later than three business days) after the effective time of the
Merger, an amount in cash (without interest and less applicable
withholding taxes) equal to:
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the excess, if any, of $8.50 over the per Share exercise price
of the option, multiplied by
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the total number of Shares subject to the option as of
immediately prior to the effective time of the Merger;
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each outstanding share of restricted stock granted under the
Stock Plans will become fully vested, will be cancelled and will
be converted into the right to receive, as soon as reasonably
practicable (but in any event no later than three business days)
after the effective time of the Merger, $8.50 in cash, without
interest and less any applicable withholding taxes;
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each outstanding warrant to purchase Shares will be cancelled
and will be converted into the right to receive, as soon as
reasonably practicable (but in any event no later than three
business days) after the effective time of the Merger, an amount
in cash (without interest and less applicable withholding taxes)
equal to:
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the excess, if any, of $8.50 over the exercise price per Share
under such warrant, multiplied by
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the total number of Shares subject to such warrant immediately
prior to the effective time, without interest, less any
applicable withholding taxes; and
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each outstanding share of common stock, par value $0.01 per
share, of Merger Sub will be converted into one share of common
stock, par value $0.01 per share, of the surviving corporation
of the Merger.
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Parent has informed the Company that 2,326,116 Shares held
by Mr. Baker and Focused Healthcare Partners, L.L.C., an
entity controlled by Mr. Baker, as well as in the
money options held by Mr. Baker to purchase
55,500 Shares will be directly or indirectly delivered to
Parent in exchange for equity securities of Parent or one of its
affiliates. The $8.50 per Share merger consideration will not be
paid for Shares and options to purchase Shares that are
exchanged for equity securities of Parent or one of its
affiliates.
Voting
Rights; Quorum; Vote Required for Approval
Stockholders of record at the close of business on
October 1, 2009, the record date for the special meeting,
are entitled to notice of, and to vote at, the special meeting.
On the record date, there were 1,918 holders of record of
Shares and 13,899,095 Shares outstanding. Each Share
entitles the holder to cast one vote at the special meeting.
There are no other voting securities of the Company.
Stockholders may vote at the special meeting either in person or
by proxy. However, if your Shares are held for you by a bank,
broker or other so-called nominee holder:
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you must instruct your bank, broker or other nominee to vote
your Shares by following the procedures specified by the nominee
for voting; or
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if you want to vote in person at the meeting, you must request a
proxy card in your name from your bank, broker or other nominee.
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Participants in the Huntingdon Life Sciences, Inc. Savings and
Investment Plan are entitled to instruct the trustee of the plan
about how to vote the Shares allocated to each such
participants account. Pursuant to the terms of the plan
and the trust agreement, the trustee will vote Shares allocated
to a participants account for which the trustee receives
no instructions and any unallocated Shares in the same
proportion that the trustee votes Shares for which it receives
instructions.
The presence in person or by proxy of the holders of a majority
of the Shares outstanding on the record date is necessary to
constitute a quorum at the special meeting. If there is no
quorum, business cannot be conducted at the special meeting and
the proposal to approve the Merger will not be voted on.
Abstentions and so-called broker non-votes will be
counted for the purpose of establishing a quorum at the special
meeting.
The Merger must be approved by (1) the affirmative vote of
the holders of a majority of the outstanding Shares entitled to
vote on the Merger (i.e., the State Law Vote) and (2) a
majority of the votes cast by holders of outstanding Shares
entitled to vote on the Merger, excluding the votes cast by
Parent, Merger Sub or any Interested Party (i.e., the
Neutralized Vote). Mr. Baker and his affiliates
beneficially owned as of the record date approximately 17.7% of
the Shares, which Shares would be counted for purposes of
determining the State Law Vote but would not be counted for
purposes of determining the Neutralized Vote. Accordingly,
assuming that Mr. Baker and his affiliates voted all of
their Shares in favor of the Merger, the affirmative vote of
greater than 39.2% of the remaining 82.3% of the Shares (or
32.3% of all outstanding Shares) would be required to approve
the Merger for purposes of the State Law Vote, and, assuming all
of the Companys stockholders voted all of their Shares
with respect to the Merger, the affirmative vote of a majority
of the remaining 82.3% of the Shares would be required to
approve the Merger for purposes of the Neutralized Vote.
Abstentions and broker non-votes effectively will be votes
against the approval of the Merger for purposes of the State Law
Vote but will not count as votes cast for purposes of the
Neutralized Vote. Because a broker, bank or other nominee cannot
vote without instructions, your failure to give instructions has
the same effect as a vote against the Merger for purposes of the
State Law Vote.
Under applicable law, the only matters that may be acted on at a
special meeting of stockholders are those stated in the notice
of the special meeting. Accordingly, other than procedural
matters relating to the proposal to approve the Merger or the
conduct of the special meeting, no other business may properly
come before the special meeting. If any such procedural matter
requiring a vote of stockholders should arise, or any question
as to an adjournment of the special meeting is submitted to
stockholders, the persons appointed as proxies will vote on such
procedural matters in accordance with their discretion. The
special meeting may be
54
postponed to a new date, time and location announced publicly,
with the same record date, subject to applicable law.
Voting
and Revocation of Proxies
All Shares represented by properly executed proxies received by
the Company or proxies properly submitted via telephone or
Internet and not revoked prior to or at the special meeting will
be voted in accordance with the instructions marked on the
proxies.
If no instructions are given, the proxy will be
voted
FOR
the proposal to approve the Merger.
A stockholder may revoke a proxy:
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by delivering to the Companys Secretary c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717 a later-dated signed
proxy card or a written revocation prior to the vote at the
special meeting;
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by authorizing his, her or its vote again by Internet or
telephone;
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by attending the special meeting and voting in person; or
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if a stockholder has instructed a bank, broker or other nominee
holder to vote his or her Shares, by following the procedures to
change a vote specified by the nominee holder.
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Attending the special meeting in person will not alone revoke a
proxy. You must take one of the actions specified above to
validly revoke a proxy. Revoking a proxy after the vote is taken
at the special meeting will not have any effect.
The Board of Directors is not currently aware of any business to
be brought before the special meeting other than the proposal to
approve the Merger. However, if other matters regarding the
conduct of the special meeting are properly presented, the
persons named as proxies in the proxy card will have the
discretionary authority to vote in accordance with their
judgment on any such matters.
Proxy
Solicitation
Proxies may be solicited by executive officers of the Company,
including Mr. Baker, either in person, by mail, telephone
or telegraph, over the Internet or by facsimile. Directors,
officers and employees of the Company will not be specifically
compensated for their services. The Company anticipates that
banks, brokers, nominees, custodians and fiduciaries will
forward proxy soliciting material to beneficial owners of Shares
and that such persons will be reimbursed by the Company for the
expenses incurred in doing so.
Structure
of the Merger
The proposed acquisition of the Company by Parent has been
structured as a merger of Merger Sub with and into the Company,
with the Company surviving as a direct wholly owned subsidiary
of Parent. The transaction was structured as a cash merger to
provide the stockholders of the Company (other than Parent,
Merger Sub, any direct or indirect wholly owned subsidiary of
Parent or any direct or indirect wholly owned subsidiary of the
Company) with a cash payment for all of the Shares they hold and
to provide a prompt and orderly transfer of ownership to Parent
with reduced transaction costs. Such cash consideration will not
be paid with respect to any Shares or options to purchase Shares
that are exchanged by Mr. Baker and his affiliate, Focused
Healthcare Partners, L.L.C., for equity securities of Parent.
Effective
Time of the Merger
The Merger will become effective at the time that the articles
of merger are accepted for record by the State Department of
Assessments and Taxation of Maryland or at such later time (not
to exceed 30 days after the articles of merger are accepted
for record) as may be agreed by the Company, Parent and Merger
Sub in writing and specified in the articles of merger. The
Company expects to cause the Merger to become effective on the
second business day after the conditions to the Merger
(including the approval of the Merger by the requisite vote of
the Companys stockholder) are satisfied or waived.
55
Payment
of Merger Consideration
Prior to the effective time of the Merger, Parent will designate
a paying agent (subject to the Companys approval) to make
payment of the merger consideration to the Companys
stockholders. The Company may act as the paying agent in certain
circumstances. At or prior to the effective time of the Merger,
Parent will deposit in trust with the paying agent the funds
necessary to pay the $8.50 per Share merger consideration for
each Share issued and outstanding immediately prior to the
effective time of the Merger, without interest and less any
applicable withholding taxes. The paying agent will deliver the
merger consideration according to the procedures summarized
below.
Surrender of Stock Certificates.
Promptly
after the effective time of the Merger (and in any event within
two business days thereof), Parent will cause the paying agent
to mail to each holder of record of Shares a letter of
transmittal and instructions advising stockholders how to
surrender their stock certificates in exchange for the merger
consideration. Upon surrender of your stock certificate(s),
together with a properly completed letter of transmittal and any
other items specified by the letter of transmittal, the paying
agent will pay you the $8.50 per Share merger consideration for
each Share surrendered, without interest and less any applicable
withholding taxes, and your stock certificate(s) will be
cancelled. No interest will accrue or be paid on the merger
consideration.
If your stock certificate(s) have been lost, mutilated or
destroyed, you may deliver to the paying agent an affidavit and,
if required by the surviving corporation, an indemnity bond in
customary amount instead of your stock certificate(s).
If ownership of any Shares has been transferred but such
transfer is not reflected in the transfer records of the
Company, upon the transferees surrender of the transferred
certificate(s) to the paying agent, together with all documents
reasonably required to evidence and effect such transfer and to
evidence that all applicable stock transfer taxes have been paid
to the extent applicable, the paying agent will pay the merger
consideration applicable to such transferred Shares, without
interest and less any applicable withholding taxes.
Please do not forward your stock certificates to the paying
agent without a letter of transmittal, and do not return your
stock certificates with the enclosed proxy card.
At and after the effective time of the Merger, your Shares will
be cancelled and you will cease to have any rights as a
stockholder of the Company, except for the right to surrender
your stock certificates in exchange for the merger
consideration. At the effective time of the Merger, the
Companys stock ledger with respect to Shares that were
outstanding prior to the Merger will be closed and no further
registration of transfers of such Shares will be made.
One year after the effective time of the Merger, the paying
agent will deliver to the Company, as the surviving corporation
of the Merger, all cash that has not yet been claimed by
stockholders of the Company in payment of the merger
consideration, plus any accrued interest, and the paying
agents duties will terminate. Thereafter, stockholders may
surrender stock certificates directly to Parent and the
surviving corporation and receive the $8.50 per Share merger
consideration for each Share surrendered, without interest and
less any applicable withholding taxes. However, none of Parent,
Merger Sub, the paying agent, the Company as the surviving
corporation or any other person will be liable to any person for
any merger consideration required to be delivered to a public
official under any applicable abandoned property, escheat or
similar law.
Treatment of Stock Options, Restricted Stock and
Warrants.
At the effective time of the Merger:
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except as otherwise agreed to in writing by Parent and a holder
thereof prior to the effective time of the Merger (i.e., with
respect to options to be contributed to Parent by
Mr. Baker), each outstanding option to purchase Shares
granted under any of the Stock Plans will become fully vested
and exercisable, will be cancelled, and will be converted into
the right to receive an amount in cash equal to the excess, if
any, of $8.50 over the per Share exercise price of the option,
multiplied by the total number of Shares subject to the option
immediately prior to the effective time of the Merger, without
interest and less any applicable withholding taxes;
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each outstanding share of restricted stock of the Company
granted under any of the Stock Plans will become fully vested,
will be cancelled and will be converted into the right to
receive an amount in cash equal to $8.50, without interest and
less any applicable withholding taxes; and
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each outstanding warrant to purchase Shares will be cancelled
and converted into the right to receive an amount in cash equal
to the excess, if any, of $8.50 over the per Share exercise
price of the warrant, multiplied by the total number of Shares
subject to the warrant immediately prior to the effective time
of the Merger, without interest and less any applicable
withholding taxes.
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Merger
Financing
The total amount of funds necessary to consummate the Merger and
the related transactions is estimated to be approximately
$192.7 million, comprised of (i) approximately
$123.4 million in cash to fund the payment of the merger
consideration and payments in respect of the cancellation of
outstanding stock options, restricted stock and warrants,
(ii) approximately $55.0 million of the Companys
senior indebtedness under its Existing Financing Agreement,
which agreement will remain in place following the Merger on
amended terms, and (iii) approximately $14.3 million
in cash to pay transaction fees and expenses.
It is anticipated that these funds will be obtained from equity
and debt financings as described below, together with available
cash of the Company of up to $22.6 million (subject to the
minimum qualified cash condition under the debt financing
commitment letters).
Equity Financing.
Pursuant to an equity
commitment letter dated July 8, 2009, addressed to Parent
from LAB Holdings, a company controlled by Mr. Baker, LAB
Holdings has committed to provide equity financing to Parent in
the aggregate amount of $123.1 million (less the amount of
cash on hand at the Company available to finance the Merger), of
which approximately $20.1 million will be provided through
the contribution of Shares or options to purchase Shares held by
Mr. Baker and his affiliate, Focused Healthcare Partners,
L.L.C., and the balance will be provided in cash of not less
than $80.0 million. Shares contributed to LAB Holdings will
be contributed to Parent. The equity commitment of LAB Holdings
is subject to the satisfaction (or written waiver by Parent) of
each of the conditions to Parent and Merger Subs
obligations to consummate the Merger.
LAB Holdings may elect to terminate the equity commitment
letter, at its sole discretion, if disclosure of the identity of
any of LAB Holdings affiliates, or any of the officers,
directors, employees, members, accountants, consultants, legal
counsel, direct or indirect financing sources, agents and other
representatives of LAB Holdings, Parent, Merger Sub, or certain
other specified persons (other than Mr. Baker and subject
to certain limited exceptions) becomes necessary to effect or
obtain stockholder or regulatory approval for the Merger or
otherwise proceed with the transaction (unless such disclosure
is made pursuant to a protective order or other confidentiality
arrangement reasonably acceptable to LAB Holdings). LAB Holdings
may also elect to terminate the equity commitment letter, at its
sole discretion, if the Company, an affiliate of the Company, or
any officers, directors, employees, counsel or agents of the
foregoing, discloses the identity of any person in contravention
of the foregoing.
Debt Financing.
Parent and Merger Sub have
received debt commitments from each of Progress Funding and
River Investment Partners, which are referred to herein as the
lenders.
River Investment Partners acquired the existing
loan to the Company and its subsidiaries that was previously
owned by Anchor, a prior lender, and assumed Anchors
obligations under its debt financing commitment to Parent.
Pursuant to these debt commitments, Progress Funding and River
Investment Partners have committed, subject to certain specified
conditions discussed below, to enter into an amended and
restated financing agreement among Parent, the Company as the
surviving corporation of the Merger, certain of their
subsidiaries either as additional borrowers or as guarantors,
and Progress Funding and River Investment Partners as the
lenders, pursuant to which such lenders will provide to Merger
Sub, or a wholly owned United Kingdom subsidiary of Merger Sub,
and each of the borrowers under the Companys Existing
Financing Agreement (which are referred to in this proxy
statement, collectively, as the
Borrowers
) term loan
facilities in the aggregate principal amount of
$70.0 million, consisting of a term loan A facility of up
to $15.0 million to be funded from new financing on the
closing date and a term loan B facility of up to
$55.0 million consisting of the aggregate
57
principal amount of loans outstanding under the Companys
Existing Financing Agreement, which agreement will remain in
place on amended terms following the Merger. Progress Funding
has committed to provide $40.0 million (consisting of
$5.0 million of new financing and $35.0 million in
rollover of currently outstanding loans) of the aggregate debt
commitment and River Investment Partners has committed to
provide $30.0 million (consisting of $10.0 million of
new financing and $20.0 million in rollover of currently
outstanding financing) of the aggregate debt commitment. The
proceeds of the debt financing will be used to (i) fund a
portion of the purchase price of the Merger, (ii) pay fees
and expenses related to the financing and other transactions
contemplated by the commitment letters and (iii) provide
for other general corporate purposes of the Borrowers.
The term A loan facility matures thirty months following the
closing of the Merger and the term B loan facility matures
thirty-six months following the closing of the Merger. The term
loans will bear interest at a rate of 15% per annum, 3% of which
may be capitalized and added to the principal amount of the term
loans at the Companys option so long as no event of
default has occurred and is continuing. At the closing, Parent
will also issue to the lenders (or their designees) warrants to
purchase 4.5% in the aggregate of the common stock of Parent on
a fully diluted basis, at an exercise price of $0.01 per share.
The term loans will be secured by a perfected, first priority
security interest in all of the assets and property of the
Company, each Borrower and each of the guarantors. Parent and
each subsidiary of the Company that is not a borrower will
guarantee the Borrowers obligations under the term loans.
Amounts outstanding under the term loan will bear interest in
cash, but the Borrowers have an option to capitalize a portion
of each interest payment so long as no event of default has
occurred. In addition, the Borrowers have agreed to pay fees and
provide other compensation to the lenders, including expense
reimbursement, in consideration of their agreements to provide
the debt financing.
Conditions to Debt Financing.
The commitments
of the lenders to provide the above-described debt financing
arrangements and facilities are subject to satisfaction or
waiver of the following conditions:
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the use of commercially reasonable efforts to deliver amendments
to existing leasehold mortgages in form and substance
satisfactory to the agent under the term loans (which agent is
referred to in this proxy statement as the
Agent
) prior
to the closing date;
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delivery of opinions from U.S. and foreign counsel to each
Borrower and Guarantor as to such customary closing matters
reasonably requested by Agent and its counsel;
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negotiation, execution and delivery of definitive loan
documentation and the satisfaction of the conditions precedent
described herein;
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funding of the equity commitment to Parent pursuant to the LAB
Holdings equity commitment letter;
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the availability to Parent and Merger Sub, after funding of the
equity commitment, the use of available cash on hand and the
receipt of the loan proceeds, of sufficient funds to consummate
the Merger, including the payment of the purchase price and all
fees, costs and expenses then payable in respect of the Merger;
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the absence of indebtedness or outstanding preferred stock of
Parent and Merger Sub, other than indebtedness under the new
amended and restated financing agreement and preferred equity,
if any, contributed by LAB Holdings in connection with the
closing of the Merger;
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the absence of certain specified indebtedness of the Company and
its subsidiaries, other than (i) indebtedness under the
Companys Existing Financing Agreement,
(ii) indebtedness under certain leases and (iii) other
specified indebtedness not to exceed $4.5 million in the
aggregate;
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|
that the Merger Agreement and all other material documents
related thereto or entered into in connection therewith are
satisfactory to the Agent, and the conditions therein are
satisfied (the Agent having agreed that the definitive documents
executed on July 8, 2009 were satisfactory to the Agent);
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|
the consummation of the Merger prior to, or concurrently with,
the funding of the financing facility pursuant to the Merger
Agreement and related documents without any material amendment,
|
58
|
|
|
|
|
modification or waiver thereof (as reasonably determined by the
Agent) without the prior written consent of the Agent;
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|
|
|
that certain specified defaults shall not have occurred and no
event of default shall have occurred and be continuing under the
Companys Existing Financing Agreement on the closing date;
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|
that after giving effect to the transactions contemplated by the
Merger Agreement, Qualified Cash (as defined in the
Companys Existing Financing Agreement), shall be no less
than $20.0 million as of the closing date;
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|
payment of all reasonable and documented out-of-pocket costs,
fees, expenses and other compensation amounts contemplated by
the debt financing commitments payable to the lenders or any of
their respective affiliates to the extent due;
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|
|
Parents compliance with all other covenants, agreements
and obligations under the debt commitment letters required to be
performed prior to the closing date;
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|
that certain of Parents representations and warranties in
the amended and restated financing agreement shall be true and
correct on the closing date; and
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|
the absence of a change in the financial condition, properties,
assets, liabilities, business or results of operations of the
Company and its subsidiaries taken as a whole, since
March 31, 2009, that individually or in the aggregate has
had or would reasonably be expected to have a material adverse
effect (as defined in the Merger Agreement).
|
Notwithstanding the foregoing conditions, the lenders have
agreed that (a) the only representations and warranties
relating to the Constituent Corporations, the Borrowers and the
guarantors, the accuracy of which shall be a condition to the
availability of the debt financing on the closing date, shall be
(1) the representations and warranties made by the Company
in the Merger Agreement, to the extent that the Constituent
Corporations would have a right to terminate their obligations
under the Merger Agreement as a result of a breach of such
representations and warranties, and (2) the representations
in the amended and restated financing agreement relating to
organization, existence, power and authority, due authorization,
execution, delivery, enforceability and non-contravention of the
Loan Documents (as defined therein) with organizational
documents, receipt of governmental approvals necessary for
execution, delivery, and performance of the Loan Documents (as
defined therein), use of proceeds, solvency, Federal Reserve
Bank margin regulations, the Investment Company Act and the
validity, perfection and required priority of the security
interests required to be granted in the collateral as of the
closing date, and (b) the terms of the Loan Documents (as
defined therein) shall be in a form such that they do not impair
availability of the amended and restated financing agreement on
the closing date if the conditions to the debt financing
commitments are satisfied.
Either lender may elect to terminate its debt commitment letter,
at its sole discretion, if disclosure of the identity or
location of any of its affiliates, equityholders, officers,
directors, employees, legal counsel, advisors, accountants,
agents or representatives or other related persons becomes
necessary to effect or obtain stockholder or regulatory approval
for the Merger or otherwise proceed with the transaction, or is
otherwise disclosed (unless in any such case such disclosure is
made pursuant to a protective order or other reliable assurance
that confidential treatment will be accorded such information
reasonably acceptable to such lender). In addition, either
lender may elect to terminate its debt commitment letter, at its
sole discretion, if the identity of any of the affiliates,
principals, equity holders or other representatives of such
lender is disclosed in violation of the applicable commitment
letter.
The obtaining of financing is not a condition to the
consummation of the Merger. If the Merger is not consummated
because Parent and Merger Sub are unable to secure adequate
financing to consummate the Merger if all conditions to the
Merger are satisfied five business days prior to the Outside
Date, the Company will be entitled to terminate the Merger
Agreement and Parent will be obligated to pay the Company a
termination fee of $2.23 million. There are no plans or
arrangements for alternative financing in the event the expected
financing becomes unavailable.
59
At this time, the Acquiring Parties do not have any present
intention to refinance or repay the term loans, but expect to
explore alternatives following the Merger to improve the
Companys cost of capital. The Acquiring Parties have been
advised by the lenders that they have no current intention to
syndicate the term loans.
Conduct
of the Business of the Company if the Merger is Not
Completed
If the Merger is not completed, the Board of Directors expects
that the Companys business would continue to be operated
substantially as presently operated. The Board of Directors
would reassess the strategic alternatives available to the
Company to enhance stockholder value, including the possibility
of a sale of the Company and alternatives that would keep the
Company independent and publicly owned. In determining which
strategic alternative is in the best interests of the Company
and its stockholders, the Board of Directors would consider,
among other things, any obligation of the Company to pay a
termination fee and expense reimbursement to Parent in
connection with certain acquisition proposals. See
THE
MERGER AGREEMENT Expenses and Termination
Fee.
Interests
of Certain Persons in the Merger; Potential Conflicts of
Interest
In considering the recommendations of the Board of Directors,
you should be aware that certain of the Companys executive
officers and directors have interests in the transaction that
are different from, or are in addition to, the interests of the
Companys stockholders generally. The Special Committee and
the Board of Directors were aware of these potential or actual
conflicts of interest and considered them along with other
matters when they determined to recommend the Merger. See
SPECIAL FACTORS Background of the Merger
and Special Committee Proceedings.
LTIP Payments.
At a joint meeting held on
June 3, 2009, the Companys Board of Directors and
Compensation Committee (with Mr. Baker and Mr. Cass,
abstaining from the Board vote) approved amendments to the LTIP.
The amendments to the LTIP provided that, among other things, if
there is a change in control of the Company on or before
December 31, 2010, then:
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|
|
the LTIP matures immediately upon the change in control and the
target performance level is deemed achieved;
|
|
|
|
payout to participants in the LTIP is based on the individual
gross salaries (prior to the 6% reduction in salaries now in
force) current at the time of the change in control;
|
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|
|
payout to participants in the LTIP is made at the levels
prescribed for having fully achieved the 16% operating profit
percentage LTIP target;
|
|
|
|
payout is made within 30 days after the date of the change
in control;
|
|
|
|
the LTIP payout amount to be included in a participants
total compensation or base salary for purposes of calculating
employment termination payments following a change in control
under employment agreement or other applicable change in control
provisions is limited to one third of the individual
recipients LTIP payout; and
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there will be a modified cutback of LTIP payouts to comply with
limits under Section 280G of the Internal Revenue Code of
1986, as amended (which is referred to in this proxy statement
as the
United States Tax Code
), for those, if any, to
whom Section 280G applies.
|
60
If there is a change of control of the Company on or before
December 31, 2010 (including the Merger), then, pursuant to
the LTIP, the following officers of the Company will be entitled
to the following payments within 30 days following the
occurrence of such change of control:
|
|
|
|
|
Andrew Baker, Chairman and CEO*
|
|
$
|
1,147,000
|
|
Brian Cass, President and Managing Director*
|
|
$
|
1,147,000
|
|
Richard Michaelson, CFO
|
|
$
|
560,000
|
|
Julian Griffiths, Director of Operations*
|
|
$
|
496,000
|
|
Mark Bibi, Secretary and General Counsel
|
|
$
|
420,000
|
|
|
|
|
(*
|
|
Payments to Messrs. Baker, Cass and Griffiths are made in
U.K. pounds sterling. For purposes of estimating these payments
in U.S. dollars, an exchange rate of £1.00 = $1.55 has
been used, which was the average exchange rate during the second
fiscal quarter of 2009. However, the actual payments to be
received by Messrs. Baker, Cass and Griffiths will be made
in U.K. pounds sterling based on the exchange rate in effect at
that time and, accordingly, the actual U.S. dollar amount
paid to such persons may differ from the U.S. dollar amount
set forth above.)
|
Change in Control Severance Payments.
Pursuant
to employment agreements between the Company, or a subsidiary
thereof, and each of Messrs. Baker (through Focused
Healthcare Partners, L.L.C., an entity controlled by
Mr. Baker), Bibi, Cass, Griffiths and Michaelson, each such
executive officer may be entitled to certain severance payments
if, within twelve months following a change of control of the
Company (which includes the consummation of the Merger),
(i) his employment is terminated by the Company (or such
affiliate) without cause (as defined in each such employment
agreement) or (ii) he resigns such employment for good
reason (as defined in each such employment agreement). In case
of such a termination, the Company (or such affiliate) will make
a lump sum severance payment in cash to such executive officer
in an amount equal to (a) 2.99 times the executives
then current annualized base salary plus (b) 2.99 times any
additional compensation (such as bonus or incentive
compensation) earned during the 12 months prior to such
termination or resignation; provided, that, with respect to any
distribution to such executive pursuant to the LTIP during the
12 months prior to such termination or resignation, only
one-third of such LTIP distribution shall be considered
additional compensation for purposes of calculating
such executives severance payment. Accordingly, if such
events described above were to occur, the following payments
would be made: Mr. Baker $2,857,942;
Mr. Bibi $1,465,100; Mr. Cass
$2,857,942; Mr. Griffiths $1,421,247; and
Mr. Michaelson $1,604,633. For purposes of
estimating these payments, an exchange rate of £1.00 =
$1.55 has been used, which was the average exchange rate during
the second fiscal quarter of 2009. However, the actual payments
to Messrs. Baker, Cass and Griffiths will be made in U.K.
pounds sterling, based on the exchange rate in effect at the
time and, accordingly, the actual U.S. dollar amount paid
to such persons may differ from the U.S. dollar amounts set
forth above.
The employment agreements between the Company and each of the
executive officers named above further provide that, if any
payments or benefits received or to be received by any such
executive in connection with his employment with the Company or
an affiliate of the Company (or termination thereof or
otherwise) would subject the executive to the excise tax imposed
under Section 4999 of the United States Tax Code such that
the net-after-tax amount that the executive would receive with
respect to such payments or benefits would not exceed the
net-after tax amount the executive would receive if the amount
of such payments and benefits were reduced to the maximum amount
which could otherwise be payable to the executive without the
imposition of such excise tax, then, only to the extent
necessary to eliminate the imposition of the excise tax, such
payments and benefits shall be so reduced in the following
order: (i) cash payments and benefits shall first be
reduced (if necessary, to zero) and (ii) all other non-cash
payments and benefits shall next be reduced.
Indemnification and Insurance.
The
Companys charter and bylaws provide that the Company will
indemnify its directors and officers to the fullest extent
permitted under Maryland law. The Company also maintains
directors and officers liability insurance for the
benefit of such persons. In the Merger Agreement, Parent and the
surviving corporation have agreed to indemnify to the fullest
extent permitted under applicable
61
law each present and former director and officer of the Company
against any costs, expenses, judgments, fines, losses, claims,
damages or liabilities incurred in connection with claims,
actions, suits, proceedings or investigations brought against
such officers and directors as a result of their service to the
Company or any of its subsidiaries at or prior to the effective
time of the Merger. In addition, Parent and the Company have
agreed to maintain for a period of six years from the effective
time of the Merger, officers and directors liability
insurance covering the directors and officers of the Company as
of July 8, 2009, on policies with terms not less favorable
than those in effect July 8, 2009 in terms of coverage and
amounts, subject to certain limitations stated in the Merger
Agreement, and to continue in effect the indemnification and
exculpation provisions contained in the Companys charter
and bylaws, as in effect on the date of the Merger Agreement for
a period of six years. See
THE MERGER
AGREEMENT Directors and Officers
Indemnification and Insurance.
Acceleration of Stock Options and Restricted
Stock.
The Merger Agreement provides that, except
as otherwise agreed to in writing by Parent and a holder thereof
prior to the effective time of the Merger, at the effective time
of the Merger, each option to purchase Shares granted under the
Stock Plans will become fully vested and exercisable and will be
cancelled in exchange for the right to receive cash in an amount
equal to the excess, if any, of $8.50 over the per Share
exercise price of the option, multiplied by the total number of
Shares subject to the option, without interest and net of any
applicable withholding taxes. The Merger Agreement further
provides that, at the effective time of the Merger, each
outstanding share of restricted stock granted under the Stock
Plans will become fully vested and will be cancelled in exchange
for $8.50 in cash, without interest and less applicable
withholding taxes.
Management employees and directors hold options to purchase
Shares, many of which options have exercise prices below $8.50
per Share and will be accelerated as a result of the Merger.
Subsequent to the date of the Merger Agreement, the executive
officers of the Company were offered the opportunity to exchange
their Shares and options to purchase Shares for equity
securities of Parent. All of the executive officers declined
this opportunity and, therefore, their Shares and options to
purchase Shares will be converted into the right to receive cash
in accordance with the terms of the Merger Agreement. As a
result of the Merger, options to purchase 554,008 Shares
held by the Companys directors and executive officers
(excluding options currently held by Mr. Baker) will be
cashed out. In the aggregate, the Companys directors and
executive officers (excluding Mr. Baker) will receive an
aggregate payment of $3,636,842 as a result of their options
being cashed out in the Merger, which amount will be apportioned
among the Companys directors and officers as follows:
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|
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|
|
|
|
|
|
Name
|
|
Number of Options
|
|
|
Cash Out Value
|
|
|
Richard Michaelson
|
|
|
120,303
|
|
|
$
|
787,576
|
|
Brian Cass
|
|
|
255,500
|
|
|
$
|
1,688,600
|
|
Julian Griffiths
|
|
|
87,750
|
|
|
$
|
564,300
|
|
Mark Bibi
|
|
|
70,455
|
|
|
$
|
456,366
|
|
Gabor Balthazar
|
|
|
20,000
|
|
|
$
|
140,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
554,008
|
|
|
$
|
3,636,842
|
|
Non executive-officer employees and directors also hold
9,000 shares of restricted stock in the aggregate, and the
Companys non executive-officer employees and directors
(excluding Mr. Baker) will receive an aggregate payment of
$76,500 in respect of shares of restricted stock accelerated and
cancelled as a result of the Merger, which amount will be
apportioned among the Companys non executive-officer
employees and directors as follows:
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|
|
|
|
|
|
|
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Number of Shares of
|
|
|
|
|
Name
|
|
Restricted Stock
|
|
|
Cash Out Value
|
|
|
Gabor Balthazar
|
|
|
3,000
|
|
|
$
|
25,500
|
|
Afonso Junqueiras
|
|
|
3,000
|
|
|
$
|
25,500
|
|
Yaya Sesay
|
|
|
3,000
|
|
|
$
|
25,500
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9,000
|
|
|
$
|
76,500
|
|
62
Mr. Baker will contribute to Parent in the
money options to purchase 55,500 Shares in exchange
for options to purchase shares of Parent, and such options to
purchase Shares, representing a cash value of approximately
$288,600, will not be cashed out in the Merger.
Total Payments to Executive Officers and
Directors.
The following table sets forth the
total amount that may be payable to the Companys executive
officers as a result of the Merger (other than any amounts
payable to such executive officers and directors in respect of
Shares held by such executive officers and directors, which
number of shares are disclosed in this Proxy Statement under the
caption
Information About the Company
Security Ownership of Management and Certain Beneficial
Owners Ownership of Management and
Directors
):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of
|
|
|
|
|
|
|
|
|
|
|
Control
|
|
|
|
|
Stock
|
|
Restricted
|
|
|
|
Severance
|
|
|
Name
|
|
Options
|
|
Stock
|
|
LTIP
|
|
Payments(1)
|
|
Total
|
|
Andrew Baker
|
|
$
|
0
|
(2)
|
|
$
|
0
|
|
|
$
|
1,147,000
|
(3)
|
|
$
|
2,857,942
|
|
|
$
|
4,004,942
|
|
Richard Michaelson
|
|
$
|
787,576
|
|
|
$
|
0
|
|
|
$
|
560,000
|
|
|
$
|
1,604,633
|
|
|
$
|
2,952,209
|
|
Brian Cass
|
|
$
|
1,688,600
|
|
|
$
|
0
|
|
|
$
|
1,147,000
|
(3)
|
|
$
|
2,857,942
|
|
|
$
|
5,693,542
|
|
Julian Griffiths
|
|
$
|
564,300
|
|
|
$
|
0
|
|
|
$
|
496,000
|
(3)
|
|
$
|
1,421,247
|
|
|
$
|
2,481,547
|
|
Mark Bibi
|
|
$
|
456,366
|
|
|
$
|
0
|
|
|
$
|
420,000
|
|
|
$
|
1,465,100
|
|
|
$
|
2,341,466
|
|
Gabor Balthazar
|
|
$
|
140,000
|
|
|
$
|
25,500
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
165,500
|
|
Yaya Sesay
|
|
$
|
0
|
|
|
$
|
25,500
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,500
|
|
Alfonso Junqueiras
|
|
$
|
0
|
|
|
$
|
25,500
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,500
|
|
TOTAL
|
|
$
|
3,636,842
|
|
|
$
|
76,500
|
|
|
$
|
3,770,000
|
|
|
$
|
10,206,864
|
|
|
$
|
17,690,206
|
|
|
|
|
(1)
|
|
A named officer would only be entitled to a change of control
severance payment if, within 12 months following a change
of control of the Company (including the consummation of the
Merger), (i) his employment is terminated by the Company
(or such affiliate) without cause (as defined in each such
employment agreement) or (ii) he resigns such employment
for good reason (as defined in each such employment agreement).
|
|
(2)
|
|
As described in this proxy statement, Mr. Baker has agreed
to contribute all of his options to purchase Shares in exchange
for equity securities of Parent.
|
|
(3)
|
|
Payments to Messrs. Baker, Cass and Griffiths are made in
U.K. pounds sterling. For purposes of estimating these payments
in U.S. dollars, an exchange rate of £1.00 = $1.55 has been
used, which was the average exchange rate during the second
fiscal quarter of 2009. However, the actual payments to be
received by Messrs. Baker, Cass and Griffiths will be made
in U.K. pounds sterling based on the exchange rate in effect at
that time and, accordingly, the actual U.S. dollar amount paid
to such persons may differ from the U.S. dollar amount set forth
above.
|
Equity Investments in Parent by Mr. Baker and Possible
Equity Participation by Other Members of
Management.
The Company expects that prior to the
effective time of the Merger, Mr. Baker and Focused
Healthcare Partners, L.L.C., an entity controlled by
Mr. Baker, will directly or indirectly contribute to
Parent, 2,326,116 Shares and in the money
options to purchase 55,500 Shares held by Mr. Baker in
exchange for equity securities of Parent or an affiliate of
Parent. Mr. Baker will not receive any cash consideration
for any such Shares or options in connection with the Merger
pursuant to the Merger Agreement. Subsequent to the date of the
Merger Agreement, the executive officers of the Company were
offered the opportunity to exchange their Shares and options to
purchase Shares for equity securities of Parent. All of the
executive officers declined this opportunity and, therefore,
their Shares and options to purchase Shares will be converted
into the right to receive cash in accordance with the terms of
the Merger Agreement.
In addition, Parent has informed the Company that it intends to
create an incentive compensation program for certain employees
of the Company, including executive officers, which program will
be adopted and implemented following the Merger. The program may
provide cash or equity-based incentive compensation arrangements
tied to individual or company performance targets. No decision
concerning the program will be made by Parent prior to the
Merger.
After the Merger, Mr. Baker and any other executive
officers who may receive equity in Parent pursuant to the
incentive compensation program described above will continue to
have an opportunity to share in the
63
future earnings and growth of the Company by virtue of their
direct and indirect equity interests in Parent. This continuing
investment involves substantial risk because of the limited
liquidity of the investment and the particular risks of an
investment in the Company, which include changes in the customer
base resulting from industry consolidation, risks of cancelled
contracts, foreign exchange risk associated with the
predominantly
non-U.S. revenue
sources, the risk of the capital intensive nature of the
business, the substantial financing cost that the Company will
bear following the Merger and the impact of animal rights
activists. However, if the Company achieves its business plan
objectives or the Company is later sold, the value of their
equity investment could be considerably greater than their
original cost. Even if the objectives are not met or the Company
is not sold, these persons still may earn a substantial return
on their investment. The Companys stockholders are
generally not being afforded the right to participate directly
or indirectly in the equity of the Company following the Merger,
whether through the exchange of equity interests, options or
otherwise.
Arrangement Fee.
Parent has informed the
Company that it intends to enter into an arrangement fee letter
pursuant to which the Company will pay an arrangement fee equal
to $4.5 million to LAB Holdings, an entity controlled by
Mr. Baker, or its designee(s), in connection with
structuring and arranging the debt and equity financing for the
Merger.
Services Agreement.
Parent has informed the
Company that it intends to enter into, or cause the Company to
enter into, a services agreement with LAB Holdings, an entity
controlled by Mr. Baker, or its designee(s), pursuant to
which, following the Merger, the Company will be provided
strategic oversight and advice (including with respect to
potential M&A activity, joint ventures and financing
options), financial advice and such other services as shall be
agreed upon between the parties, in consideration of an
aggregate annual monitoring fee of $1.25 million.
Employment Agreement for Mr. Baker and Other Executive
Officers.
Parent has informed the Company that
Mr. Baker is expected to serve as Chairman and Chief
Executive Officer of both the surviving corporation and Parent,
which will be the surviving corporations parent company,
on the same terms as those contained in his existing employment
agreement. Parent had informed the Company that it expects each
of the executive officers to continue in his current role and
with his current responsibilities following the Merger.
Special Committee Members.
The Board of
Directors agreed to pay $50,000 to each of the members of the
Special Committee for his service on such committee, as well as
an additional $2,000 payment to each member for attendance at a
meeting if attended in person, or $1,000 if attended
telephonically. Of such total $50,000 payment, $25,000 was paid
shortly after the Special Committee was originally formed, with
the remaining $25,000 to be paid at a later time. These
remaining payments may be made prior to or following the
consummation of the Merger, and are not conditioned upon the
occurrence of the Merger.
Intent to
Vote
To the Company knowledge, each of the Companys
executive officers and directors intends to vote all Shares he
owns in favor of approval of the Merger primarily for the
reasons that motivated the Special Committee to recommend
approval of the Merger, and none of the Companys executive
officers intends to make a recommendation in support of or
opposed to the Merger in press releases and other employee
communications. The Board of Directors recommends that the
Companys stockholders vote
FOR
approval of the
Merger.
Estimated
Fees and Expenses of the Merger
Whether or not the Merger is completed, except as provided in
the Merger Agreement, fees and expenses incurred by or on behalf
of the Company, Parent and Merger Sub and their affiliates in
connection with the Merger will generally be paid by the party
incurring the expense, provided that Parent will reimburse the
Company for all reasonable out-of-pocket costs incurred by the
Company or its subsidiaries in connection with their providing
to Parent all reasonable cooperation requested by Parent in
connection with the financing for the Merger. If the Merger is
not completed, under certain circumstances described in
THE MERGER AGREEMENT Expenses and
Termination Fee
, Parent has agreed to pay the Company
a termination fee of either $1.0 million, approximately
$1.53 million or $4.46 million in certain
circumstances upon termination of
64
the Merger Agreement, and the Company has agreed to pay Parent
a termination fee of either $1.0 million, approximately
$1.53 million or $4.46 million in certain
circumstances upon termination of the Merger Agreement, in each
case depending on the reason therefor. The estimated total fees
and expenses to be incurred by the Company, Parent and Merger
Sub in connection with the Merger are as follows:
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Securities and Exchange Commission filing fee
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$
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5,763.12
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Financing, legal, accounting and advisory expenses
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$
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13,739,000.00
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Printing and mailing costs
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$
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125,000.00
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Miscellaneous fees and expenses
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$
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430,236.88
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Total
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$
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14,300,000.00
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Except as set forth herein, none of the Company, Parent or
Merger Sub will pay any fees or commission to any broker, dealer
or other person for soliciting proxies pursuant to the Merger.
Prior to the effective time of the Merger, Parent will designate
a paying agent (which may be the Company). The paying agent will
receive reasonable and customary compensation for its services
in connection with the Merger, plus reimbursement for
out-of-pocket expenses. Parent will pay all charges and expenses
of the paying agent.
The expense of preparing and mailing the notice of special
meeting, the proxy statement and the proxy card(s), will be paid
by the Company.
These expenses will not reduce the merger consideration to be
received by the Companys stockholders in the Merger.
Appraisal
Rights
In accordance with applicable law and the Companys
charter, no stockholder of the Company will have any statutory
rights to demand and receive payment of the fair value of the
stockholders Shares as a result of the transactions
contemplated by the Merger or the Merger Agreement.
Material
U.S. Federal Income Tax Consequences
The following is a summary of the material U.S. federal
income tax consequences of the Merger to holders of Shares that
are converted into the right to receive cash in the Merger. This
summary does not purport to consider all aspects of
U.S. federal income taxation that might be relevant to the
Companys stockholders. For purposes of this discussion,
the term U.S. holder refers to a beneficial
owner of Shares that is, for U.S. federal income tax
purposes:
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a citizen or resident of the United States;
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a corporation created or organized under the laws of the United
States or any of its political subdivisions;
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a trust that (i) is subject to the supervision of a court
within the United States and the control of one or more
U.S. persons or (ii) has a valid election in effect
under applicable U.S. Treasury Regulations to be treated as
a U.S. person; or
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an estate that is subject to U.S. federal income tax on its
income regardless of its source.
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A
non-U.S. holder
is a person (other than a partnership) that is not a
U.S. holder.
If a partnership holds Shares, the tax treatment of a partner
will generally depend on the status of the partner and the
activities of the partnership. A partner of a partnership
holding Shares should consult its tax advisor.
This discussion is based on current law, which is subject to
change, possibly with retroactive effect. It applies only to
beneficial owners who hold Shares as capital assets, and may not
apply to Shares received in connection with the exercise of
employee stock options or otherwise as compensation,
stockholders who hold an equity interest, directly or
indirectly, in Parent or the surviving corporation after the
Merger, or certain types of beneficial owners who may be subject
to special rules (such as insurance companies, banks, tax-
65
exempt organizations, financial institutions, broker-dealers,
partnerships, S corporations or other pass-through
entities, mutual funds, traders in securities who elect the
mark-to-market method of accounting, stockholders subject to the
alternative minimum tax, stockholders that have a functional
currency other than the U.S. dollar, or stockholders who
hold Shares as part of a hedge, straddle or a constructive sale
or conversion transaction). This discussion does not address the
receipt of cash in connection with the cancellation of shares of
restricted stock or options to purchase Shares, or any other
matters relating to equity compensation or employee benefit
plans. This discussion also does not address any aspect of
state, local or foreign tax laws.
U.S.
Holders
The exchange of Shares for cash in the Merger will be a taxable
transaction to U.S. holders for U.S. federal income
tax purposes. In general, a U.S. holder whose Shares are
converted into the right to receive cash in the Merger will
recognize capital gain or loss for U.S. federal income tax
purposes equal to the difference, if any, between the amount of
cash received with respect to such Shares (determined before the
deduction of any applicable withholding taxes) and the
stockholders adjusted tax basis in such Shares. Gain or
loss will be determined separately for each block of Shares
(i.e., Shares acquired at the same cost in a single
transaction). Such gain or loss will be long-term capital gain
or loss provided that a stockholders holding period for
such Shares is more than 12 months at the time of the
consummation of the Merger. Long-term capital gains of
individuals are eligible for reduced rates of taxation. There
are limitations on the deductibility of capital losses.
Backup withholding of tax may apply to cash payments received by
a non-corporate stockholder in the Merger, unless the
stockholder or other payee provides a taxpayer identification
number (social security number, in the case of individuals, or
employer identification number, in the case of other
stockholders), certifies that such number is correct, and
otherwise complies with the backup withholding rules. Each of
the Companys U.S. holders should complete and sign
the Substitute
Form W-9
included as part of the letter of transmittal and return it to
the paying agent (which may be the Company), in order to provide
the information and certification necessary to avoid backup
withholding, unless an exemption applies and is established in a
manner satisfactory to the paying agent. Backup withholding is
not an additional tax. Any amounts withheld under the backup
withholding rules will be allowable as a refund or a credit
against a U.S. holders federal income tax liability
provided the required information is timely furnished to the
Internal Revenue Service. Cash received in the Merger will also
be subject to information reporting unless an exemption applies.
Non-U.S.
Holders
Any gain realized on the receipt of cash in the Merger by a
non-U.S. holder
generally will not be subject to United States federal income
tax unless:
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the gain is effectively connected with a trade or business of
the
non-U.S. holder
in the United States (and, if required by an applicable income
tax treaty, is attributable to a United States permanent
establishment of the
non-U.S. holder);
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the
non-U.S. holder
is an individual who is present in the United States for
183 days or more in the taxable year of that disposition,
and certain other conditions are met; or
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the Company is or has been a United States real property
holding corporation for U.S. federal income tax
purposes and the
non-U.S. holder
owned more than 5% of the Shares at any time during the five
years preceding the Merger.
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An individual
non-U.S. holder
described in the first bullet point immediately above will be
subject to tax on the net gain derived from the Merger under
regular graduated U.S. federal income tax rates. If a
non-U.S. holder
that is a foreign corporation falls under the first bullet point
immediately above, it will be subject to tax on its net gain in
the same manner as if it were a U.S. person as defined
under the United States Tax Code and, in addition, may be
subject to the branch profits tax equal to 30% of its
effectively connected earnings and profits or at such lower rate
as may be specified by an applicable income tax treaty. An
individual
non-U.S. holder
described in the second bullet point immediately above will be
subject to a flat
66
30% tax on the gain derived from the Merger, which may be offset
by U.S. source capital losses, even though the individual
is not considered a resident of the United States.
The Company believes that it is not and has not been a
United States real property holding corporation for
U.S. federal income tax purposes.
Backup withholding of tax may apply to the cash received by a
non-corporate stockholder in the Merger, unless the stockholder
or other payee certifies under penalty of perjury that it is a
non-U.S. holder
in the manner described in the letter of transmittal (and the
payor does not have actual knowledge or reason to know that the
beneficial owner is a U.S. person as defined under the
United States Tax Code) or otherwise establishes an exemption in
a manner satisfactory to the paying agent. Backup withholding is
not an additional tax and any amounts withheld under the backup
withholding rules may be refunded or credited against a
non-U.S. holders
U.S. federal income tax liability, if any, provided that
such
non-U.S. holder
furnishes the required information to the Internal Revenue
Service in a timely manner. Cash received in the Merger will
also be subject to information reporting, unless an exemption
applies.
The U.S. federal income tax consequences set forth above
are not intended to constitute a complete description of all tax
consequences relating to the Merger. Because individual
circumstances may differ, you should consult your tax advisor
regarding the applicability of the rules discussed above to you
and the particular tax effects to you of the Merger in light of
your particular circumstances, the application of state, local
and foreign tax laws, and, if applicable, the tax consequences
of the receipt of cash in connection with the cancellation of
Shares of restricted stock, or options to purchase Shares,
including the transactions described in this proxy statement
relating to the Companys other equity compensation and
employee benefit plans.
Certain
Legal Matters
General.
Except as described in this section,
none of the Company, Parent or Merger Sub is aware of any
license or regulatory permit that is material to the business of
the Company that might be adversely affected by the Merger, nor
are they aware of any approval or other action by a domestic or
foreign governmental, administrative or regulatory agency or
authority required for the Merger to occur that is not described
in this proxy statement. Should any such approval or other
action be required, Parent and Merger Sub presently contemplate
that such approval or other action will be sought. While the
Company does not presently intend to delay the Merger pending
the outcome of any such matter (unless otherwise described in
this proxy statement), there can be no assurance:
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that any such approval or other action, if needed, would be
obtained or would be obtained without substantial conditions;
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that failure to obtain the approval or other action might not
result in consequences adverse to the Companys
business; or
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that there might be conditions to obtaining a required approval
or action, including, without limitation, the divestiture of
certain parts of the Companys business.
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See
THE MERGER AGREEMENT Conditions to
Completing the Merger,
below, for certain conditions
to the Merger, including conditions with respect to governmental
actions.
State Takeover Statutes.
Under the Maryland
Business Combination Act, unless exempted, a Maryland
corporation may not engage in business combinations, including a
merger, consolidation, share exchange or, in certain
circumstances, an asset transfer or reclassification of equity
securities, with an interested stockholder or an
affiliate of an interested stockholder for five years after the
most recent date on which the interested stockholder became an
interested stockholder. An interested stockholder is generally a
person owning or controlling, directly or indirectly, ten
percent or more of the voting power of the outstanding stock of
a Maryland corporation. After the five year prohibition, any
business combination between the Maryland corporation and an
interested stockholder generally must be recommended by the
board of directors of the corporation and approved by the
affirmative vote of at least (a) eighty percent of the
votes entitled to be cast
67
by holders of outstanding shares of voting stock of the
corporation and (b) two-thirds of the votes entitled to be
cast by holders of voting stock of the corporation, other than
shares held by the interested stockholder with whom or with
whose affiliate the business combination is to be effected or
held by an affiliate or associate of the interested stockholder.
These super-majority vote requirements do not apply if the
corporations common stockholders receive a minimum price,
as defined under Maryland law, for their shares in the form of
cash or other consideration in the same form as previously paid
by the interested stockholder for its shares. The statute
permits various exemptions from its provisions, including
business combinations that are exempted by the board of
directors prior to the time that the interested stockholder
becomes an interested stockholder. Pursuant to the statute, the
Board of Directors has adopted a resolution exempting from the
definition of interested stockholder any person that would be
deemed an interested stockholder by virtue of any agreement,
arrangement or understanding entered into for the purpose of
proposing a business combination with the Company, subject to
the requirement that any proposed business combination be
consistent with the Special Committees guidelines and
subject to the right of the Special Committee to reject any
proposed business combination, in which case such person would
then be subject to the Maryland Business Combination Act. This
resolution may be altered or repealed, in whole or in part, at
any time by the Board of Directors. Additionally, the Acquiring
Parties are exempt from the Maryland Business Combination Act
because the Merger has been approved by the Board of Directors.
The Maryland Control Share Acquisition Act provides that
control shares of a corporation acquired in a
control share acquisition shall have no voting
rights except to the extent approved by a vote of two-thirds of
the shares entitled to be cast on the matter, excluding shares
of stock owned by the acquiror, or by officers or by directors
who are employees of the corporation. Control shares
means voting shares of stock that, if aggregated with all other
shares of stock previously acquired by the acquiror or in
respect of which the acquiror is able to exercise or direct the
exercise of voting power (except solely by virtue of a revocable
proxy), would entitle the acquiror to exercise voting power in
electing directors within one of the following ranges of voting
power: one-tenth or more but less than one-third, one-third or
more but less than a majority, or a majority or more of, all
voting power. A control share acquisition means the
acquisition of control shares, subject to certain exceptions. If
voting rights of control shares acquired in a control share
acquisition are not approved at a stockholders meeting,
then subject to certain conditions and limitations, the issuer
may redeem any or all of the control shares for fair value. If
voting rights of such control shares are approved at a
stockholders meeting and the acquiror becomes entitled to
vote a majority of the shares of stock entitled to vote, all
other stockholders may exercise appraisal rights. The
Companys bylaws contain a provision exempting from the
Control Share Acquisition Act any and all acquisitions by any
person of shares of the Companys stock. However, the Board
of Directors may in the future amend the Companys bylaws
to repeal or modify this exemption, in which case any control
shares of the Company acquired in a control share acquisition
will be subject to the Maryland Control Share Acquisition Act.
Under the terms of the Merger Agreement, the Company and its
directors, among others, are prohibited from taking any action
(other than any action taken prior to July 8, 2009) to
exempt any person from the restrictions under the Maryland
Business Combination Act or the Maryland Control Share
Acquisition Act.
Merger Related Litigation.
On or about
March 9, 2009, a purported class action lawsuit,
Berger v. Life Sciences Research, et. al., was filed in the
Superior Court of New Jersey, Chancery Division, Somerset
County, naming as defendants the Company and each director of
the Company. The complaint alleged, among other things, that the
Companys directors breached their fiduciary duties with
respect to the March 3, 2009 non-binding proposal made by
Mr. Baker to acquire all of the outstanding Shares for
$7.50 per Share. On or about July 13, 2009, the plaintiff
filed an amended class action complaint in the same court. The
amended complaint names as defendants Mr. Baker, all other
members of the Companys Board of Directors and the
Company, and alleges, among other things, that the
Companys directors breached their fiduciary duties with
respect to the Merger; that Mr. Baker controls the Company
and its directors; that the $8.50 per Share merger consideration
constitutes inadequate consideration; and that certain terms of
the Merger Agreement unfairly benefit Mr. Baker at the
expense of the other stockholders, including the absence of
appraisal rights, accelerated vesting of restricted stock,
restrictions on the solicitation of negotiations with respect to
third party proposals, and termination fees. The amended
complaint further alleges that the directors were motivated to
68
accept Mr. Bakers offer because of concerns that a
public dispute with Mr. Baker would draw unwanted attention
from animal rights activists. The amended complaint seeks
unspecified damages and other relief.
In addition, on July 17, 2009, a second purported class
action lawsuit, Ramaiah v. Baker, et al., was filed in the
Superior Court of New Jersey, Chancery Division, Somerset County
and named as defendants Mr. Baker, all other members of the
Companys Board of Directors, the Company and Parent. This
complaint alleged, among other things, that the Board of
Directors breached its fiduciary duties in connection with the
Merger by agreeing to sell the Company for an unfair price
pursuant to an unfair process and that the Merger Agreement
contains preclusive deal protection provisions by virtue of its
no shop and standstill clauses and its
termination fee provisions. This complaint sought unspecified
damages and other relief. On August 5, 2009, the plaintiffs
discontinued this action without prejudice and without costs to
any party.
On August 10, 2009, a third purported class action lawsuit,
Oakland v. Life Sciences Research, Inc., et al., was filed
in the Superior Court of New Jersey, Chancery Division, Somerset
County, and named as defendants the Company, Mr. Baker and
the other members of the Companys Board of Directors. The
complaint alleged, among other things, that the directors
breached their fiduciary duties in connection with the Merger by
agreeing to sell the Company for an unfair price pursuant to an
unfair process, that the Merger Agreement contains preclusive
deal protection provisions by virtue of its termination fee
provisions, that the Company and Mr. Baker aided and
abetted the directors breach of their fiduciary duties and
that the Company has failed to disclose material facts regarding
the Merger. The complaint seeks injunctive and other unspecified
relief.
On August 29, 2009, a Consolidated Amended
Class Action and Derivative Complaint was filed in the
Superior Court of New Jersey, Chancery Division, Somerset County
(Civil Action
No. SOM-C-12006-09)
and named as defendants the Company, Mr. Baker and the
other members of the Companys Board of Directors. The
consolidated complaint combines and supplements the lawsuits
captioned Berger v. Life Sciences Research, et. al. and
Oakland v. Life Sciences Research, Inc., et al. The
consolidation of the two actions is subject to court approval.
The consolidated complaint, which made both direct and
derivative claims, alleged, among other things, that the
directors breached their fiduciary duties in connection with the
Merger by agreeing to sell the Company for an unfair price
pursuant to an unfair process and by filing and circulating a
proxy statement with materially misleading disclosures and
omissions, that Mr. Baker controls the Company and its
directors, that the directors were motivated to accept
Mr. Bakers offer because of concerns that a public
dispute with Mr. Baker would draw unwanted attention from
animal rights activists, that certain terms of the Merger
Agreement unfairly benefit Mr. Baker at the expense of the
other stockholders, including the absence of appraisal rights
and provisions providing for accelerated vesting of restricted
stock, restrictions on the solicitation of negotiations with
respect to third party proposals and termination fees, and that
the Company, Mr. Baker and the Companys other
directors each aided and abetted the other defendants
breach of their fiduciary duties. The complaint seeks injunctive
and other unspecified relief.
On October 20, 2009, the Company entered into a MOU to
settle the pending litigation with respect to the consolidated
complaint. The MOU provides, among other things, that in
consideration for full settlement and release of all claims
under the consolidated complaint:
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The Company agreed to disclose certain additional information in
the definitive proxy statement to be filed by the Company
regarding the Merger with the SEC and mailed to the
Companys stockholders (which agreed upon information was
first included in a revised preliminary proxy statement filed
with the SEC on October 14, 2009 and is included herein).
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Parent agreed that for the twelve (12) month period
beginning on the effective date of the Merger, it will not, and
will cause its controlled affiliates not to, consummate (i.e.,
close) any transaction in which it sells 90% or more of the
Companys assets (as existing on the date of consummation
of the Merger) to an unaffiliated third party, whether by
merger, consolidation, or otherwise, for an amount representing
an enterprise value at such time in excess of 125% of the
enterprise value of the Company at the time of the Merger unless
Parent pays or causes to be paid to the settlement class members
an amount equal to 50% of any amount in excess of 125% of the
enterprise value of the Company at the time of the Merger.
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Parent agreed that the termination fee payable by the Company to
Parent pursuant to paragraph 8.5 of the Merger Agreement,
shall be reduced from $2.23 million to approximately
$1.53 million. The reduced termination fee of approximately
$1.53 million is payable under certain circumstances, as
described under the caption
THE MERGER AGREEMENT
Expenses and Termination Fee Termination
Fee Payable by the Company
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The defendants in the litigation agreed to pay fees and expenses
of plaintiffs counsel, if approved by the Court, up to a
certain capped amount.
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The consummation of the settlement is subject to certain
conditions, including: (a) the satisfactory completion of
reasonable confirmatory discovery by plaintiffs; (b) the
drafting and execution of a formal Stipulation of Settlement and
such other documentation as may be required to obtain final
Court approval of the settlement; (c) the consummation of
the Merger; and (d) final Court approval of the settlement
and the entry of a final order and judgment by the Court.
In connection with the settlement, on October 20, 2009 the
Company entered into Amendment No. 1 to the Merger
Agreement to incorporate the reduction in the termination fee
described above. The Companys stockholders are urged to
read the full text of Amendment No. 1 to the Merger
Agreement, which is included in this proxy statement as
Appendix A-1
and is incorporated herein by reference.
Regulatory Approvals.
The U.K. Good Laboratory
Practice Monitoring Authority, which is referred to in this
proxy statement as
GLPMA
, has issued guidelines providing
that GLPMA should be informed in writing of any significant
changes that happen with regards to the premises, activities or
management of a test facility of the Company, including major
changes in personnel. If deemed appropriate, a GLPMA inspector
will visit the test facility in order to assess whether GLP
compliance has been affected by the change of control. When
there have been very significant changes to the management of a
test facility, e.g. as a result of a merger, it is usually
necessary for the GLPMA to revisit the test facility. The
Company may voluntarily provide notification to the U.K. Good
Manufacturing Practices and U.K. Good Clinical Practices
monitoring authorities.
The Company is required to notify the United States Department
of Agriculture Animal and Plant Health Inspection Service REAC
Sector Supervisor by certified mail of any change in the name,
address, management, or substantial control or ownership of the
Company within 10 days of the change.
Other Legal Matters.
The Company operated the
HLS Pension and Life Assurance Scheme, subsequently renamed
LSR Pension and Life Assurance Scheme through to
December 31, 2002. The LSR Pension and Life Assurance
Scheme has been closed to new entrants since April 5, 1997
and was curtailed as of December 31, 2002. The LSR Pension
and Life Assurance Scheme is currently underfunded and is
subject to a funding plan as further described in the
Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008. Whether
additional funding will be required as a result of the Merger is
subject to negotiations between the trustees of the plan and the
U.K. Pensions Regulator.
Provisions
for Unaffiliated Stockholders
No provision has been made to grant the unaffiliated
stockholders access to the files of the Company, Parent or
Merger Sub, or to obtain counsel or appraisal services at the
Companys or any other such partys expense.
THE
MERGER AGREEMENT
The following is a summary of the material provisions of the
Merger Agreement. The Companys stockholders are urged to
read the full text of the Merger Agreement and Amendment
No. 1 thereto, which are included in this proxy statement
as Appendices A and A-1, respectively, and are incorporated
herein by reference.
70
The
Merger
The Merger Agreement provides that, at the effective time of the
Merger, Merger Sub will merge with and into the Company. Upon
completion of the Merger, Merger Sub will cease to exist and the
Company will continue as the surviving corporation and a direct
wholly owned subsidiary of Parent under the name Life
Sciences Research, Inc.
Effective
Time of the Merger
The Merger will become effective when the articles of merger
have been accepted for record by the State Department of
Assessment and Taxation of Maryland, or at such other time as
agreed upon by the parties and as is specified in the articles
of merger (not to exceed 30 days after the articles of
merger are accepted for record). The Company and Parent have
agreed to file the articles of merger as soon as practicable
following the closing of the Merger.
Charter,
Bylaws and Directors and Officers of the Company and the
Surviving Corporation
At the effective time of the Merger:
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the charter of the Company, as amended and restated in the form
attached to the Merger Agreement, will become the charter of the
surviving corporation;
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the bylaws of the Company in effect immediately before the
effective time of the Merger will become the bylaws of the
surviving corporation;
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Mr. Baker, as the sole director of Merger Sub immediately
before the effective time, will be the sole director of the
surviving corporation; and
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the officers of the Company immediately before the effective
time will remain the officers of the surviving corporation.
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Conversion
of Common Stock
At the effective time of the Merger, each Share outstanding
immediately before the effective time of the Merger (other than
Shares owned by Parent, Merger Sub or any other direct or
indirect wholly owned subsidiary of Parent (which will include
Shares directly or indirectly contributed to Parent by
Mr. Baker and his affiliate, Focused Healthcare Partners,
L.L.C.) and Shares owned by any direct or indirect wholly owned
subsidiary of the Company) will be converted automatically into
the right to receive $8.50 in cash, payable to the holder
thereof, without interest and less any applicable withholding
taxes. All Shares so converted will no longer be outstanding,
will automatically be cancelled, and will cease to exist.
At the effective time of the Merger, each share of common stock,
par value $0.01 per share, of Merger Sub outstanding immediately
before the effective time of the Merger will be converted into
and exchanged for one share of common stock, $0.01 per share, of
the surviving corporation.
Payment
for Shares
Prior to the effective time of the Merger, Parent must select a
paying agent, as approved by the Company, to make payment of the
merger consideration to the Companys stockholders. If a
paying agent reasonably acceptable to Parent and the Company is
not available on commercially reasonable terms, the Company will
act as paying agent. At or prior to the effective time, Parent
will deposit or cause to be deposited with the paying agent a
cash amount in immediately available funds necessary for the
paying agent to pay the $8.50 per Share merger consideration for
each Share issued and outstanding immediately prior to the
effective time of the Merger, without interest and less any
applicable withholding taxes (which funds are referred to in
this proxy statement as the
exchange fund
). Such funds
will be invested in high-grade investments by the paying agent
as directed by Parent. Any interest or income produced by such
investments will become part of the exchange fund and any
amounts in excess of the amounts payable in respect of converted
Shares will be returned to the surviving corporation. To the
extent that there are losses with respect to any such
investments
71
or the exchange fund diminishes for any reason below the level
required to make the cash payments described above, Parent will,
or will cause the surviving corporation to, replace, restore or
increase the cash in the exchange fund so as to ensure that the
exchange fund is at all times maintained at a level sufficient
to make such payments.
As soon as practicable after the effective time of the Merger,
the surviving corporation will cause the paying agent to mail to
each record holder of Shares as of immediately prior to the
effective time of the Merger a letter of transmittal and
instructions on how to effect the surrender of their share
certificate(s) in exchange for payment of the merger
consideration, without interest and net of any applicable
withholding taxes. Upon surrender of a share certificate (or
affidavit of loss in lieu thereof) with the duly executed letter
of transmittal, the holder of such certificate shall be entitled
to receive the $8.50 per Share merger consideration for each
Share represented thereby, and such certificate so surrendered
will be cancelled. Until properly surrendered to the paying
agent with a properly executed letter of transmittal, each
certificate will be deemed to represent only the right to
receive the merger consideration relating thereto. No interest
will be paid or accrued on any amount payable upon due surrender
of the Shares.
If ownership of any Shares has been transferred but such
transfer is not reflected in the transfer records of the
Company, upon the transferees surrender of the transferred
certificate(s) to the paying agent, together with all documents
reasonably required to evidence and effect such transfer and to
evidence that all applicable stock transfer taxes have been paid
to the extent applicable, the paying agent will pay the merger
consideration applicable to such transferred Shares, net of any
applicable withholding taxes. If any certificate is lost, stolen
or destroyed, upon delivery by the holder of an affidavit in
lieu of the certificate and, if required by Parent, an indemnity
bond of a customary amount, the paying agent will pay the merger
consideration applicable to such lost, stolen or destroyed
certificate, net of applicable withholding taxes.
Any portion of the exchange fund that remains unclaimed by the
stockholders of the Company for one year after the effective
time shall be delivered to the surviving corporation.
Thereafter, any holder of certificates representing Shares
outstanding before the effective time of the Merger will be
entitled to look only to Parent and the surviving corporation
for payment of any merger consideration to which they may be
entitled, without interest. None of the Parent, the surviving
corporation, the paying agent, or any other person, will be
liable to any person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
Transfer
of Shares
At the effective time of the Merger, the stock transfer books of
the Company will be closed and there will not be any further
registration of transfers of any Shares that were outstanding
immediately prior to the effective time. If, after the effective
time of the Merger, certificates for Shares are presented to the
surviving corporation, Parent or the paying agent (which may be
the Company), such certificates will be cancelled and exchanged
for the merger consideration to which the holder thereof is
entitled under the Merger Agreement.
Treatment
of Options, Restricted Stock and Warrants
Options.
Except as otherwise agreed to in
writing by Parent and a holder thereof prior to the effective
time of the Merger (i.e., with respect to options to be
contributed to Parent by Mr. Baker in exchange for new
options to purchase shares of Parent), at the effective time of
the Merger, each outstanding option to purchase Shares granted
under any of the Stock Plans will become fully vested and
exercisable, will be cancelled and will be converted into the
right to receive an amount in cash equal to the excess, if any,
of $8.50 over the per Share exercise price of the option,
multiplied by the total number of Shares subject to such option
immediately prior to the effective time of the Merger, without
interest and net of any applicable withholding taxes.
Restricted Stock.
At the effective time of the
Merger, each outstanding share of restricted stock of the
Company granted under any of the Stock Plans will become fully
vested, will be cancelled and will be converted into the right
to receive an amount in cash equal to $8.50, without interest
and net of any applicable withholding taxes.
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Warrants.
At the effective time of the Merger,
each outstanding warrant to purchase Shares will be cancelled
and will be converted into the right to receive an amount in
cash equal to the excess, if any, of $8.50 over the per Share
exercise price of the option, multiplied by the total number of
Shares subject to such warrant immediately prior to the
effective time of the Merger, without interest and net of any
applicable withholding taxes.
Payment of any amounts owing in connection with the conversion
of outstanding options, restricted stock or warrants, as
described above, will be made promptly after the effective time,
but in no event later than three days after the effective time.
Appraisal
Rights
In accordance with the Companys charter and
Section 3-202(c)
of the Maryland General Corporation Law, no stockholder is
entitled to any statutory rights to demand and receive payment
of the fair value of the stockholders Shares as a result
of the Merger.
Representations
and Warranties
The Merger Agreement contains various representations and
warranties made by the Company to Parent and Merger Sub, subject
to identified exceptions, including representations and
warranties relating to:
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the due organization, valid existence, foreign qualifications
and good standing of the Company and each of its subsidiaries;
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the requisite corporate power and authority of the Company and
each of its subsidiaries to own, lease and operate their
respective assets and properties and to carry on their
respective businesses;
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the capital structure of the Company and its subsidiaries;
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the Companys and its subsidiaries ownership of
equity interests in other entities;
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the necessary corporate power and authority of the Company to
enter into the Merger Agreement and to complete the Merger;
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the due execution and delivery of the Merger Agreement by the
Company;
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the validity and binding effect of the Merger Agreement on the
Company;
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the determination, approval and recommendation of the Board of
Directors;
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the receipt of an opinion from the Special Committees
financial advisor as to the fairness of the merger consideration
to certain holders of Shares from a financial point of view;
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the absence of the necessity for waivers, consents, approvals or
authorizations from government entities in connection with the
Merger Agreement or the Merger;
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the absence of any conflicts related to the Merger Agreement and
the Merger with the organization documents of the Company or any
of its significant subsidiaries, contracts of the Company or any
of its subsidiaries, or any laws to which the Company or any of
its subsidiaries is subject;
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the absence of certain defaults under the Companys
Existing Financing Agreement or of a continuing event of default
under such agreement;
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the Companys filings with the Securities and Exchange
Commission;
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the financial statements of the Company;
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the cash and specified indebtedness of the Company and its
subsidiaries as of July 8, 2009 and as of the closing of
the Merger;
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the absence of certain changes from March 31, 2009;
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the absence of any claim, action, suit, proceeding or
investigation against the Company, its subsidiaries and officers
and directors of the Company or any of its subsidiaries;
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the material employee benefit plans of the Company and its
subsidiaries and the Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder;
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other employee benefit or labor matters;
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compliance with laws and regulations;
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adequacy of permits, licenses and other authorizations;
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the inapplicability of takeover statutes or regulations to the
Merger;
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environmental matters;
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tax matters;
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intellectual property matters;
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insurance matters;
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the absence of any real property owned by the Company or any of
its subsidiaries; and the real property leases of the Company
and its subsidiaries;
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the validity, binding effect and enforceability of certain
material contracts of the Company and its subsidiaries and the
absence of violations, breaches or defaults thereunder;
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contracts with officers, directors or affiliates;
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the engagement of a broker, finder or investment banker in
connection with the transactions contemplated by the Merger
Agreement;
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the absence of undisclosed liabilities of the Company and its
subsidiaries; and
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regulatory compliance matters.
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Some of the representations and warranties referred to above are
not breached unless the breach of the representation or warranty
has had or would reasonably be expected to have a material
adverse effect on the Company. For purposes of the Merger
Agreement, material adverse effect on the Company refers to any
event, circumstance, development, change or effect that
(i) has a material adverse effect on the financial
condition, properties, assets, liabilities, business or results
of operations of the Company and its subsidiaries taken as a
whole or (ii) would reasonably be expected to prevent the
Company from consummating the Merger or prevent the Company from
performing its obligations under the Merger Agreement, except
that none of the following will constitute or will be taken into
account for determining whether there has been or is a material
adverse effect:
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events, circumstances, developments, changes or effects in the
economy or financial markets generally in the United States or
other countries in which the Company or any of its subsidiaries
conduct operations or that are the result of acts of war or
terrorism so long as such events, circumstances, developments,
changes or effects do not adversely affect the Company or its
subsidiaries in a materially disproportionate manner relative to
participants in the pharmaceutical industry or any industry in
which the Company or its subsidiaries operate;
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events, circumstances, developments, changes or effects that are
the result of factors generally affecting the pharmaceutical
industry or any industry in which the Company and its
subsidiaries operate so long as such events, circumstances,
developments, changes or effects do not adversely affect the
Company or its subsidiaries in a materially disproportionate
manner relative to participants in either the pharmaceutical
industry or any industry in which the Company or its
subsidiaries operate, respectively;
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any loss or threatened loss of, or adverse change or threatened
adverse change in, the relationship of the Company or any of its
subsidiaries with its customers, employees, financing sources or
vendors
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caused by the pendency or the announcement of the transactions
contemplated by the Merger Agreement;
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events, circumstances, developments, changes or effects arising
from the entry into, actions contemplated by or the performance
of obligations required by the Merger Agreement, including any
litigation or other proceeding arising therefrom, and any
actions taken by the Company and its Subsidiaries to obtain
approval under applicable anti-trust or competition laws for
consummation of the Merger;
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changes in any laws or U.S. generally accepted accounting
principles, or interpretation thereof after July 8, 2009;
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any failure by the Company to meet any estimates of revenues or
earnings for any period ending on or after June 30, 2008
(provided that the exception in this clause shall not prevent or
otherwise affect a determination that any change, effect,
circumstance or development underlying such failure has resulted
in, or contributed to, a material adverse effect);
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a decline in the price or trading volume of the Shares (provided
that the exception in this clause shall not prevent or otherwise
affect a determination that any change, effect, circumstance or
development underlying such decline has resulted in, or
contributed to, a material adverse effect); and
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events, circumstances, developments, changes or effects arising
out of compliance by any of the parties with the confidentiality
provisions of the Merger Agreement.
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The Merger Agreement also contains various representations and
warranties by Parent and Merger Sub to the Company, subject to
identified exceptions, including representations and warranties
relating to:
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the due organization and good standing of Parent and Merger Sub,
and the necessary corporate power and authority of Parent and
Merger Sub to carry on their business;
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the requisite corporate power and authority of Parent and Merger
Sub to enter into the Merger Agreement and to complete the
Merger;
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the due execution and delivery of the Merger Agreement by Parent
and Merger Sub;
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the enforceability and binding effect of the Merger Agreement on
Parent and Merger Sub;
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the absence of the necessity for waivers, consents, approvals or
authorizations from government entities in connection with the
Merger Agreement or the Merger;
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the absence of any conflicts related to the Merger Agreement and
the Merger with the organizational documents and contracts of
Parent and Merger Sub;
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the absence of any claim, action, suit, proceeding or
investigation against Parent or Merger Sub seeking to enjoin the
transaction or that would reasonably be expected to prevent,
make illegal or otherwise interfere with any of the transaction
contemplated by the Merger Agreement;
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the debt and equity financing commitments obtained by Parent,
the ability to satisfy the conditions thereof and the
sufficiency thereof to fund the payment of the aggregate merger
consideration and related fees and expenses;
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the capital structure of Merger Sub and the governance of
Parent, Merger Sub and LAB Holdings;
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the fees or commissions, if any, payable to any broker, finder
or investment banker in connection with the transactions
contemplated by the Merger Agreement;
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the delivery of a duly executed guaranty by LAB Holdings to the
Company guaranteeing the obligations of Parent and Merger Sub to
pay termination fees to the extent required under the Merger
Agreement, the enforceability thereof and the sufficiency of
funds to meet their obligations thereunder;
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that neither Parent nor Merger Sub is an interested
stockholder under applicable provisions of the Maryland
General Corporation Law; and
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the delivery by Parent to the Company of Parent Confidentiality
Documents.
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The representations and warranties listed above will not be
considered breached unless the breach of the representation or
warranty would, individually or in the aggregate, prevent or
materially impair the ability of Parent and Merger Sub to
consummate the Merger and the other transactions contemplated by
the Merger Agreement.
None of the representations and warranties in the Merger
Agreement will survive after the completion of the Merger.
Conduct
of Business Pending the Merger
Until the effective time of the Merger and unless otherwise
contemplated by the Merger Agreement or as required by
applicable law, subject to certain identified exceptions, the
Company (i) must conduct its business and the business of
its subsidiaries in the ordinary and usual course, and
(ii) to the extent consistent with (i), the Company and its
subsidiaries must use their respective commercially reasonable
efforts to preserve the assets of the Company, preserve their
business organizations intact, and maintain existing
relationships and goodwill with governmental entities,
customers, vendors, employees and business associates. The
Company has also specifically agreed that, except as provided in
the Merger Agreement or approved by Parent in writing, required
by law or by a governmental entity or subject to certain other
limited exceptions, the Company will not, and will not permit
its subsidiaries to:
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adopt or propose to change its charter, bylaws or any other
applicable governing instrument;
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merge or consolidate the Company or any of its subsidiaries with
any other person (other than with another subsidiary of the
Company), or restructure, reorganize or completely or partially
liquidate the Company;
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acquire assets outside of the ordinary course of business with a
value or purchase price above $1.0 million in any
transaction or series of related transactions, except for
acquisitions pursuant to existing agreements or the creation and
ownership of newly formed wholly owned subsidiaries;
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issue, sell, pledge, dispose of, grant, transfer, encumber (or
authorize any of the foregoing) any shares of capital stock of
the Company or its subsidiaries or any securities convertible or
exchangeable into, or exercisable for, any shares of such
capital stock, or any options, warrants or rights of any kind to
acquire any of the foregoing, excluding (i) the issuance of
Shares upon the exercise of stock options or warrants or the
settlement of restricted stock under the Stock Plans or warrants
in effect as of July 8, 2009, (ii) the issuance of
shares of capital stock by a wholly owned subsidiary to the
Company or another wholly owned subsidiary or (iii) the
pledge of shares of capital stock of Company subsidiaries in
connection with the Existing Financing Agreement;
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make any loans, advances or capital contributions to, or any
investment in, any person (other than the Company or a wholly
owned subsidiary of the Company) in excess of $500,000 in the
aggregate;
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declare, set aside, make or pay any dividend or other
distribution with respect to any of its capital stock (other
than dividends paid by any direct or indirect wholly owned
subsidiary of the Company to the Company or to any other direct
or indirect wholly owned subsidiary of the Company) or enter
into any agreement with respect to the voting of its capital
stock;
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reclassify, split, combine, subdivide, redeem, purchase or
otherwise acquire any of its capital stock or any securities
convertible or exchangeable into, or exercisable for, any shares
of such capital stock other than (a) the acquisition of
Shares tendered by employees pursuant to a Stock Plan consistent
with past practice and (b) the acquisition of shares of
capital stock of a wholly owned subsidiary of the Company;
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incur or guarantee (other than the guarantee of indebtedness of
a wholly-owned subsidiary of the Company) certain specified
indebtedness or issue or sell any debt securities or warrants or
other rights to acquire debt securities of the Company or any of
its subsidiaries, except to the extent that the specified
indebtedness representation and warranty would not be breached
as a result thereof and except for inter-company transactions;
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adopt or enter into a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization or other
reorganization of the Company or any subsidiary, other than the
Merger Agreement, the Merger or as otherwise permitted under the
non-solicitation provisions of the Merger Agreement;
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make or authorize any capital expenditure in excess of
$1.0 million in the aggregate, unless identified in certain
specified capital budgets;
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make material changes to accounting policies or procedures
unless required by GAAP or a governmental entity;
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settle any litigation or other proceedings before a governmental
entity, or any obligation or liability of the Company in excess
of $500,000;
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make, change or rescind any material tax election, change any
method of tax accounting, settle or compromise any material tax
liability, file any material amended tax return or enter into a
closing agreement relating to taxes or waive or extend any
material tax statute of limitations, in each case other than in
the ordinary course of business consistent with past practice;
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transfer, sell, lease, license, mortgage, pledge, surrender,
encumber, divest, cancel, abandon or allow to lapse or expire or
otherwise dispose of any material assets, product lines or
businesses, except in the ordinary course of business consistent
with past practice, pursuant to agreements, contracts or other
documents in effect prior to July 8, 2009, or pursuant to
existing commitments or inter-company transactions;
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grant or provide any severance or termination payment to (except
in the case of non-officer employees in the ordinary course of
business), increase compensation of (except for ordinary course
increases for non-officer employees), or make new equity awards
to any officer, director or employee, or establish, adopt,
terminate or materially amend any benefit plan, or take any
action to fund or require funding of any compensation or
benefits under any benefit plan, in each case except as required
pursuant to certain benefit plans, agreements, contracts or
other documents in effect prior to July 8, 2009;
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enter into or materially amend any transactions between the
Company or any of its subsidiaries, on the one hand, and an
affiliate of the Company, on the other hand, that would need to
be disclosed under Item 404 of
Regulation S-K;
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knowingly take or permit any of its subsidiaries to take any
action intended or reasonably likely to prevent the consummation
of the Merger, except as otherwise permitted under the
non-solicitation provisions of the Merger Agreement; or
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agree, authorize or commit to take any of the actions described
above.
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Parent agrees not to knowingly take or permit any of its
subsidiaries to take any action intended or reasonably likely to
prevent the consummation of the Merger.
Limitation
on Soliciting Transactions
Upon execution of the Merger Agreement, the Company agreed to:
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immediately cease and cause to be terminated, and to cause its
subsidiaries and the directors, officers, employees, investment
bankers, attorneys, accountants and other advisors and
representatives of the Company and its subsidiaries to cease and
cause to be terminated, any existing solicitation, initiation,
encouragement, discussion or negotiation with any person other
than Parent and its affiliates; and
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enforce the provisions of, and abstain from modifying, waiving,
amending or releasing, any standstill, confidentiality or
similar agreements entered into by the Company prior to
July 8, 2009.
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Furthermore, from July 8, 2009 until the effective time of
the Merger or the earlier termination of the Merger Agreement,
the Company may not, and may not direct, authorize or permit its
subsidiaries or any of the directors, officers, employees,
investment bankers, attorneys, accountants and other advisors
and representatives of the Company and its subsidiaries to,
directly or indirectly:
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initiate, solicit or knowingly encourage any inquiries or the
making of any inquiry, offer or proposal that constitutes or
would reasonably be expected to lead to a proposal or offer with
respect to a merger, joint venture, partnership, consolidation,
dissolution, liquidation, tender offer, recapitalization,
reorganization, share exchange, business combination or similar
transaction, or any other direct or indirect acquisition, in
each case involving 15% or more of the total voting power of any
class of equity securities of the Company or any of its
subsidiaries, or 15% or more of the consolidated net revenue,
consolidated net income or consolidated total assets of the
Company and its subsidiaries (such proposal being referred to in
this proxy statement as an
Acquisition Proposal
);
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engage in or otherwise participate in any negotiations or
discussions regarding any proposal or offer that constitutes or
would reasonably be expected to result in an Acquisition
Proposal; or
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otherwise knowingly facilitate (including taking any action to
exempt any person from the business combination statute or
control share acquisition statute of the Maryland General
Corporation Law) any effort or attempt to make any proposal or
offer that constitutes or would reasonably be expected to result
in an Acquisition Proposal.
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However, the restrictions described above will not apply with
respect to any person submitting an Acquisition Proposal which
the Special Committee determines in good faith, and after
consultation with its financial and legal advisors, constitutes
or could reasonably be excepted to result in a bona fide
Acquisition Proposal involving more than 50% of the consolidated
assets of the Company and its subsidiaries (taken as a whole) or
more than 50% of the total voting power of the equity securities
of the Company or any subsidiary or subsidiaries that
represent(s) 50% or more of the consolidated assets of the
Company and its subsidiaries (taken as a whole) that the Special
Committee determines in good faith is reasonably likely to be
consummated in accordance with its terms taking into account all
legal, financial and regulatory aspects of the proposal and, if
consummated, would be more favorable to the Companys
stockholders from a financial point of view, taking into account
any alterations to the Merger Agreement agreed to by Parent or
Merger Sub in response thereto, than the transactions
contemplated by the Merger Agreement (such proposal being
referred to in this proxy statement as a
Superior
Proposal
).
Notwithstanding the restrictions described above, if at any time
before the Companys stockholders vote to approve the
Merger Agreement the Company receives an unsolicited bona-fide
Acquisition Proposal, the Company may provide information in
response to a request by such offeror, and engage or participate
in discussions or negotiations with such offeror if, and to the
extent that:
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the Company has not breached the provisions of the Merger
Agreement relating to soliciting or negotiating in respect of an
Acquisition Proposal;
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prior to taking the applicable action, the Special Committee
determines in good faith after consultation with outside legal
counsel that failure to take such action would be inconsistent
with the directors duties under applicable law;
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the Special Committee determines in good faith, based on
information then available and after consultation with its
financial advisors, that such Acquisition Proposal constitutes
or would reasonably be expected to result in a Superior Proposal;
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the Company requires such offeror to execute a confidentiality
agreement on customary terms; and
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the Company provides to Parent, at least concurrently with such
offeror, any non-public information provided to such offeror and
not previously provided to Parent.
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In addition, except as provided below, neither the Board of
Directors nor the Special Committee may:
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withhold, withdraw, qualify or modify (or publicly propose to do
so), in a manner adverse to Parent, its recommendation that the
Companys stockholders approve the Merger, unless, prior to
the approval of the Merger by the Companys stockholders,
the Board of Directors determines in good faith, after
consultation with outside counsel, that failure to do so would
be inconsistent with its duties under applicable law; or
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approve or recommend (or publicly propose to do so) an
Acquisition Proposal, or cause or permit the Company to enter
into any acquisition agreement, merger agreement, letter of
intent or other similar agreement relating to an Acquisition
Proposal or enter into any agreement requiring the Company to
abandon, terminate or fail to consummate the transactions
contemplated by the Merger Agreement or resolve, propose or
agree to do any of the foregoing;
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except that, if the Company receives an unsolicited bona fide
Acquisition Proposal that the Special Committee determines in
good faith, and after consultation with its financial and legal
advisors, constitutes a Superior Proposal (after giving effect
to all adjustments to the Merger Agreement following further
negotiations with Parent), then the Company may terminate the
Merger Agreement to enter into an agreement in respect of such
Superior Proposal so long as it:
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has not breached the provisions of the Merger Agreement relating
to soliciting or negotiating in respect of an Acquisition
Proposal;
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gives at least five days (or three days in the event of each
subsequent material revision to such Superior Proposal) prior
written notice to Parent;
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negotiates in good faith, and causes its financial and legal
advisors to negotiate in good faith, during such notice period
to make such adjustments in the terms and conditions of the
Merger Agreement such that the Acquisition Proposal ceases to
constitute a Superior Proposal; and
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concurrently with such termination, pays Parent a termination
fee of approximately $1.53 million.
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The Company is required to notify Parent within 48 hours if
it receives an Acquisition Proposal, receives a request for
non-public information, or if discussions or negotiations are
sought or initiated with the Company or any of its
representatives regarding an Acquisition Proposal.
Nothing in the non-solicitation provisions of the Merger
Agreement prohibits the Company or the Companys Board of
Directors from (i) complying with its disclosure
obligations under U.S. federal or state law with regard to
an Acquisition Proposal, including taking and disclosing to its
stockholders a position contemplated by
Rules 14d-9
and
14e-2(a)
promulgated under the Exchange Act, (ii) making any
disclosures as to factual matters that are required by
applicable law or which a majority of a committee composed of
disinterested members of the Board of Directors, after
consultation with legal counsel, determines in good faith is
required in the exercise of its duties under applicable law or
(iii) making any stop-look-and-listen
communication to the stockholders of the Company pursuant to
Rule 14d-9(f)
promulgated under the Exchange Act.
Stockholders
Meeting
The Company must take all reasonable action necessary to convene
a meeting of the holders of Shares promptly after the filing of
a definitive proxy statement with the Securities and Exchange
Commission to consider and vote upon the approval of the Merger
pursuant to the Merger Agreement. The Company must also take all
reasonable lawful action to solicit the stockholders
approval of the Merger, include in its proxy statement the
recommendation of the Board of Directors to approve the Merger
pursuant to the Merger Agreement, and, if reasonably requested
by Parent, use customary and commercially reasonable efforts to
solicit from its stockholders proxies in favor of the approval
of the Merger pursuant to the Merger Agreement.
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Except as provided in the Merger Agreement (including the
non-solicitation provisions thereof), unless the Merger
Agreement is terminated, the Company may not submit to the vote
of its stockholders any Acquisition Proposal other than the
transactions contemplated by the Merger Agreement.
Approvals
and Consents; Cooperation
Parent and the Company have agreed to use their commercially
reasonable efforts to take or cause to be taken all actions, and
do or cause to be done all things reasonably necessary, proper
or advisable on its part under the Merger Agreement and
applicable laws to consummate and make effective the Merger and
the other transactions contemplated by the Merger Agreement as
soon as practicable, including preparing and filing as promptly
as practicable all documentation to effect all necessary
notices, reports and other filings, and to obtain as promptly as
practicable all consents, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any
third party
and/or
any
governmental entity in order to consummate the Merger or any of
the other transactions contemplated by the Merger Agreement.
Parent and the Company will have the right to review in advance,
and to the extent practicable each will consult with the other
on and consider in good faith the views of the other in
connection with, all of the information relating to Parent or
the Company, as the case may be, and any of their respective
subsidiaries, that appears in any filing made with, or written
materials submitted to, any third party
and/or
any
governmental entity in connection with the Merger and the other
transactions contemplated by the Merger Agreement. Subject to
applicable laws, the Company and Parent must keep the other
apprised of the status of matters relating to completion of the
transactions contemplated by the Merger Agreement. Neither the
Company nor Parent may permit any of its officers or any other
representatives to participate in any meeting with any
governmental entity in respect of any filings, investigation or
other inquiry unless it consults with the other party in advance
and, to the extent permitted by the applicable governmental
entity, gives the other party the opportunity to attend and
participate thereat.
Antitrust
Matters
Parent and the Company have agreed to use reasonable best
efforts to cooperate with each other to determine whether any
filings, consents, permits, authorizations, waivers, clearances,
approvals and expirations or terminations of waiting periods are
required to be obtained from any third parties or other
governmental entities in connection with the execution and
delivery of the Merger Agreement and the consummation of the
transactions contemplated thereby, and further agreed to timely
make or obtain all such filings, consents, permits
authorizations or approvals. Parent and the Company have also
agreed to use reasonable best efforts to supply to any
governmental entity as promptly as practicable any additional
information or documents requested by such governmental entity
or pursuant to applicable law. The Company and Parent will
permit counsel for the other party reasonable opportunity to
review in advance, and consider in good faith, the views of the
other party in connection with any proposed written
communication to any governmental entity. Each of the Company
and Parent agreed not to participate in any substantive meeting
or discussion, either in person or by telephone, with any
governmental entity in connection with the proposed Merger or
the other transactions contemplated by the Merger Agreement
unless it consults with the other party in advance and, to the
extent not prohibited by such governmental entity, gives the
other party the opportunity to attend and participate. If any
administrative or judicial action or proceeding, including any
proceeding by a private party, is instituted (or threatened to
be instituted) challenging the Merger or any other transaction
contemplated by the Merger Agreement as violative of any
applicable law, each of the Company and Parent will cooperate in
all respects with each other, and Parent will use commercially
reasonable efforts to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned
any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and that
prohibits, prevents or restricts consummation of the Merger or
any other transactions contemplated by the Merger Agreement.
NYSE Arca
De-listing
The Company is required to cooperate with Parent and use
commercially reasonable efforts to take, or cause to be taken,
all actions, and do or cause to be done all things, reasonably
necessary, proper or advisable
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on its part under applicable laws and rules and policies of NYSE
Arca to enable the delisting by the surviving corporation of the
Shares from NYSE Arca and the deregistration of the Shares under
the Exchange Act as promptly as practicable after the effective
time of the Merger.
Employee
Benefits Matters
Parent has agreed that it will, for a
12-month
period after the effective date of the Merger, provide (or cause
to be provided) each of the Companys employees
(i) base salary and bonus opportunities that are no less
than the base salary and bonus opportunities provided
immediately before the effective time of the Merger,
(ii) benefit and compensation plans, contracts, policies or
arrangements that are no less favorable in the aggregate than
those provided immediately before the effective time of the
Merger and (iii) severance benefits that are no less
favorable than those set forth in such employees
employment or service agreement
and/or
severance plan applicable to such employee. No employee or other
person has any third party beneficiary rights with respect to
this provision, and the surviving corporation and its
subsidiaries are not restricted from terminating any employee,
or amending, terminating or modifying any benefit or
compensation plan, contract, policy or arrangement.
Directors
and Officers Indemnification and Insurance
Parent and the surviving corporation have agreed that they will,
until six years after the effective time of the Merger,
indemnify and hold harmless to the fullest extent permitted by
law, each present and former director and officer of the Company
and its subsidiaries against any costs or expenses (including
reasonable attorneys fees), judgments, fines, losses,
claims, damages or liabilities incurred in connection with any
claim, action, suit, proceeding or investigation arising out of
or related to their service as director, officer, employee or
agent of the Company or its subsidiaries or services provided to
the Company or its subsidiaries at or prior to the effective
time of the Merger at the request of the Company or its
subsidiaries whether asserted or claimed on or prior to the
effective time of the Merger. Each of Parent and the surviving
corporation is required to also pay expenses (including
attorneys fees) incurred by an indemnified person in
advance of the final disposition of any such claim, action,
suit, proceeding or investigation to the fullest extent
permitted under applicable laws,
provided
that the person
to whom expenses are advanced provides, to the extent permitted
by applicable laws, an undertaking to repay such advances if it
is ultimately determined that such person is not entitled to
indemnification.
The Merger Agreement requires that the Company (or, if the
Company is unable to, the surviving corporation) obtain from an
insurance carrier with the same or better credit rating as the
Companys current insurance carrier with respect to
directors and officers liability insurance and
fiduciary liability insurance, and fully pay the premium for
Side A tail coverage directors and
officers liability insurance, for a claims reporting or
discovery period of at least six years from and after the
effective time of the Merger with respect to directors and
officers liability insurance and fiduciary liability
insurance with terms, conditions, retentions and limits of
liability that are at least as favorable as the Companys
existing policies on July 8, 2009 with respect to any
actual or alleged error, misstatement, misleading statement,
act, omission, neglect, breach of duty or any matter claimed
against a director or officer of the Company or any of its
Subsidiaries by reason of him serving in such capacity that
existed or occurred at or prior to the effective time of the
Merger. If Parent and the surviving corporation are unable to
obtain such tail coverage insurance policies as of
the effective time of the Merger, the surviving corporation
shall continue to maintain in effect for a period of at least
six years from and after the effective time, the Companys
directors and officers liability insurance and
fiduciary liability insurance policy in effect on July 8,
2009, with terms, conditions, retentions and limits of liability
that are at least as favorable as provided in the Companys
policies in effect as of July 8, 2009. However, if the
annual premiums for such insurance exceed 300% of the
Company annual premium as of July 8, 2009, then the
surviving corporation is only required to provide the maximum
coverage then available at an annual premium equal to 300% of
the Company annual premium as of July 8, 2009. The
surviving corporation is also required to continue in effect the
indemnification provisions provided by the charter and the
bylaws of the Company as of July 8, 2009 for at least six
years following the effective time of the Merger. In addition,
Parent, Merger Sub and the Company, as the surviving
corporation, have agreed that all provisions relating to
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exculpation, advancement of expenses and indemnification for
acts or omissions occurring prior to the effective time of the
Merger now existing in favor of any present and former officer
or director of the Company or any of its subsidiaries, as
provided in the charter or bylaws of the Company or any such
subsidiary, shall remain in full force and effect to the same
extent as on July 8, 2009 for a period of six years from
the effective time of the Merger.
Takeover
Statute
If any fair price, moratorium,
control share acquisition or any other state
anti-takeover or similar statute is or may become applicable to
the Merger or the other transactions contemplated by the Merger
Agreement, the Company and its Board of Directors shall, to the
fullest extent practicable, grant such approvals and take such
actions as are necessary so that such transactions may be
consummated as promptly as practicable on the terms contemplated
by the Merger Agreement and otherwise act to eliminate or
minimize the effects of such statute or regulation on such
transactions.
Financing
Parent has agreed that it will use commercially reasonable
efforts to arrange for the equity and debt financing of the
Merger on the terms and conditions described in the debt and
equity financing commitments, including using commercially
reasonable efforts to:
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maintain in effect the financing commitments;
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timely satisfy all conditions applicable to it and Merger Sub to
obtain the financing set forth in the financing commitments;
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enter into definitive agreements in respect of the financing on
the terms and conditions set forth in the financing
commitments; and
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consummate the debt and equity financing at or prior to closing.
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Parent and Merger Sub further agreed that they will not modify
any financing commitments without the Companys prior
written consent, except that Parent can modify or replace any
debt financing commitment to add lenders, lead arrangers,
bookrunners, syndication agents or similar entities that have
not signed the debt financing commitments as of July 8,
2009 or otherwise so long as terms would not adversely impact
ability of Parent or Merger Sub to timely consummate the
transactions contemplated by the Merger Agreement or the
likelihood of consummation of such transactions.
Parent and Merger Sub must notify the Company of any material
breach of any of the financing commitments by any party thereto
or of any termination of any of the financing commitments.
The Company must (and must cause its subsidiaries to) provide to
Parent and Merger Sub, and must use its commercially reasonable
efforts to cause the respective officers, employees and
advisors, including legal and accounting advisors, of the
Company and its subsidiaries to, provide to Parent and Merger
Sub, all cooperation reasonably requested in writing by Parent
that is necessary in connection with the debt and equity
financing, except to the extent such cooperation would,
individually or in the aggregate, materially interfere with the
business or operations of the Company or its subsidiaries.
Parent has agreed to reimburse the Company for all reasonable
out-of-pocket costs incurred by the Company or its subsidiaries
in connection with such cooperation. In addition, the Company is
required to furnish Parent with copies of all monthly financial
statements delivered to the lenders under the Companys
Existing Financing Agreement.
The consummation of the transactions contemplated by the Merger
Agreement is not conditional upon receipt by Parent of the
proceeds of the financing commitments. If the conditions to
closing are satisfied or capable of being satisfied on the date
which is five business days prior to the Outside Date and Parent
fails to have available all funds contemplated by the financing
commitments, the Company may terminate the Merger Agreement and
Parent will be obligated to pay the Company a termination fee of
approximately $2.23 million.
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Guaranty
Pursuant to a limited guaranty dated as of July 8, 2009 by
the Guarantor in favor of the Company (which limited guaranty is
referred to in this proxy statement as the
Guaranty
), the
Guarantor has agreed to irrevocably and unconditionally
guarantee to the Company, up to a maximum amount of
$4.46 million, the payment by Parent of its obligation to
pay a termination fee to the Company, and reimburse the Company
for expenses incurred in enforcing the guaranteed obligations,
in accordance with the terms of the Merger Agreement. Except
with respect to the payment or settlement of any claims made
prior to termination as set forth below, the Guaranty terminates
upon the first to occur of:
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the closing under the Merger Agreement;
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the payment in full of all amounts payable by the Guarantor
under the Guaranty;
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30 days after termination of the Merger Agreement; or
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termination of the Merger Agreement by mutual agreement or
automatic termination due to compelled disclosure of information
in violation of the confidentiality provisions of a Parent
Confidentiality Document (once Guarantor has paid and satisfied
the obligations of Parent and Merger Sub to the Company payable
in the event of such automatic termination).
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Stockholder
Litigation
The Company is required to promptly notify Parent of any
stockholder litigation related to the Merger Agreement, the
Merger or the related transactions, and must keep Parent
reasonably informed with respect to the status thereof. No
settlement of such litigation may be agreed to without
Parents prior written consent (such consent not to be
unreasonably withheld, conditioned or delayed).
Capitalization
Parent and Merger Sub have agreed that, as of the Closing Date,
the definitive agreements with respect to the control of Parent,
Merger Sub and Guarantor will be consistent in all material
respects with the information supplied to the Company on the
date of the Merger Agreement unless changes are approved in
advance by the Company in writing (such changes not to be
unreasonably withheld, conditioned or delayed).
Confidentiality
The Company, Parent and Merger Sub each agreed not to disclose
any information in violation of the confidentiality provisions
contained in any Parent Confidentiality Document, except that
such information may be disclosed to regulators, courts,
securities exchanges (and their regulatory affiliates) or other
governmental authorities pursuant to a protective order or
similar confidentiality agreement in a manner reasonably
satisfactory to Parent. The parties agreed to cooperate to
obtain such an order
and/or
similar confidentiality arrangement providing that such
confidential treatment will be accorded the disclosed
information.
Any breach by any party to the Merger Agreement primarily as a
result of compliance with the confidentiality provisions of the
Merger Agreement will not be deemed an intentional or willful
breach of the Merger Agreement. If any party is legally
compelled to disclose information in violation of a
confidentiality provision in any Parent Confidentiality
Document, it will not be deemed to have breached the Merger
Agreement or be liable for such disclosure unless such party
fails to use its commercially reasonable efforts to cooperate
with the other parties to obtain a protective order or similar
confidentiality arrangement reasonably acceptable to Parent. The
Merger Agreement will automatically terminate immediately prior
to any such compelled disclosure other than a disclosure to
regulators, courts, securities exchanges (and their regulatory
affiliates) or other governmental authorities pursuant to a
protective order or similar confidentiality arrangement
reasonably acceptable to Parent or the other party under such
Parent Confidentiality Document. Upon an automatic termination,
if the Company is not in material breach of any representation,
warranty covenant or agreement contained in the Merger Agreement
and none of the Companys representations or warranties
contained in the Merger Agreement has become untrue in any
material respect such that the conditions to
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Parents obligations to consummate the Merger would not be
satisfied, Parent will be obligated to pay the Company a
termination fee of $1.0 million.
Furthermore, Parent may terminate the Merger Agreement if the
Company discloses information in violation of the
confidentiality provisions summarized above if such breach is
not willful and intentional and (i) is not made in a public
filing, filing with a regulator or press release by the Company
or any of its subsidiaries and (ii) is not otherwise
publicly available, unless it was not reasonably foreseeable, at
the time the applicable disclosure was made, that the applicable
information disclosed would become publicly available (such
breach by the Company being referred to in this proxy statement
as an
Inadvertent Breach
). If the Merger Agreement is
terminated by Parent as a result of an Inadvertent Breach, the
Company will be obligated to pay Parent a termination fee of
$1.0 million. If the Merger Agreement is terminated by
Parent as a result of a willful and intentional breach by the
Company of the confidentiality provisions of the Merger
Agreement, the Company will be obligated to pay Parent a
termination fee of $4.46 million.
Resignations
The Company must use commercially reasonable efforts to obtain
and deliver to Parent at the closing of the Merger evidence
reasonably satisfactory to Parent of the resignations, effective
as of the effective time of the Merger, of those directors of
the Company or any subsidiary thereof designated by Parent to
the Company in writing at least 10 business days prior to the
closing of the Merger.
Conditions
to Completing the Merger
Conditions to Each Partys
Obligation.
The obligations of the Company,
Parent and Merger Sub to effect the Merger are subject to the
satisfaction or waiver of the following conditions, on or prior
to the effective time of the Merger:
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the Merger Agreement must have been approved by (1) the
holders of at least a majority of the outstanding Shares
entitled to vote on the Merger and (2) a majority of the
votes cast by holders of outstanding Shares entitled to vote on
the Merger, excluding votes cast by Parent, Merger Sub or any
Interested Party; and
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no court or other governmental entity shall have enacted,
issued, promulgated, enforced or entered any order or law that
is in effect and restrains, enjoins or otherwise prohibits the
consummation of the Merger.
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Conditions to Parents and Merger Subs
Obligations.
The obligations of Parent and Merger
Sub to effect the Merger are subject to the satisfaction or
waiver of the following conditions on or prior to the effective
time of the Merger:
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the Company representations and warranties which are
qualified with respect to material adverse effect must be true
and correct as of the date of the Merger Agreement and the
closing date of the Merger (unless such representation and
warranty expressly speaks as of a specific date, in which case
such representation and warranty shall be true and correct as of
such specific date); and the Companys representations and
warranties that are not qualified by reference to material
adverse effect must be true and correct as of the date of the
Merger Agreement and the closing date of the Merger (unless such
representation and warranty expressly speaks as of a specific
date, in which case such representation and warranty shall be
true and correct as of such specific date) except that this
condition shall be satisfied even if any such representation and
warranty (but excluding the representations relating to the
capital structure of the Company and its subsidiaries, the
absence of certain defaults under the Companys Existing
Financing Agreement or of a continuing Event of Default under
such agreement, and Qualified Cash of the Loan Parties (each as
defined in the Companys Existing Financing Agreement)) is
not so true and correct unless such breach, individually or in
the aggregate, has had or would reasonably be expected to have a
material adverse effect on the Company, and Parent shall have
received a certificate signed on behalf of the Company stating
that the above conditions have been satisfied; and
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the Company must have performed in all material respects all
obligations required to be performed by it prior to the
effective time of the Merger, and Parent shall have received a
certificate signed on behalf of the Company to such effect.
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Conditions to the Companys
Obligation.
The obligation of the Company to
effect the Merger is subject to the satisfaction or waiver of
the following conditions on or prior to the effective time of
the Merger:
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The representations and warranties of Parent and Merger Sub must
be true as of the date of the Merger Agreement and the closing
date of the Merger (unless such representation and warranty
expressly speaks as of a specific date, in which case such
representation and warranty shall be true and correct as of such
specific date), or, if they are not so true and correct, the
failure of such representations and warranties to be correct,
individually or in the aggregate, does not prevent or materially
impair or is not reasonably likely to prevent or materially
impair the ability of Parent and Merger Sub to consummate the
Merger and the other transactions contemplated by the Merger
Agreement, and the Company shall have received a certificate
signed on behalf of Parent stating that the above conditions
have been satisfied; and
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each of Parent and Merger Sub must have performed in all
material respects all obligations required to be performed by it
prior to the effective time of the Merger, and the Company shall
have received a certificate signed on behalf of the Parent to
such effect.
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Termination
Automatic Termination.
The Merger Agreement
will automatically terminate immediately prior to the compelled
disclosure of any information in violation of a confidentiality
provision in any Parent Confidentiality Document if such
information is not accorded confidential treatment pursuant to a
protective order or other confidentiality arrangement reasonably
acceptable to Parent.
Mutual Termination.
The Merger Agreement may
be terminated by mutual written consent of the Company and
Parent by action of their respective boards of directors.
Termination by Parent or the Company.
Either
Parent or the Company may terminate the Merger Agreement if:
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the Merger is not consummated by the Outside Date;
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the requisite vote of stockholders to approve the Merger is not
obtained at the stockholders meeting called for that
purpose; or
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any law or order permanently restraining, enjoining or
prohibiting the transaction becomes final and non-appealable;
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provided
that
, neither party may terminate the
Merger Agreement for the reasons described above if such party
has materially breached its obligations under the Merger
Agreement in a way that proximately contributed to the failure
of a condition to the Merger.
Termination by the Company.
The Company may
terminate the Merger Agreement if:
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prior to the time that the stockholder vote is obtained, the
Board of Directors authorizes the Company to enter into an
agreement in respect of a Superior Proposal, and the Company
enters into such an agreement and pays Parent the applicable
termination fee;
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Parent or Merger Sub breaches any representation, warranty,
covenant or agreement in the Merger Agreement, or any of their
representations and warranties become untrue after July 8,
2009, such that the conditions to the Companys obligation
to effect the Merger would not be satisfied, and such breach is
not curable or, if curable, is not cured prior to the earlier of
(i) 30 days after written notice is given by the
Company to Parent or (ii) two business days prior to the
Outside Date;
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the Board of Directors makes a change in its recommendation to
the stockholders with respect to the Merger and the Company pays
Parent the applicable termination fee;
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any of the conditions to the Merger is not satisfied or cannot
be satisfied on or prior to five business days prior to the
Outside Date (excluding conditions that, by their terms, cannot
be satisfied until the closing of the Merger), primarily as a
result of the compliance by the Company, Parent or Merger Sub
with the confidentiality provisions of the Merger Agreement;
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Parent or Merger Sub willfully or intentionally breaches the
Merger Agreement such that the conditions to the Companys
obligation to effect the Merger would not be satisfied, and such
breach is not curable or, if curable, is not cured prior to the
earlier of (i) 30 days after written notice is given
by the Company to Parent or (ii) two business days prior to
the Outside Date; or
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the conditions to the obligations of Parent and the Company to
effect the Merger are satisfied or waived on the date which is
five business days prior to the Outside Date (excluding
conditions that, by their terms, cannot be satisfied until the
closing of the Merger) and Parent or Merger Sub fails to obtain
sufficient financing to consummate the transactions contemplated
by the Merger Agreement on such date.
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Termination by Parent.
Parent may terminate
the Merger Agreement if:
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the Board of Directors changes its recommendation to the
stockholders, recommends a transaction pursuant to a Superior
Proposal or either fails to recommend in its proxy statement
that the Companys stockholders approve the Merger or fails
to call a stockholders meeting for the approval of the Merger;
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the Company breaches any representation, warranty, covenant or
agreement made by it in the Merger Agreement, or any
representation and warranty of the Company becomes untrue after
July 8, 2009, such that the conditions to Parents
obligation to effect the Merger would not be satisfied, and such
breach or failure is not curable or, if curable, is not cured
prior to the earlier of (i) 30 days after written
notice is given by Parent to the Company or (ii) two
business days prior to the Outside Date;
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any of the conditions to the Merger is not satisfied or cannot
be satisfied on or prior to the date that is five business days
prior to the Outside Date (excluding conditions that, by their
terms, cannot be satisfied until the closing of the Merger),
primarily as a result of the compliance by the Company, Parent
or Merger Sub with the confidentiality provisions of the Merger
Agreement;
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the Company willfully or intentionally breaches the Merger
Agreement such that the conditions to Parents obligation
to effect the Merger would not be satisfied and such breach is
not curable or, if curable, is not cured prior to the earlier of
(i) 30 days after written notice is given by Parent to
the Company or (ii) two business days prior to the Outside
Date; or
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there is an Inadvertent Breach by the Company.
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Expenses
and Termination Fee
Except for Parents reimbursement of the Companys
expenses for assisting Parent with obtaining its financing and
under other limited circumstances, if the Merger is not
consummated (it being understood that Merger Subs
obligations are being assumed by the surviving corporation upon
the consummation of the Merger), all costs and expenses incurred
in connection with the Merger Agreement and the Merger and the
other transactions contemplated by the Merger Agreement will be
paid by the party incurring such expense.
Termination
Fee Payable by the
Company
.
The Company shall pay Parent a termination fee of
approximately $1.53 million promptly following the
date on which the Company or any of its Subsidiaries has
consummated an Acquisition Proposal (substituting 50% for 15% in
the definition thereof), if:
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(1) a bona fide Acquisition Proposal is made to the Company
or any of its subsidiaries or stockholders, or if any person has
publicly announced an intention (whether or not conditional) to
make an Acquisition Proposal with respect to the Company or any
of its subsidiaries; (2) after such Acquisition Proposal or
announcement, the Merger Agreement is terminated by Parent or
the Company because
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(i) the Merger was not consummated by the Outside Date, or
(ii) the approval of the Companys stockholders was
not obtained at the stockholders meeting called for such
purpose, or any adjournment or postponement thereof; and
(3) an Acquisition Proposal is consummated within
12 months of such termination; or
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(a) the Board of Directors has (1) changed its
recommendation that the Companys stockholders approve of
the Merger, (2) recommended that the Companys
stockholders approve an Acquisition Proposal other than the
Merger, or (3) either failed to include in the proxy
statement distributed to the Companys stockholders its
recommendation that the Stockholders approve the Merger or
failed to call a meeting of stockholders as required under the
Merger Agreement; and (b) an Acquisition Proposal is
consummated within 12 months of such termination.
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The Company shall pay Parent a termination fee of
approximately $1.53 million by wire transfer of same
day funds if the Company terminates the Merger Agreement because
(i) prior to the time that the stockholder vote is
obtained, the Board of Directors authorizes the Company to enter
into an agreement in respect of a Superior Proposal, in
compliance with the terms and conditions contained in the Merger
Agreement, and immediately prior to or concurrently with the
termination of such agreement the Company enters into an
agreement in respect of a Superior Proposal, or (ii) the
Board of Directors of the Company shall have made a change in
recommendation and terminated the agreement concurrently
therewith.
The Company shall pay Parent a termination fee of
$1.0 million by wire transfer of immediately available
funds within three business days of the date on which the Merger
Agreement is terminated by Parent as a result of an Inadvertent
Breach by the Company.
Termination
Fee Payable by
Parent
.
Parent shall pay the Company a termination fee of
$2.23 million by wire transfer of immediately available
funds no later than three business days after the Company
terminates the Merger Agreement because the conditions to the
obligations of Parent to effect the Merger have been satisfied
or waived on the date which is five business days prior to the
Outside Date (excluding conditions that, by their terms, cannot
be satisfied until the closing of the Merger) and Parent or
Merger Sub fails to obtain sufficient financing to consummate
the transactions contemplated by the Merger Agreement on such
date. However, Parent will not be obligated to pay such
termination fee if, at the time of such termination by the
Company, the Company is in material breach of any
representation, warranty, covenant or agreement contained in the
agreement, or if any representation or warranty of the Company
contained in the Merger Agreement shall have become untrue in
any material respect, in each such case with the result that the
conditions to the obligations of Parent and Merger Sub to effect
the Merger would not be satisfied (excluding conditions that, by
their terms, cannot be satisfied until the closing of the
Merger).
Parent shall pay the Company a termination fee of
$1.0 million by wire transfer of immediately available
funds no later than three business days after the Company or
Parent terminates the Merger Agreement because any of the
conditions to the Merger have not been satisfied or cannot be
satisfied on or prior to five business days prior to the Outside
Date (excluding conditions that, by their terms, cannot be
satisfied until the closing of the Merger), primarily as a
result of the compliance by the Company, Parent or Merger Sub
with the confidentiality provisions of the Merger Agreement.
Intentional
Breach
Fee
.
If the Company terminates the Merger Agreement because Parent or
Merger Sub willfully or intentionally breached the Merger
Agreement such that the conditions to the Companys
obligation to effect the Merger would not be satisfied, and such
breach is not curable or, if curable, is not cured prior to the
earlier of (i) 30 days after written notice is given
by the Company to Parent or (ii) two business days prior to
the Outside Date, then Parent shall promptly, but in no event
later than three business days after the date of such
termination by the Company, pay the Company a termination fee of
$4.46 million by wire transfer of immediately available
funds. If Parent terminates the Merger Agreement because the
Company willfully or intentionally breached the Merger Agreement
such that the conditions to the Parents and Merger
Subs
87
obligation to effect the Merger would not be satisfied, and such
breach is not curable or, if curable, is not cured prior to the
earlier of (i) 30 days after written notice is given
by Parent to the Company or (ii) two business days prior to
the Outside Date, then the Company shall promptly, but in no
event later than three business days after the date of such
termination by Parent, pay Parent a termination fee of
$4.46 million by wire transfer of immediately available
funds.
Other than with respect to an Inadvertent Breach, any other
violation or breach of the confidentiality provisions of the
Merger Agreement by the Company or any violation or breach of
the provisions of the Merger Agreement regarding the control of
Parent will be deemed a willful and intentional breach of the
Merger Agreement; provided that any breach by Company, Parent or
Merger Sub of any covenant or agreement set forth in the Merger
Agreement primarily as a result of compliance with the
confidentiality provisions of the Merger Agreement will not be
deemed an intentional or willful breach of the Merger Agreement.
To the extent that any breach of any representation, warranty,
covenant or agreement of the Company in the Merger Agreement is
as a result of the action or inaction by Mr. Baker (solely
to the extent acting in a manner that is not (x) at the
direction of the Board of Directors or a committee thereof, or
(y) as required by the terms of the Merger Agreement or
under applicable law or pursuant to any requirement of any
governmental entity), the Company will not be deemed to have
breached such representation, warranty, covenant or agreement
for all purposes under the Merger Agreement (including in
determining whether any condition has been satisfied hereunder).
Failure to Pay Termination Fees When Due.
If
either Parent or the Company fails to pay any termination fee
described above when due, then such party shall reimburse the
other party for all reasonable costs and expenses incurred or
accrued by such party (including reasonable and documented fees
and expenses of outside counsel) in connection with the
collection under and enforcement of the termination fee
provisions of the Merger Agreement up to a maximum total amount,
including the applicable termination fee and such costs and
expenses, of $4.46 million.
Sole
Remedy; Liquidated Damages
The parties to the Merger Agreement have agreed that the
termination fees described above constitute liquidated damages
with respect to any claims against Parent, Merger Sub or the
Company, as applicable, and shall be the sole and exclusive
remedy of the claming party with respect to the Merger
Agreement, the Guaranty, and the transactions contemplated by
each of the Merger Agreement and the Guaranty, the termination
of the Merger Agreement, the failure to consummate the
transactions contemplated by the Merger Agreement and any claims
arising out of any such breach, termination or failure. The
parties further agreed that none of Parent, Merger Sub or the
Company is entitled to seek or pursue, or be granted, any
specific performance or other equitable relief, or obtain any
damages other than the applicable termination fee and, if
applicable, costs and expenses incurred in collecting such
termination fee, for or with respect to any of the claims
described above.
Amendment
Subject to applicable law, the Merger Agreement may be amended
by written agreement of Parent, Merger Sub and the Company at
any time prior to the approval of the Merger by the
Companys stockholders. After the Merger Agreement is
approved and adopted by the Company stockholders, no
amendment may be made which would require the further approval
of the Companys stockholders unless such further approval
has been obtained.
Waiver
At any time prior to the effective time of the Merger, any party
to the Merger Agreement may, by action taken or authorized by
the board of directors of such party: (1) extend the time
for the performance of any obligation or other acts required of
the other parties under the Merger Agreement, (2) to the
extent permitted by applicable law, waive any inaccuracy in the
representations and warranties of the other parties contained in
the Merger Agreement or in any document delivered pursuant to
the Merger Agreement and (3) subject to the
88
amendment provisions of the Merger Agreement and applicable law,
waive compliance with any agreement or condition contained in
the Merger Agreement. Any extension or waiver must be in writing.
Assignment
The Merger Agreement may not be assigned by any party by
operation of law or otherwise except that, prior to the mailing
of the Companys definitive proxy statement to its
stockholders, Parent may designate another wholly owned direct
or indirect subsidiary of Parent to take the place of Merger Sub
in the Merger Agreement so long as such designation will not
impede or delay the consummation of the transactions
contemplated by the Merger Agreement or otherwise materially
impede the rights of the Company or its stockholders under the
Merger Agreement.
Governing
Law; Arbitration
The Merger Agreement will be interpreted, construed and governed
by the laws of the State of Maryland. All disputes under the
Merger Agreement will be resolved pursuant to arbitration
procedures applying the laws of the State of Maryland.
INFORMATION
ABOUT THE COMPANY
The Company provides preclinical and non-clinical biological
safety evaluation research services to many of the worlds
leading pharmaceutical and biotechnology companies, as well as
many agrochemical and industrial chemical companies. The purpose
of this safety evaluation is to identify risks to humans,
animals or the environment resulting from the use or manufacture
of a wide range of chemicals, which are essential components of
the Companys customers products. The Companys
services are designed to meet the regulatory requirements of
governments around the world.
The Companys aim is to develop its business within these
markets, principally in the pharmaceutical sector, and through
organic growth. In doing so, the Company expects to benefit from
strong drug pipelines in the pharmaceutical industry and a
growing trend towards greater outsourcing as customers focus
more internal resources on research and increasingly look to
variabilize their development costs and reduce their development
timelines.
The Companys sales and marketing functions are
specifically focused on two main groups, pharmaceutical and
biotechnology customers, and non-pharmaceutical customers. As
much of the research activity conducted for these two customer
groups is similar, the Company believes it is appropriate,
operationally, to view this as one business.
The principal offices of the Company are located at
PO Box 2360, Mettlers Road, East Millstone New Jersey
08875-2360,
and the telephone number of the Company is
(732) 649-9961.
Directors
and Executive Officers of the Company
The Companys executive officers and directors are:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position within the Company
|
|
Andrew Baker
|
|
|
60
|
|
|
Director, Chairman of the Board and Chief Executive Officer
|
Gabor Balthazar
|
|
|
67
|
|
|
Director
|
Mark Bibi
|
|
|
51
|
|
|
General Counsel and Secretary
|
Brian Cass
|
|
|
61
|
|
|
Director, Managing Director/President
|
Julian Griffiths
|
|
|
56
|
|
|
Vice President of Operations
|
Afonso Junqueiras
|
|
|
52
|
|
|
Director
|
Richard Michaelson
|
|
|
57
|
|
|
Chief Financial Officer
|
Yaya Sesay
|
|
|
66
|
|
|
Director
|
89
The business address of each of the Companys executive
officers and directors, other than Brian Cass, is
PO Box 2360, Mettlers Road, East Millstone New Jersey
08875-2360,
and the business telephone number of each of the Companys
executive officers and directors, other than Brian Cass, is
(732) 649-9961.
The business address of Brian Cass is
c/o Huntingdon
Life Sciences, Woolley Road, Alconbury, Huntingdon
Cambridgeshire PE28 4HS, England and the business telephone
number of Brian Cass is
011-44-1480-892-000.
Identification
of Directors and Executive
Officers
.
Andrew Baker
became a director and Chairman and Chief
Executive Officer of the Company on January 10, 2002. He
was appointed to the board of directors of Huntingdon Life
Sciences Group plc, which is referred to in this proxy statement
as
Huntingdon
, as Executive Chairman in September 1998.
He is a chartered accountant and has operating experience in
companies involved in the delivery of healthcare ancillary
services. He spent 18 years until 1992 with Corning
Incorporated, which is referred to in this proxy statement as
Corning
, and held the posts of President and CEO of
MetPath Inc., Cornings clinical laboratory subsidiary,
from 1985 to 1989. He became President of Corning Laboratory
Services Inc. in 1989, which at the time controlled MetPath Inc.
(now trading as part of Quest Diagnostics Inc.), and Hazleton
Corporation, G.H. Besselaar Associates and SciCor Inc., all
three now trading as part of Covance Inc. Since leaving Corning
in 1992, Mr. Baker has focused on investing in and
developing companies in the healthcare sector including Unilab
Corporation, a clinical laboratory services provider in
California, and Medical Diagnostics Management, a
U.S. based provider of radiology and clinical laboratory
services to health care payers. In 1997, he formed Focused
Healthcare Partners, L.L.C., an investment firm involved with
healthcare startup and development companies. Mr. Baker is
a citizen of the United Kingdom.
Gabor Balthazar
became a director of the Company on
January 10, 2002. He was appointed to the board of
directors of Huntingdon as the Senior Independent Non-Executive
Director in March 2000. He has been active in international
marketing and management consulting for almost 30 years. He
was a founding member of the board of directors of Unilab
Corporation, serving as President from 1989 to 1992, and
continued to sit on Unilabs board of directors until
November 1999. From 1985 to 1997, Mr. Balthazar served as a
consultant to Frankfurt Consult, the merger/acquisition
subsidiary of BHF-Bank, Frankfurt, Germany and to Unilabs
Holdings SA, a Swiss clinical laboratory-testing holding
company, from 1987 to 1992. He is a graduate of the Columbia Law
School and the Columbia Business School in New York City.
Mark Bibi
became Secretary and General Counsel of the
Company effective July 28, 2005. Prior thereto he served as
General Counsel of the Company and Huntingdon Life Sciences Inc.
from April 1, 2002. He served as Executive Vice President,
Secretary and General Counsel of Unilab Corporation, a clinical
laboratory testing company based in Los Angeles, California from
May 1998 to November 1999 and as Vice President, Secretary and
General Counsel of Unilab from June 1993 to May 1998. Prior
thereto, Mr. Bibi was affiliated with the New York City law
firms, Schulte Roth & Zabel and Sullivan &
Cromwell.
Brian Cass,
FCMA, CBE, became a director and Managing
Director/President of the Company on January 10, 2002. He
was appointed to the board of directors of Huntingdon as
Managing Director/Chief Operating Officer in September 1998.
Prior to joining Huntingdon, he was a Vice President of Covance
Inc. and Managing Director of Covance Laboratories Ltd.
(previously Hazleton Europe Ltd.) for nearly 12 years,
having joined the company in 1979 as Controller. Mr. Cass
worked at Huntingdon Research Center between 1972 and 1974 and
has previous experience with other companies in the electronics
and heavy plant industries. He has also held directorships with
North Yorkshire Training & Enterprise Council Ltd. and
Business Link North Yorkshire Ltd. In June 2002, Mr. Cass
was also appointed as a Commander in the Most Excellent Order of
the British Empire (CBE).
Julian Griffiths
MA, FCA, has served as Vice President of
Operations of the Company since July 28, 2005. Prior
thereto he was Director of Operations of Huntingdon from April
2003. He was appointed to the Huntingdon Board as Finance
Director in April 1999 and Secretary in February 2000. He served
as a director of the Company from January 10, 2002 to
June 11, 2002. Prior to joining Huntingdon, he was most
recently Vice President of Analytical Services in the European
preclinical division of Covance Inc., having spent nine
90
years as Vice President of Finance in the same organization.
Prior to that, he held various positions with KPMG.
Afonso Junqueiras
became a director of the Company on
January 15, 2003. He is a civil engineer and has been
President and a director of a South American private civil
engineering firm since 1997.
Richard Michaelson
became Chief Financial Officer and
Secretary of the Company effective January 10, 2002 and has
been Chief Financial Officer since July 28, 2005.
Mr. Michaelson was Director of Strategic Finance of
Huntingdon from September 1998 to December 2001. He served as
Senior Vice President of Unilab Corporation, a clinical
laboratory testing company based in Los Angeles, California,
from September 1997 to December 1997, Senior Vice
President-Finance, Treasurer and Chief Financial Officer of
Unilab from February 1994 to September 1997, and Vice
President-Finance, Treasurer and Chief Financial Officer of
Unilab from November 1993 to February 1994. Mr. Michaelson
also served as Vice President of Unilab beginning in October
1990. Mr. Michaelson joined MetPath, Inc., the clinical
laboratory subsidiary of Corning Incorporated, in 1980 and
served as Vice President of MetPath from 1983 and Treasurer of
Corning Lab Services, Inc. from 1990 through, in each case,
September 1992. He currently serves as a director of Huntsman
Corporation.
Yaya Sesay
, served as a senior government official of an
African nation for approximately 25 years, culminating in
his service as Financial Secretary of the Ministry of Finance
for three years. For the past five years, Mr. Sesay has
been an international businessman with an interest in the
development of pharmaceutical products.
None of the Companys executive officers or directors was
convicted in a criminal proceeding during the past 5 years
(excluding traffic violations or similar misdemeanors) or was a
party to any judicial or administrative proceeding during the
past 5 years (except for matters that were dismissed
without sanction or settlement) that resulted in a judgment,
decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or
state securities laws, or a finding of any violation of federal
or state securities laws.
Security
Ownership of Management and Certain Beneficial Owners
Ownership
of Management and Directors
The following table sets forth certain information known to the
Company regarding the beneficial ownership of the Shares as of
October 2, 2009 by: (i) each of the Companys
directors and executive officers and (ii) all directors and
executive officers as a group. For purposes of this table, a
person or group of persons is deemed to have beneficial
ownership of any Shares as of October 2, 2009 which
such person has the right to acquire within 60 days after
such date and any Shares, in addition thereto, represented by
outstanding options to purchase Shares that will fully vest as a
result of the Merger. For purposes of computing the percentage
of outstanding Shares held by each person or group of persons
named below on a given date, any security which such person or
persons have the right to acquire within 60 days after such
date and any Shares, in addition thereto, represented by
outstanding options to purchase Shares that will fully vest as a
result of the Merger are deemed to be outstanding, but are not
deemed to be outstanding for the purpose of computing the
91
percentage ownership of any other person. Except as noted below,
each person has full voting and investment power over the Shares
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nature of
|
|
Percentage of
|
|
|
|
Number of Shares
|
|
|
Beneficial
|
|
Shares Beneficially
|
|
Name of Beneficial Owner
|
|
Beneficially Owned
|
|
|
Ownership
|
|
Owned(1)
|
|
|
Andrew Baker
|
|
|
451,639
|
|
|
Direct
|
|
|
3.2
|
%
|
Chairman and Chief Executive Officer
|
|
|
1,874,477
|
|
|
Indirect
|
|
|
13.5
|
%
|
|
|
|
155,500
|
(2)
|
|
Options
|
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
2,481,616
|
|
|
|
|
|
17.7
|
%
|
Gabor Balthazar
|
|
|
5,500
|
|
|
Direct
|
|
|
|
*
|
Director
|
|
|
22,500
|
|
|
Options
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
28,000
|
|
|
|
|
|
|
*
|
Mark Bibi
|
|
|
156,561
|
|
|
Direct
|
|
|
1.1
|
%
|
General Counsel and Secretary
|
|
|
170,455
|
(3)
|
|
Options
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
327,016
|
|
|
|
|
|
2.3
|
%
|
Brian Cass
|
|
|
455,893
|
|
|
Direct
|
|
|
3.3
|
%
|
President and Managing Director
|
|
|
355,500
|
(4)
|
|
Options
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
811,393
|
|
|
|
|
|
5.7
|
%
|
Julian Griffiths
|
|
|
54,076
|
|
|
Direct
|
|
|
|
*
|
Vice President of Operations
|
|
|
137,750
|
(5)
|
|
Options
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
191,826
|
|
|
|
|
|
1.4
|
%
|
Afonso Junqueiras
|
|
|
5,500
|
|
|
Direct
|
|
|
|
*
|
Director
|
|
|
2,500
|
|
|
Options
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
8,000
|
|
|
|
|
|
|
*
|
Richard Michaelson
|
|
|
293,242
|
|
|
Direct
|
|
|
2.1
|
%
|
Chief Financial Officer
|
|
|
120,303
|
|
|
Options
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
413,545
|
|
|
|
|
|
2.9
|
%
|
Yaya Sesay
|
|
|
5,500
|
|
|
Direct
|
|
|
|
*
|
Director
|
|
|
2,500
|
|
|
Options
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
8,000
|
|
|
|
|
|
|
*
|
All Directors and Executive Officers as a group (8 persons)
|
|
|
4,269,396
|
|
|
|
|
|
28.7
|
%
|
|
|
|
*
|
|
Signifies less than 1%.
|
|
(1)
|
|
All percentages calculated on the basis of
13,899,095 Shares outstanding on October 2, 2009.
|
|
(2)
|
|
Includes presently exercisable options to purchase
105,500 Shares and options to purchase 50,000 Shares
that will fully vest as a result of the Merger. As of the record
date, 1,874,477 of such Shares are beneficially owned by Focused
Healthcare Partners, L.L.C., an entity controlled by
Mr. Baker.
|
|
(3)
|
|
Includes presently exercisable options to purchase
120,455 Shares and options to purchase 50,000 Shares
that will fully vest as a result of the Merger.
|
|
(4)
|
|
Includes presently exercisable options to purchase
305,500 Shares and options to purchase 50,000 Shares
that will fully vest as a result of the Merger.
|
|
(5)
|
|
Includes presently exercisable options to purchase
112,750 Shares and options to purchase 25,000 Shares
that will fully vest as a result of the Merger.
|
92
Ownership
of Certain Beneficial Owners
The following table sets forth certain information known to the
Company regarding the beneficial ownership of Shares as of
October 2, 2009 by all stockholders known by the Company
(based on public filings with the Securities and Exchange
Commission, except as otherwise noted) to be the beneficial
owners of more than 5% of the outstanding Shares. For purposes
of this table, a person or group of persons is deemed to have
beneficial ownership of any Shares as of
October 2, 2009 which such person has the right to acquire
within 60 days after such date and any Shares, in addition
thereto, represented by outstanding options to purchase Shares
that will fully vest as a result of the Merger. For purposes of
computing the percentage of outstanding Shares held by each
person or group of persons named below on a given date, any
security which such person or persons have the right to acquire
within 60 days after such date and any Shares, in addition
thereto, represented by outstanding options to purchase Shares
that will fully vest as a result of the Merger are deemed to be
outstanding, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other
person. Except as noted below, each person has full voting and
investment power over the Shares indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nature of
|
|
Percent of Shares
|
|
Name and Address
|
|
Number of Shares
|
|
|
Beneficial
|
|
Beneficially
|
|
of Beneficial Owner
|
|
Beneficially Owned
|
|
|
Ownership
|
|
Owned(1)
|
|
|
Andrew Baker
|
|
|
451,639
|
|
|
Direct
|
|
|
3.2
|
%
|
c/o Life
Sciences Research, Inc.
|
|
|
1,874,477
|
|
|
Indirect
|
|
|
13.5
|
%
|
Mettlers Road
|
|
|
155,500
|
|
|
Options
|
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
East Millstone, NJ 08875
|
|
Total:
|
2,481,616
|
(2)
|
|
|
|
|
17.7
|
%
|
Brian Cass
|
|
|
455,893
|
|
|
Direct
|
|
|
3.3
|
%
|
c/o Huntingdon
Life Sciences
|
|
|
355,500
|
|
|
Options
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Woolley Road
|
|
Total:
|
811,393
|
(3)
|
|
|
|
|
5.7
|
%
|
Alconbury, Huntingdon
|
|
|
|
|
|
|
|
|
|
|
Cambridgeshire PE28 4HS
|
|
|
|
|
|
|
|
|
|
|
England
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Signifies less than 1%.
|
|
(1)
|
|
All percentages calculated on the basis of
13,899,095 Shares outstanding on October 2, 2009.
|
|
(2)
|
|
Mr. Baker is the Chairman and Chief Executive Officer of
the Company. Includes presently exercisable options to purchase
105,500 Shares and options to purchase 50,000 Shares
that will fully vest as a result of the Merger. As of the record
date, 1,874,477 of such Shares are beneficially owned by Focused
Healthcare Partners, L.L.C., an entity controlled by
Mr. Baker. Share ownership numbers reported herein are
based on Company records and Form 4s and Schedules
13D filed by Mr. Baker.
|
|
(3)
|
|
Mr. Cass is President and Managing Director of the Company.
Includes presently exercisable options to purchase
305,500 Shares and options to purchase 50,000 Shares
that will fully vest as a result of the Merger. Share ownership
numbers reported herein are based on Company records and
Form 4s and Schedules 13D filed by Mr. Cass.
|
Selected
Consolidated Financial Data
The selected consolidated financial data set forth below as of
December 31, 2008 and 2007 are derived from the
Companys audited consolidated financial statements and
notes thereto included in the Companys Annual Report on
Form 10-K
filed with the Securities and Exchange Commission for the fiscal
year ended December 31, 2008, which is incorporated herein
by reference. The selected consolidated financial data set forth
below for the six months ended June 30, 2009 and 2008 are
derived from the Companys unaudited consolidated financial
data and notes thereto included in the Companys Quarterly
Report on
Form 10-Q
filed with the Securities and Exchange Commission for the
quarterly period ended June 30, 2009, which is incorporated
herein by reference. The results for the six months ended
June 30, 2009, are not necessarily indicative of results
for the entire fiscal year. The information presented below
should be read in conjunction with such financial statements and
notes thereto, and the Managements Discussion and
Analysis of Financial
93
Condition and Results of Operations included in the
Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 and the
Companys Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2009.
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For the Six Months
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For the Years Ended
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Ended June 30,
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December 31,
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2009
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2008
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2008
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2007
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(Unaudited)
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(In thousands, except for per share data)
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Consolidated Operating Data:
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Net Revenues
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$
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93,295
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$
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127,557
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$
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242,422
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$
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236,800
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Gross Profit
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25,686
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40,686
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73,125
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71,010
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Operating Income
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9,892
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19,691
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35,915
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31,875
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Net Income (loss)
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9,964
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14,019
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10,418
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(13,974
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)
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Earnings Per Share Data:
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Income/(loss) per share
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Basic:
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$
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0.75
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$
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1.11
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$
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0.81
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$
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(1.10
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)
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Diluted:
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$
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0.69
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$
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0.91
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$
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0.70
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$
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(1.10
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Weighted average number of Shares outstanding
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Basic:
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13,347
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12,644
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12,798
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12,698
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Diluted:
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14,452
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15,480
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14,970
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12,698
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Consolidated Financial Position Data and Liquidity:
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Current Assets
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$
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92,087
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$
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100,000
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$
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85,668
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$
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100,167
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Total Assets
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183,594
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201,516
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171,198
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201,583
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Current Liabilities
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72,684
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89,970
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72,141
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105,572
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Pension Liabilities
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38,320
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41,547
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33,859
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43,522
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Long term debt and related party loans
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71,982
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75,316
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71,943
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73,029
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Total liabilities
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191,293
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215,460
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186,410
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230,910
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Ratio of Earnings to Fixed Charges:
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2.54
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3.05
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1.87
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2.13
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Book
Value Per Share
The Companys net book value per Share as of
December 31, 2008 was ($1.19) per Share.
Projected
Financial Information
The Company does not as a matter of course make public forecasts
as to future performance or earnings. However, in connection
with the discussions concerning the Merger, the Company
furnished to the Acquiring Parties, Plymouth Partners and
certain other potential bidders certain internal financial
forecasts prepared by the Companys management. These
forecasts consisted of projections for 2009 derived from the
Companys internal forecasting systems and projections for
2010-2012
modeled using assumed growth rates for each year. The Company
also prepared sensitivity cases reflecting changes in the
assumed growth rates. These forecasts were used by the Acquiring
Parties and such other potential bidders to analyze the Company,
and were used by Plymouth Partners in connection with its
financial analyses described above under
SPECIAL
FACTORS Opinion of Financial Advisor to the Special
Committee.
These financial forecasts were prepared by
management after the receipt of the Initial Baker Offer in the
context of a possible acquisition transaction, including the
Merger. The Company did not prepare any forecasts at that time
other than those provided to the Acquiring Parties, Plymouth
Partners and certain other potential bidders. These financial
forecasts were last updated by management in late
May / early June 2009. The projections were prepared
by members of the Companys finance department, under the
direction of Messrs. Griffiths and Michaelson.
Mr. Baker played no role in preparation of these forecasts.
94
The Company did not prepare the forecasts that were provided to
the Acquiring Parties, Plymouth Partners and other potential
bidders with a view to public disclosure and such forecasts are
included in this proxy statement only because this information
was used by the Acquiring Parties, Plymouth Partners and certain
other bidders in the manner described above. The Company did not
prepare the forecasts that were provided to the Acquiring
Parties, Plymouth Partners and other potential bidders with a
view to compliance with published guidelines of the Securities
and Exchange Commission or the guidelines established by the
American Institute of Certified Public Accountants for
preparation and presentation of prospective financial
information. Hugh Scott P.C., the Companys independent
auditor, has neither examined nor compiled the accompanying
prospective financial information and, accordingly, such firm
did not express any opinion or any other form of assurance with
respect thereto. The Hugh Scott P.C. reports incorporated by
reference in this proxy statement relate to the Companys
historical financial information. Such reports do not extend to
the projected financial information set forth below and should
not be read to do so.
In general, managements internal financial forecasts are
prepared for internal use and are subjective in many respects,
and thus susceptible to, interpretations and assumptions, all
made by management of the Company, with respect to industry
performance, general business, economic, market and financial
conditions and other matters, all of which are difficult to
predict and many of which are beyond the control of the Company.
Accordingly, the Company cannot offer any assurance that the
assumptions made in preparing the forecasts will prove accurate,
and actual results may be materially greater or less than those
contained in the forecasts. Therefore, this information should
not be relied upon as being necessarily indicative of future
results, and you are cautioned not to place undue reliance on
the prospective financial information. Except to the extent
required under the federal securities laws, the Company does not
intend to make publicly available any update or other revisions
to the forecasts to reflect circumstances existing after the
date of the preparation of the forecasts. See
SPECIAL
NOTE ON FORWARD LOOKING STATEMENTS
.
The forecasts should be read together with the information
contained in the consolidated financial statements of the
Company available in its filings with the Securities and
Exchange Commission and the information set forth in this proxy
statement, and along with the risk factors set forth in this
proxy statement and in the Companys filings with the
Securities and Exchange Commission.
The Company initially provided to the Acquiring Parties,
Plymouth Partners and other potential bidders forecasts based on
an assumed exchange rate of U.S. dollars to U.K. pounds
sterling of $1.45 = £1.00, and provided to the Acquiring
Parties and Plymouth Partners a restatement of those same
forecasts assuming an exchange rate of U.S. dollars to U.K.
pounds sterling of $1.45 = £1.00 for January through May
2009 and $1.65 = £1.00 thereafter, as the exchange rate had
risen to approximately $1.65 = £1.00 after the initial
forecasts were prepared. Because the forecasts are identical
other than for the assumed foreign exchange rate, this proxy
statement only includes the forecasts prepared assuming an
exchange rate of U.S. dollars to U.K. pounds sterling of
$1.65 = £1.00, except as otherwise noted.
In addition to the exchange rate assumptions described above and
the growth assumptions presented in the tables immediately
preceding the presentation of the financial forecasts below, the
Companys forecasts were prepared in early May 2009 based
on the assumptions that:
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the Company will continue to transact its business in the
ordinary course; no adjustments were made to reflect any change
in capital structure, cost savings as a private company,
and/or
costs
associated with the Merger or triggered by the Merger;
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the Companys FAS 156 charge (representing expense
calculated for U.K. closed defined benefit pension plan) will
remain at the 2009 rate of £2.6 million
($4.2 million at the $1.65 exchange rate);
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the Company will continue to accrue for the LTIP (expires
December 2010);
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some of the discretionary short-term cost saving initiatives
currently undertaken by the Company will only be possible for a
fixed period of time (resulting in decreased incremental margins
in later years);
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with respect to the base case and sensitivity case one
scenarios, the projected staff cost savings announced by the
Company in 2009 are reversed over the one to two years following
2009;
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95
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the Companys borrowings will continue to accrue interest
at the current rate of 7.75% per year; no allowance was made for
the modification of the Existing Financing Agreement entered
into on July 8, 2009 or any increased interest expense or
fees payable thereunder;
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the Company will be required to pay a $5.0 million
arrangement fee to arrange for an additional $50.0 million
in financing (similar to the rollover of the outstanding loans
under the Companys Existing Financing Agreement, as
described above) after March 1, 2011;
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other income and expense will remain negligible and will not be
affected by large swings in the exchange rate of
U.S. dollars to U.K. pounds sterling;
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the Company will not have any tax liability for corporate taxes
in the United Kingdom or in the United States;
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the Company will not earn any interest (or will earn a
negligible amount of interest) in respect of its cash
balances; and
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the Companys capital expenditures requirements will be
$12.2 million in 2009 and $17.0 million each year
thereafter (other than with respect to the sensitivity case one
scenario, which assumes capital expenditure requirements of
$23.0 million for 2010 and 2011), all at the $1.65 exchange
rate.
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FOUR YEAR
FORECAST BASE CASE
Growth
Assumptions
(a)
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2010
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2011
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2012
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Revenue Volume Growth
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6.00
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%
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6.00
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%
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8.00
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%
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Revenue Price Inflation
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0.90
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%
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2.70
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%
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2.50
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%
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Compound Incremental Revenue Growth
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6.95
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%
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8.86
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%
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10.70
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%
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Cost of Sales Growth
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1.80
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%
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2.40
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%
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6.00
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%
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Cost Inflation
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5.00
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%
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4.00
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%
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2.50
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%
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SG&A Increase
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1.80
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%
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2.40
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%
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8.00
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%
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Energy Expense Increase
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(10.00
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%)
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3.00
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%
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3.00
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%
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Cost of Sales Growth as % of Revenue Volume Growth
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30
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%
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40
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%
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75
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%
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SG&A Growth as % of Revenue Volume Growth
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30
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%
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40
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%
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100
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%
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(a)
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The revenue growth rates above are the composite of separately
estimated growth rates for the Companys U.K. and U.S.
operations. The resulting growth rates for revenues and costs
are stated in local currency terms. The growth rates above do
not match the growth rates calculated from the forecasts for
2010 due to the impact of different average exchange rates for
2009 compared to the subsequent periods.
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Summary
Income Statement and Cash Flow
Items
(a)
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Model
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Historical
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Projected
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Q1 2009
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Q2 2009
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Q3 2009
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Q4 2009
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2009
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2010
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2011
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|
2012
|
|
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(Dollars in millions)
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Net Revenues
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$
|
48.4
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$
|
44.7
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$
|
49.7
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$
|
49.0
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|
$
|
191.8
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$
|
213.4
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$
|
232.3
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$
|
257.1
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Gross Profit
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|
$
|
13.8
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$
|
12.1
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$
|
14.0
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$
|
14.0
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|
$
|
53.9
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$
|
61.7
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$
|
70.9
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$
|
81.8
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SG&A
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|
$
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(7.8
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)
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$
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(7.1
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)
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$
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(8.4
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)
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$
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(8.1
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)
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$
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(31.4
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)
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$
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(34.1
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)
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$
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(36.3
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)
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$
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(40.2
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)
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EBITDA
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$
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8.1
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$
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7.1
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$
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7.8
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$
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8.1
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$
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31.1
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$
|
37.0
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$
|
44.9
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$
|
52.7
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Net Income
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$
|
4.2
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$
|
2.6
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$
|
2.8
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|
$
|
3.4
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$
|
13.0
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$
|
17.9
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$
|
26.8
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|
$
|
34.3
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Capital Expenditures
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|
$
|
2.2
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$
|
3.0
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|
$
|
3.4
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$
|
3.6
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$
|
12.2
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$
|
17.0
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$
|
17.0
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$
|
17.0
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Depreciation & Amortization
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|
$
|
2.1
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$
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2.1
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$
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2.2
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$
|
2.2
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$
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8.6
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$
|
9.3
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$
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10.3
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|
$
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11.1
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(a)
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Assumes an exchange rate of U.S. dollars to U.K. pounds sterling
of $1.45 = £1.00 for January May 2009, and
$1.65 = £1.00 for June 2009 and thereafter (the average
assumed exchange rate for 2009 is
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96
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$1.57 = £1.00). Figures in the forecast model for
historical periods may vary slightly from actual reported
figures due to rounding, minor differences in classification and
assumed currency exchange rate.
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Summary
Balance Sheet Items
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Model
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Historical
(a)
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Projected
(b)
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|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
|
(Dollars in millions)
|
|
Cash
|
|
$
|
36.5
|
|
|
$
|
36.0
|
|
|
$
|
45.6
|
|
|
$
|
57.5
|
|
|
$
|
83.0
|
|
Current Assets
|
|
$
|
86.2
|
|
|
$
|
86.4
|
|
|
$
|
101.1
|
|
|
$
|
117.7
|
|
|
$
|
150.7
|
|
Total Assets
|
|
$
|
171.2
|
|
|
$
|
174.5
|
|
|
$
|
197.5
|
|
|
$
|
221.4
|
|
|
$
|
260.3
|
|
Current Liabilities
|
|
$
|
69.7
|
|
|
$
|
62.0
|
|
|
$
|
68.0
|
|
|
$
|
73.8
|
|
|
$
|
81.4
|
|
Total Liabilities
|
|
$
|
186.5
|
|
|
$
|
176.7
|
|
|
$
|
178.0
|
|
|
$
|
179.6
|
|
|
$
|
178.9
|
|
Equity
|
|
$
|
(15.3
|
)
|
|
$
|
(2.2
|
)
|
|
$
|
19.5
|
|
|
$
|
41.8
|
|
|
$
|
81.3
|
|
|
|
|
(a)
|
|
Year-end exchange rate of U.S. dollars to U.K. pounds sterling
was $1.44 = £1.00 on December 31, 2008.
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|
(b)
|
|
Assumes an exchange rate of U.S. dollars to U.K. pounds sterling
of $1.65 = £1.00 for December 31, 2009 and thereafter.
|
FOUR YEAR
FORECAST SENSITIVITY CASE 1
Growth
Assumptions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2011
|
|
2012
|
|
Revenue Volume Growth
|
|
|
7.00
|
%
|
|
|
7.90
|
%
|
|
|
9.20
|
%
|
Revenue Price Inflation
|
|
|
2.00
|
%
|
|
|
3.00
|
%
|
|
|
3.00
|
%
|
Compound Incremental Revenue Growth
|
|
|
9.14
|
%
|
|
|
11.14
|
%
|
|
|
12.48
|
%
|
Cost of Sales Growth
|
|
|
3.50
|
%
|
|
|
4.74
|
%
|
|
|
6.44
|
%
|
Cost Inflation
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
3.00
|
%
|
SG&A Increase
|
|
|
3.50
|
%
|
|
|
8.69
|
%
|
|
|
11.04
|
%
|
Energy Expense Increase
|
|
|
(10.00
|
%)
|
|
|
3.00
|
%
|
|
|
3.00
|
%
|
Cost of Sales Growth as a % of Revenue Volume Growth
|
|
|
50
|
%
|
|
|
60
|
%
|
|
|
70
|
%
|
SG&A Growth as a % of Revenue Volume Growth
|
|
|
50
|
%
|
|
|
110
|
%
|
|
|
120
|
%
|
|
|
|
(a)
|
|
The revenue growth rates above are the composite of separately
estimated growth rates for the Companys U.K. and U.S.
operations. The resulting growth rates for revenues and costs
are stated in local currency terms. The growth rates above do
not match the growth rates calculated from the forecasts for
2010 due to the impact of different average exchange rates for
2009 compared to the subsequent periods.
|
Summary
Income Statement and Cash Flow
Items
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
Model
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
Projected
|
|
|
Q1 2009
|
|
Q2 2009
|
|
Q3 2009
|
|
Q4 2009
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
|
(Dollars in millions)
|
|
Net Revenues
|
|
$
|
48.4
|
|
|
$
|
44.7
|
|
|
$
|
53.6
|
|
|
$
|
52.9
|
|
|
$
|
199.6
|
|
|
$
|
226.2
|
|
|
$
|
251.4
|
|
|
$
|
282.7
|
|
Gross Profit
|
|
$
|
13.8
|
|
|
$
|
12.1
|
|
|
$
|
16.9
|
|
|
$
|
17.0
|
|
|
$
|
59.8
|
|
|
$
|
69.9
|
|
|
$
|
79.7
|
|
|
$
|
94.5
|
|
SG&A
|
|
$
|
(7.8
|
)
|
|
$
|
(7.1
|
)
|
|
$
|
(8.5
|
)
|
|
$
|
(8.3
|
)
|
|
$
|
(31.7
|
)
|
|
$
|
(35.5
|
)
|
|
$
|
(40.5
|
)
|
|
$
|
(46.3
|
)
|
EBITDA
|
|
$
|
8.1
|
|
|
$
|
7.1
|
|
|
$
|
10.6
|
|
|
$
|
10.9
|
|
|
$
|
36.7
|
|
|
$
|
43.7
|
|
|
$
|
49.8
|
|
|
$
|
60.3
|
|
Net Income
|
|
$
|
4.2
|
|
|
$
|
2.6
|
|
|
$
|
5.0
|
|
|
$
|
5.6
|
|
|
$
|
17.4
|
|
|
$
|
23.0
|
|
|
$
|
29.3
|
|
|
$
|
38.2
|
|
Capital Expenditures
|
|
$
|
2.2
|
|
|
$
|
3.0
|
|
|
$
|
3.4
|
|
|
$
|
3.6
|
|
|
$
|
12.2
|
|
|
$
|
17.0
|
|
|
$
|
23.0
|
|
|
$
|
23.0
|
|
Depreciation & Amortization
|
|
$
|
2.1
|
|
|
$
|
2.1
|
|
|
$
|
2.2
|
|
|
$
|
2.2
|
|
|
$
|
8.6
|
|
|
$
|
9.3
|
|
|
$
|
10.6
|
|
|
$
|
12.2
|
|
|
|
|
(a)
|
|
Assumes an exchange rate of U.S. dollars to U.K. pounds sterling
of $1.45 = £1.00 for January May 2009, and
$1.65 = £1.00 for June 2009 and thereafter (the average
assumed exchange rate for 2009 is
|
97
|
|
|
|
|
$1.57 = £1.00). Figures in the forecast model for
historical periods may vary slightly from actual reported
figures due to rounding, minor differences in classification and
assumed currency exchange rate.
|
Summary
Balance Sheet Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Model
|
|
|
|
|
|
|
|
|
|
|
Historical
(a)
|
|
Projected
(b)
|
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
|
(Dollars in millions)
|
|
Cash
|
|
$
|
36.5
|
|
|
$
|
42.3
|
|
|
$
|
58.2
|
|
|
$
|
68.6
|
|
|
$
|
95.4
|
|
Current Assets
|
|
$
|
86.2
|
|
|
$
|
96.2
|
|
|
$
|
116.9
|
|
|
$
|
133.9
|
|
|
$
|
170.4
|
|
Total Assets
|
|
$
|
171.2
|
|
|
$
|
183.1
|
|
|
$
|
210.4
|
|
|
$
|
238.4
|
|
|
$
|
285.7
|
|
Current Liabilities
|
|
$
|
69.7
|
|
|
$
|
66.5
|
|
|
$
|
71.8
|
|
|
$
|
79.6
|
|
|
$
|
89.1
|
|
Total Liabilities
|
|
$
|
186.5
|
|
|
$
|
181.2
|
|
|
$
|
182.2
|
|
|
$
|
185.4
|
|
|
$
|
186.7
|
|
Equity
|
|
$
|
(15.3
|
)
|
|
$
|
1.9
|
|
|
$
|
28.2
|
|
|
$
|
53.0
|
|
|
$
|
99.1
|
|
|
|
|
(a)
|
|
Year-end exchange rate of U.S. dollars to U.K. pounds sterling
was $1.44 = £1.00 on December 31, 2008.
|
|
(b)
|
|
Assumes an exchange rate of U.S. dollars to U.K. pounds sterling
of $1.65 = £1.00 for December 31, 2009 and thereafter.
|
FOUR YEAR
FORECAST SENSITIVITY CASE 2
Growth
Assumptions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2011
|
|
2012
|
|
Revenue Volume Growth
|
|
|
5.20
|
%
|
|
|
5.20
|
%
|
|
|
6.75
|
%
|
Revenue Price Inflation
|
|
|
0.00
|
%
|
|
|
1.75
|
%
|
|
|
1.75
|
%
|
Compound Incremental Revenue Growth
|
|
|
5.20
|
%
|
|
|
7.04
|
%
|
|
|
8.62
|
%
|
Cost of Sales Growth
|
|
|
1.30
|
%
|
|
|
2.08
|
%
|
|
|
5.06
|
%
|
Cost Inflation
|
|
|
2.50
|
%
|
|
|
2.50
|
%
|
|
|
2.00
|
%
|
SG&A Increase
|
|
|
1.30
|
%
|
|
|
3.12
|
%
|
|
|
6.75
|
%
|
Energy Expense Increase
|
|
|
(10.00
|
%)
|
|
|
3.00
|
%
|
|
|
3.00
|
%
|
Cost of Sales Growth as a % of Revenue Volume Growth
|
|
|
25
|
%
|
|
|
40
|
%
|
|
|
75
|
%
|
SG&A Growth as a % of Revenue Volume Growth
|
|
|
25
|
%
|
|
|
60
|
%
|
|
|
100
|
%
|
|
|
|
(a)
|
|
The revenue growth rates above are the composite of separately
estimated growth rates for the Companys U.K. and U.S.
operations. The resulting growth rates for revenues and costs
are stated in local currency terms. The growth rates above do
not match the growth rates calculated from the forecasts for
2010 due to the impact of different average exchange rates for
2009 compared to the subsequent periods.
|
98
Summary
Income Statement and Cash Flow
Items
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Model
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
|
|
Projected
|
|
|
Q1 2009
|
|
Q2 2009
|
|
Q3 2009
|
|
Q4 2009
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
|
(Dollars in millions)
|
|
Net Revenues
|
|
$
|
48.4
|
|
|
$
|
44.7
|
|
|
$
|
44.0
|
|
|
$
|
43.3
|
|
|
$
|
180.4
|
|
|
$
|
197.7
|
|
|
$
|
211.6
|
|
|
$
|
229.9
|
|
Gross Profit
|
|
$
|
13.8
|
|
|
$
|
12.1
|
|
|
$
|
8.8
|
|
|
$
|
8.8
|
|
|
$
|
43.5
|
|
|
$
|
51.1
|
|
|
$
|
58.2
|
|
|
$
|
65.3
|
|
SG&A
|
|
$
|
(7.8
|
)
|
|
$
|
(7.1
|
)
|
|
$
|
(8.1
|
)
|
|
$
|
(7.9
|
)
|
|
$
|
(30.9
|
)
|
|
$
|
(33.1
|
)
|
|
$
|
(35.0
|
)
|
|
$
|
(38.1
|
)
|
EBITDA
|
|
$
|
8.1
|
|
|
$
|
7.1
|
|
|
$
|
2.9
|
|
|
$
|
3.1
|
|
|
$
|
21.2
|
|
|
$
|
27.3
|
|
|
$
|
33.5
|
|
|
$
|
38.3
|
|
Net Income
|
|
$
|
4.2
|
|
|
$
|
2.6
|
|
|
$
|
(1.5
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
4.3
|
|
|
$
|
11.4
|
|
|
$
|
21.4
|
|
|
$
|
27.6
|
|
Capital Expenditures
|
|
$
|
2.2
|
|
|
$
|
3.0
|
|
|
$
|
3.4
|
|
|
$
|
3.6
|
|
|
$
|
12.2
|
|
|
$
|
17.0
|
|
|
$
|
17.0
|
|
|
$
|
17.0
|
|
Depreciation & Amortization
|
|
$
|
2.1
|
|
|
$
|
2.1
|
|
|
$
|
2.2
|
|
|
$
|
2.2
|
|
|
$
|
8.6
|
|
|
$
|
9.3
|
|
|
$
|
10.3
|
|
|
$
|
11.1
|
|
|
|
|
(a)
|
|
Assumes an exchange rate of U.S. dollars to U.K. pounds sterling
of $1.45 = £1.00 for January May 2009, and
$1.65 = £1.00 for June 2009 and thereafter (the average
assumed exchange rate for 2009 is $1.57 = £1.00). Figures
in the forecast model for historical periods may vary slightly
from actual reported figures due to rounding, minor differences
in classification and assumed currency exchange rate.
|
Summary
Balance Sheet Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Model
|
|
|
|
|
|
|
|
|
|
|
Historical
(a)
|
|
Projected
(b)
|
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
|
(Dollars in millions)
|
|
Cash
|
|
$
|
36.5
|
|
|
$
|
24.8
|
|
|
$
|
25.0
|
|
|
$
|
25.3
|
|
|
$
|
36.2
|
|
Current Assets
|
|
$
|
86.2
|
|
|
$
|
70.4
|
|
|
$
|
76.9
|
|
|
$
|
80.7
|
|
|
$
|
97.5
|
|
Total Assets
|
|
$
|
171.2
|
|
|
$
|
159.7
|
|
|
$
|
177.7
|
|
|
$
|
194.8
|
|
|
$
|
217.4
|
|
Current Liabilities
|
|
$
|
69.7
|
|
|
$
|
55.9
|
|
|
$
|
63.5
|
|
|
$
|
67.7
|
|
|
$
|
73.4
|
|
Total Liabilities
|
|
$
|
186.5
|
|
|
$
|
170.6
|
|
|
$
|
174.0
|
|
|
$
|
173.6
|
|
|
$
|
170.9
|
|
Equity
|
|
$
|
(15.3
|
)
|
|
$
|
(10.9
|
)
|
|
$
|
3.7
|
|
|
$
|
21.2
|
|
|
$
|
46.5
|
|
|
|
|
(a)
|
|
Year-end exchange rate of U.S. dollars to U.K. pounds sterling
was $1.44 = £1.00 on December 31, 2008.
|
|
(b)
|
|
Assumes an exchange rate of U.S. dollars to U.K. pounds sterling
of $1.65 = £1.00 for December 31, 2009 and thereafter.
|
Managements
Estimate of the Companys Capacity
In addition to the forecasts presented above, the Company
presented to the Acquiring Parties and Plymouth Partners
managements estimate of revenues of the Companys
United States and United Kingdom facilities, if operating at
full capacity in the ordinary course of business. Achieving this
level of revenue would require additional labor costs but would
not require additional plant costs beyond capital expenditures
in the ordinary course.
Annual
Estimated Revenue, 2009 Basis
|
|
|
|
|
|
|
(In thousands)
|
|
|
U.K. Capacity in Dollars(a)
|
|
$
|
229,870
|
|
U.S. Capacity
|
|
$
|
72,640
|
|
|
|
|
|
|
Total Capacity
|
|
$
|
302,510
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Assumes an exchange rate of U.S. dollars to U.K. pounds sterling
of $1.65 = £1.00.
|
99
Price
Range of the Shares
The Shares trade on NYSE Arca under the symbol LSR.
The following table shows, for the periods indicated, the high
and low sale prices per Share on NYSE Arca, based on published
financial sources:
|
|
|
|
|
|
|
|
|
|
|
High
|
|
Low
|
|
Quarter ended March 31, 2007
|
|
$
|
15.00
|
|
|
$
|
11.53
|
|
Quarter ended June 30, 2007
|
|
|
16.60
|
|
|
|
12.40
|
|
Quarter ended September 30, 2007
|
|
|
19.75
|
|
|
|
14.52
|
|
Quarter ended December 31, 2007
|
|
|
22.71
|
|
|
|
17.50
|
|
Quarter ended March 31, 2008
|
|
|
28.50
|
|
|
|
18.30
|
|
Quarter ended June 30, 2008
|
|
|
30.51
|
|
|
|
23.37
|
|
Quarter ended September 30, 2008
|
|
|
39.30
|
|
|
|
26.05
|
|
Quarter ended December 31, 2008
|
|
|
36.48
|
|
|
|
8.20
|
|
Quarter ended March 31, 2009
|
|
|
9.90
|
|
|
|
4.12
|
|
Quarter ended June 30, 2009
|
|
|
7.89
|
|
|
|
6.24
|
|
Quarter ended September 30, 2009
|
|
|
8.42
|
|
|
|
6.87
|
|
Quarter ended December 31, 2009 (through October 27,
2009)
|
|
|
8.45
|
|
|
|
7.92
|
|
Dividend
Policy
The Company has never declared or paid any cash dividends on the
Shares. If the Merger is not completed, the Company does not
anticipate paying any cash dividends in the foreseeable future,
and it intends to retain future earnings for the development and
expansion of its business. In addition, the Merger Agreement
prohibits the Company from declaring or paying dividends before
completion of the Merger. See
THE MERGER
AGREEMENT Conduct of Business Pending the
Merger above.
Prior
Public Offerings
The Company has not made an underwritten public offering of its
common stock for cash during the past three years that was
registered under the Securities Act or exempt from registration
under Regulation A.
INFORMATION
ABOUT THE ACQUIRING PARTIES
Mr. Baker is the Chairman and Chief Executive Officer of
the Company.
Mr. Baker is currently the sole owner of all of the
outstanding capital stock of Parent, and Parent is the sole
owner of all of the outstanding capital stock of Merger Sub.
Mr. Baker is also the sole owner of all of the outstanding
units of LAB Holdings.
Parent is a newly formed Delaware corporation and has not
carried on any activities other than in connection with the
Merger. Merger Sub is a newly formed Maryland corporation and
has not carried on any activities other than in connection with
the Merger. Parent and Merger Sub have been formed in connection
with the Merger and, until immediately prior to the effective
time of the Merger, it is not anticipated that Merger Sub or
Parent will have any significant assets or liabilities or engage
in activities other than those incident to their respective
formation and the transactions contemplated by the Merger
Agreement and the related debt and equity financings.
Mr. Baker is the sole director and officer of each of
Parent and Merger Sub.
LAB Holdings is a newly formed Delaware limited liability
company and has not carried on any activities other than in
connection with the Merger. LAB Holdings is the Guarantor under
the Merger Agreement and the Guaranty, and has been capitalized
with an amount estimated to be sufficient to pay the maximum
termination fee potentially payable by the Constituent
Corporations under the Merger Agreement. Mr. Baker is the
sole manager of LAB Holdings.
100
Focused Healthcare Partners, L.L.C., a New Jersey limited
liability company, is an investment firm involved with
healthcare startup and development companies. Mr. Baker is
the sole owner of all the outstanding units of, and the sole
director and officer of, Focused Healthcare Partners, L.L.C.
The principal offices of Parent, Mr. Baker, Focused
Healthcare Partners, L.L.C. and LAB Holdings are
c/o Mr. Baker
at Life Sciences Research, Inc., 401 Hackensack Avenue,
Hackensack, NJ 07601 and the telephone number of Parent and
Mr. Baker is
(732) 649-9961.
The principal office of Merger Sub is 300 East Lombard Street,
Baltimore, Maryland 21202.
OTHER
MATTERS
Other
Matters at the Special Meeting
If any procedural matters properly come before the special
meeting, it is the intention of the proxy holders, identified in
the proxy card or any proxy submitted via telephone or Internet,
to vote in their discretion on such matters pursuant to the
discretionary authority granted pursuant to the proxy card and
permitted under applicable law.
Future
Stockholder Proposals
If the Merger is consummated, the Company will not have public
stockholders and there will be no public participation in any
future meeting of stockholders. However, if the Merger is not
completed, the Company expects to hold a 2010 annual meeting of
stockholders. Any proposal by a stockholder intended to be
presented at the Companys 2010 Meeting of Stockholders
must be received by the Company no later than January 21,
2010 to be included in the Companys proxy statement and
form of proxy relating to such annual meeting. Any proposal
should be addressed to the offices of the Company, Mettlers
Road, P.O. Box 2360, East Millstone, NJ 08875,
Attention: Secretary.
Under the provisions of the Companys current bylaws, for
nominations or other business to be properly brought before an
annual meeting by a stockholder, (a) the stockholder must
have given timely notice thereof in writing to the Secretary of
the Company; (b) the business must be a proper matter for
stockholder action under Maryland law; (c) if the
stockholder, or the beneficial owner on whose behalf any such
proposal or nomination is made, has provided the Company with a
Solicitation Notice (as that term is defined below),
such stockholder or beneficial owner must, in the case of a
proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the Shares required under
applicable laws to carry any such proposal, or, in the case of a
nomination or nominations, have delivered a proxy statement and
form of proxy to holders of a percentage of the Shares
reasonably believed by such stockholder or beneficial holder to
be sufficient to elect the nominee or nominees proposed to be
nominated by such stockholder, and must, in either case, have
included in such materials the Solicitation Notice; and
(d) if no Solicitation Notice relating thereto has been
timely provided, the stockholder or beneficial owner proposing
such business or nomination must not have solicited a number of
proxies sufficient to have required the delivery of such a
Solicitation Notice. To be timely, a stockholders notice
must be delivered to the Secretary of the Company at the
principal executive offices of the Company not later than the
close of business on the ninetieth (90th) calendar day nor
earlier than the close of business on the one hundred and
twentieth (120th) calendar day prior to the first (1st)
anniversary of the preceding years annual meeting. For
purposes of the 2010 annual meeting, that would mean such notice
must be delivered no later than the close of business on
February 21, 2010 nor earlier than the close of business on
January 21, 2010. Such stockholders notice shall set
forth (A) as to each person whom the stockholder proposes
to nominate for election or reelection as a director all
information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors
in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act
(including such persons written consent to being named in
the proxy statement as a nominee and to serving as a director if
elected); (B) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the text of
the proposal or business (including the text of any resolutions
proposed for consideration and in the event that such business
includes a
101
proposal to amend the Companys bylaws, the language of the
proposed amendment), the reasons for conducting such business at
the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (C) as to the stockholder giving
the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (1) the name and address of
such stockholder, as they appear on the Companys books,
and of such beneficial owner, (2) the class (and, if
applicable, series) and number of Shares which are owned
beneficially and of record by such stockholder and such
beneficial owner, (3) a representation that the stockholder
is a holder of record of stock of the Company entitled to vote
at such meeting and intends to appear in person or by proxy at
the meeting to propose such business or nomination, and
(4) a representation whether the stockholder or the
beneficial owner, if any, intends or is part of a group which
intends to deliver a proxy statement
and/or
form
of proxy to holders of at least the percentage of the
Companys outstanding voting stock required to approve or
adopt the proposal or elect such nominee or nominees (an
affirmative statement of such intent is referred to in this
proxy statement as a
Solicitation Notice
). The foregoing
notice requirements shall be deemed satisfied by a stockholder
if the stockholder has notified the Company of his or her
intention to present a proposal at an annual meeting in
compliance with
Rule 14a-8
(or any successor) promulgated under the Exchange Act and such
stockholders proposal has been included in a proxy
statement that has been prepared by the Company to solicit
proxies for such annual meeting. The Company may require any
proposed nominee to furnish such other information as the
Company may reasonably require to determine the eligibility of
such proposed nominee to serve as a director.
Householding
of Proxy Materials
Only one copy of this proxy statement has been sent to multiple
stockholders who share the same address and last name, unless
the Company has received contrary instructions from one or more
of those stockholders. This procedure is referred to as
Householding. The Company has been notified that
certain intermediaries (brokers or banks) also will household
proxy materials. The Company will deliver promptly, upon oral or
written request, separate copies of the proxy statement to any
stockholder at the same address. If you wish to receive separate
copies of one or both of these documents, you may write to Life
Sciences Research, Inc., P. O. Box 2360, Mettlers Road,
East Millstone, NJ 08875, Attention: Secretary. You may contact
your broker or bank to make a similar request. Stockholders
sharing an address who now receive multiple copies of the
Companys proxy statement may request delivery of a single
copy of each document by writing or calling the Company at the
above address or by contacting their broker or bank (provided
the broker or bank has determined to household proxy materials).
Prior
Stock Purchases and Other Transactions
Prior stock purchases by the Company
.
Except as set forth below, the Company did not purchase any
Shares during the past two years:
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Total Number of
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|
|
|
Shares
|
|
Range of Prices Paid Per
|
|
Average Price Paid Per
|
Period
|
|
Purchased
|
|
Share or Unit
|
|
Share
|
|
September 1, 2008 December 31, 2008
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40,600
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(1)
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|
$
|
24.63
|
(2)
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|
$
|
24.63
|
(2)
|
July 1, 2007 August 31, 2007
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612,500
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(3)(4)
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|
$
|
7.00-11.50
|
(5)
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|
$
|
10.93
|
(5)
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(1)
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|
Transaction involved the privately negotiated purchase from an
unaffiliated third party of warrants to acquire
40,600 Shares at an exercise price of $10.46 per Share.
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(2)
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|
The Company repurchased warrants to acquire 40,600 Shares
at an exercise price of $10.46 per Share, for an aggregate
consideration of approximately $1,000,000.
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(3)
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|
The Company repurchased warrants to acquire 562,500 Shares
in two separate transactions. On August 1, 2007, the
Company acquired from its third party lender in a privately
negotiated transaction, concurrent with the amendment of the
Companys Existing Financing Agreement, warrants to acquire
250,000 Shares at an exercise price of $12.00 per Share for
an aggregate consideration of $2,750,000, or the equivalent of
|
102
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|
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|
|
$11.00 per each warrant to acquire a Share. On August 29,
2007, the Company acquired from an unaffiliated third party in a
privately negotiated transaction warrants to acquire
312,500 Shares at an exercise price of $10.46 per Share for
an aggregate consideration of $3,594,000, or the equivalent of
$11.50 per each warrant to acquire a Share.
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(4)
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|
Transaction involved the privately negotiated purchase from an
unaffiliated third party of warrants to acquire
50,000 Shares at an exercise price of $10.70 per Share.
|
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(5)
|
|
The Company purchased (1) warrants to acquire
250,000 Shares at an exercise price of $12.00 per Share for
an aggregate consideration of $2,750,000 or the equivalent of
$11.00 per each warrant to acquire a Share; (2) warrants to
acquire 312,500 Shares at an exercise price of $10.46 per
Share for an aggregate consideration of $3,594,000 or the
equivalent of $11.50 per each warrant to acquire a Share; and
(3) warrants to acquire 50,000 Shares for an aggregate
consideration of $350,000 or the equivalent of $7.00 per each
warrant to acquire a Share.
|
Prior Stock Purchases by the Acquiring
Parties.
Except as provided below, no purchases
of Shares have been made by any of the Acquiring Parties, or any
affiliate thereof, within the past two years:
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Total Number of
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|
Range of Prices
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|
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Shares
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|
Paid Per
|
|
Average Price Paid Per
|
Period
|
|
Purchasing Party
|
|
Purchased
|
|
Share or Unit
|
|
Share
|
|
September 1, 2008 December 31, 2008
|
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|
Andrew H. Baker
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|
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610, 914
|
(1)
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|
$
|
1.50 - $1.50
|
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|
$
|
1.50
|
|
|
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|
(1)
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|
Mr. Baker exercised warrants to purchase
410,914 Shares on October 27, 2008 at an exercise
price of $1.50 per Share, and exercised options to purchase
200,000 Shares on November 14, 2008 at an exercise
price of $1.50 per Share. The aggregate consideration for the
shares purchased by Mr. Baker pursuant to the exercise of
warrants and options, as described above, was $916,371.
|
Available
Information
The Company is subject to the informational reporting
requirements of the Exchange Act and, in accordance with the
Exchange Act, files reports, proxy statements and other
information with the Securities and Exchange Commission. These
reports, proxy statements and other information can be inspected
and copies made at the Public Reference Room of the Securities
and Exchange Commission located at 100 F Street NE,
Washington, DC
20549-2521.
Copies of these materials can also be obtained from the Public
Reference Room of the Securities and Exchange Commission at its
Washington address at prescribed rates. Information regarding
the operation of the Public Reference Room may be obtained by
calling the Securities and Exchange Commission at
1-800-SEC-0330.
Copies of these materials also may be obtained without charge at
the Securities and Exchange Commissions website at
www.sec.gov. The Shares trade on NYSE Arca, under the symbol
LSR.
The Company, Parent, Merger Sub, Mr. Baker, Focused
Healthcare Partners, L.L.C. and LAB Holdings have filed a
Schedule 13E-3
with the Securities and Exchange Commission with respect to the
Merger. As permitted by the Securities and Exchange Commission,
this proxy statement may omit certain information contained in
the
Schedule 13E-3.
The
Schedule 13E-3,
including any amendments and exhibits filed or incorporated by
reference as a part of it, is available for inspection or
copying as set forth above. This proxy statement and the
documents incorporated herein by reference include statements
regarding the contents of certain contracts or other documents;
the Companys stockholders are encouraged to read the full
text of any such contract or document filed as an exhibit with
the Securities and Exchange Commission.
If you would like to request documents from the Company, please
do so at least 10 business days before the date of the special
meeting in order to receive timely delivery of those documents
prior to the special meeting.
103
You should rely only on the information contained or
incorporated by reference in this proxy statement when
considering how to vote your Shares at the special meeting. The
Company has not authorized anyone to provide you with
information that is different from what is contained in this
proxy statement.
You should not assume that the information contained in this
proxy statement is accurate as of any date other than the date
hereof, and the mailing of this proxy statement to stockholders
does not create any implication to the contrary. This proxy
statement does not constitute a solicitation of a proxy in any
jurisdiction where, or to or from any person to whom, it is
unlawful to make a proxy solicitation.
Information
Incorporated by Reference
The Securities and Exchange Commission allows the Company to
incorporate by reference into this proxy statement, which means
the Company may disclose important information by referring you
to other documents filed separately with the Securities and
Exchange Commission. The information incorporated by reference
is deemed to be a part of this proxy statement, except for any
information superseded by information contained in, or
incorporated by reference into, this proxy statement.
This proxy statement incorporates by reference the documents
listed below that the Company previously filed with the
Securities and Exchange Commission. These documents contain
important information about the Company and its business,
financial condition and results or operations.
The following documents filed by the Company with the Securities
and Exchange Commission are incorporated herein by reference:
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Type of Report / Statement
|
|
Periods Covered / Date Filed
|
|
Annual Report on
Form 10-K
|
|
Years ended December 31, 2008 and 2007
|
Annual Report on
Form 11-K
|
|
Years ended December 31, 2008 and 2007
|
Proxy Statement on Schedule 14A
|
|
Filed on April 9, 2009
|
Quarterly Reports on
Form 10-Q
|
|
Quarters ended March 31, 2009 and June 30, 2009
|
Current Reports on
Form 8-K
|
|
Filed on May 4, 2009, May 21, 2009, June 5, 2009, July 9, 2009,
July 24, 2009, August 18, 2009, September 8, 2009 and
October 21, 2009
|
The Company also incorporates by reference all other reports it
has filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since December 31, 2008 and each document it
files under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this proxy statement and before
the special meeting. Any and all of the information that has
been incorporated by reference in this proxy statement and not
presented in this proxy statement or delivered with it, will be
made available without charge, without exhibits (unless the
exhibits are specifically incorporated by reference in this
proxy statement), to any person to whom this proxy statement is
delivered, upon written request directed to the Company at P. O.
Box 2360, Mettlers Road, East Millstone, NJ 08875, Attention:
Secretary or telephonic request to the Companys Secretary
at
(732) 649-9961.
Any requested documents will be sent by first class mail or
other equally prompt means within one business day of the
Companys receipt of such request.
By Order of the Board of Directors
Mark L. Bibi
Secretary and General Counsel
East
Millstone, New Jersey
October 28, 2009
104
Appendix A
AGREEMENT
AND PLAN OF MERGER
among
LIFE SCIENCES RESEARCH, INC.,
LION HOLDINGS, INC.
and
LION MERGER CORP.
Dated as of July 8, 2009
TABLE OF
CONTENTS
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Page
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ARTICLE I The Merger; Closing; Effective Time
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A-1
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1.1.
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|
The Merger
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A-1
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1.2.
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|
Closing
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A-1
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1.3.
|
|
Effective Time
|
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A-1
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ARTICLE II Charter and Bylaws of the Surviving Corporation
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A-1
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2.1.
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The Charter
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A-1
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2.2.
|
|
The Bylaws
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A-2
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ARTICLE III Officers and Directors of the Surviving
Corporation
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A-2
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3.1.
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|
Director
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A-2
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3.2.
|
|
Officers
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A-2
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|
ARTICLE IV Effect of the Merger on Capital Stock: Exchange
of Certificates
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A-2
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4.1.
|
|
Effect on Capital Stock
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A-2
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4.2.
|
|
Exchange of Certificates
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A-2
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|
4.3.
|
|
Treatment of Stock Plans and Warrants
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A-4
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4.4.
|
|
Adjustments to Prevent Dilution
|
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A-4
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|
ARTICLE V Representations and Warranties
|
|
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A-5
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5.1.
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|
Representations and Warranties of the Company
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|
A-5
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|
5.2.
|
|
Representations and Warranties of Parent and Merger Sub
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A-17
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ARTICLE VI Covenants
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|
A-20
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|
6.1.
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|
Interim Operations
|
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|
A-20
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6.2.
|
|
Acquisition Proposals
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A-22
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6.3.
|
|
Information Supplied
|
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A-24
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|
6.4.
|
|
Stockholders Meeting
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|
A-24
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6.5.
|
|
Filings; Other Actions; Notification
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|
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A-25
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|
6.6.
|
|
Access and Reports
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|
|
A-26
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|
6.7.
|
|
NYSE Arca De-listing
|
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|
A-26
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|
6.8.
|
|
Publicity
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|
A-26
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6.9.
|
|
Employee Benefits
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|
|
A-26
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|
6.10.
|
|
Expenses
|
|
|
A-27
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|
6.11.
|
|
Indemnification; Directors and Officers Insurance
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|
|
A-27
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|
6.12.
|
|
Takeover Statutes
|
|
|
A-28
|
|
6.13.
|
|
Rule 16b-3
|
|
|
A-28
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|
6.14.
|
|
Financing
|
|
|
A-28
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|
6.15.
|
|
Stockholder Litigation
|
|
|
A-29
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|
6.16.
|
|
Confidentiality
|
|
|
A-29
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|
6.17.
|
|
Resignations
|
|
|
A-30
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|
6.18.
|
|
Capitalization; Related Matters
|
|
|
A-30
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|
ARTICLE VII Conditions
|
|
|
A-30
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|
7.1.
|
|
Conditions to Each Partys Obligation to Effect the Merger
|
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|
A-30
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|
7.2.
|
|
Conditions to Obligations of Parent and Merger Sub
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A-31
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7.3.
|
|
Conditions to Obligation of the Company
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A-31
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A-i
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Page
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ARTICLE VIII Termination
|
|
|
A-32
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8.1.
|
|
Termination by Mutual Consent; Automatic Termination
|
|
|
A-32
|
|
8.2.
|
|
Termination by Either Parent or the Company
|
|
|
A-32
|
|
8.3.
|
|
Termination by the Company
|
|
|
A-32
|
|
8.4.
|
|
Termination by Parent
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|
|
A-33
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8.5.
|
|
Effect of Termination and Abandonment
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|
A-33
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|
ARTICLE IX Miscellaneous
|
|
|
A-36
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|
9.1.
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|
Survival
|
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|
A-36
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|
9.2.
|
|
Modification or Amendment
|
|
|
A-36
|
|
9.3.
|
|
Extensions; Waivers
|
|
|
A-36
|
|
9.4.
|
|
Counterparts
|
|
|
A-36
|
|
9.5.
|
|
Governing Law
|
|
|
A-37
|
|
9.6.
|
|
Arbitration
|
|
|
A-37
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|
9.7.
|
|
Notices
|
|
|
A-37
|
|
9.8.
|
|
Entire Agreement
|
|
|
A-38
|
|
9.9.
|
|
No Third Party Beneficiaries
|
|
|
A-38
|
|
9.10.
|
|
Obligations of Parent and of the Company
|
|
|
A-38
|
|
9.11.
|
|
Definitions
|
|
|
A-38
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|
9.12.
|
|
Severability
|
|
|
A-39
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|
9.13.
|
|
Interpretation; Construction
|
|
|
A-39
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|
9.14.
|
|
Assignment
|
|
|
A-39
|
|
Annex A
|
|
Defined Terms
|
|
|
A-41
|
|
Exhibit A
|
|
Form of Charter of the Surviving Corporation
|
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|
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|
A-ii
AGREEMENT
AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this
Agreement
), dated as of July 8,
2009, among Life Sciences Research, Inc., a Maryland corporation
(the
Company
), Lion Holdings, Inc., a
Delaware corporation
(
Parent
)
, and
Lion Merger Corp., a Maryland corporation and a wholly owned
subsidiary of Parent (
Merger Sub
; the
Company and Merger Sub sometimes being hereinafter collectively
referred to as the
Constituent
Corporations
).
RECITALS
WHEREAS, the respective boards of directors of each of Parent,
Merger Sub and the Company have approved and declared advisable
the merger of Merger Sub with and into the Company (the
Merger
) upon the terms and subject to
the conditions set forth in this Agreement and have approved
this Agreement; and
WHEREAS, the Company, Parent and Merger Sub desire to make
certain representations, warranties, covenants and agreements in
connection with this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements contained
herein, the parties hereto agree as follows:
ARTICLE I
The
Merger; Closing; Effective Time
1.1.
The Merger
.
Upon the
terms and subject to the conditions set forth in this Agreement,
at the Effective Time, Merger Sub shall be merged with and into
the Company and the separate corporate existence of Merger Sub
shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as
the
Surviving Corporation
), and the
separate corporate existence of the Company, with all of its
rights, privileges, immunities, powers and franchises, shall
continue unaffected by the Merger, except as set forth in
Article II. The Merger shall have the effects specified in
the Maryland General Corporation Law (the
MGCL
).
1.2.
Closing
.
Unless
otherwise mutually agreed in writing between the Company and
Parent, the closing for the Merger (the
Closing
) shall take place at a
location to be agreed by the parties at 9:00 a.m. (Eastern
Time) on the second business day (the
Closing
Date
) following the day on which the last to be
satisfied or waived of the conditions set forth in
Article VII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions) shall be satisfied or
waived in accordance with this Agreement. For purposes of this
Agreement, the term
business day
shall
mean any day ending at 11:59 p.m. (Eastern Time) other than
a Saturday or Sunday or a day on which banks are required or
authorized to close in the City of New York, New York.
1.3.
Effective Time
.
As soon
as practicable following the Closing, the Company and Parent
will cause the Articles of Merger (the
Articles of
Merger
) to be executed, acknowledged and filed
with the State Department of Assessments and Taxation of
Maryland. The Merger shall become effective at the time when the
Articles of Merger have been accepted for record by the State
Department of Assessment and Taxation of Maryland or at such
later time as may be agreed by the parties hereto in writing and
specified in the Articles of Merger, not to exceed thirty
(30) days after the Articles of Merger are accepted for
record (the
Effective Time
).
ARTICLE II
Charter
and
Bylaws
of the Surviving Corporation
2.1.
The Charter
.
The
charter of the Company shall be amended as a result of the
Merger so as to read in its entirety as set forth in
Exhibit A
hereto and as so amended shall be the
charter of the Surviving Corporation (the
Charter
), until duly amended as
provided therein or by applicable Laws.
A-1
2.2.
The Bylaws
.
The bylaws
of the Company in effect immediately prior to the Effective Time
shall be the bylaws of the Surviving Corporation (the
Bylaws
), until thereafter amended as
provided therein, by the Charter of the Surviving Corporation or
by applicable Laws.
ARTICLE III
Officers
and
Directors
of the Surviving Corporation
3.1.
Director
.
The director
of Merger Sub shall, from and after the Effective Time, be the
director of the Surviving Corporation until such directors
successor shall have been duly elected and qualify or until his
or her earlier death, resignation or removal in accordance with
the Charter and the Bylaws.
3.2.
Officers
.
The officers
of the Company at the Effective Time shall, from and after the
Effective Time, be the officers of the Surviving Corporation
until their successors shall have been duly elected or appointed
and qualify or until their earlier death, resignation or removal
in accordance with the Charter and the Bylaws.
ARTICLE IV
Effect of
the Merger on Capital
Stock:
Exchange of Certificates
4.1.
Effect on Capital
Stock
.
At the Effective Time, as a result of
the Merger and without any action on the part of the Company,
Parent, Merger Sub or the holder of any capital stock of the
Company:
(a)
Merger Consideration
.
Each
share of the voting common stock, par value $0.01 per share, of
the Company (a
Share
or, collectively,
the
Shares
) issued and outstanding
immediately prior to the Effective Time (other than Shares owned
by Parent, Merger Sub or any other direct or indirect wholly
owned Subsidiary of Parent and Shares owned by any direct or
indirect wholly owned subsidiary of the Company, and in each
case not held on behalf of third parties) shall be converted
into the right to receive $8.50 per Share in cash (the
Per Share Merger Consideration
). At
the Effective Time, all of the Shares shall cease to be
outstanding, shall be cancelled and shall cease to exist, each
certificate (a
Certificate
) formerly
representing any of the Shares shall thereafter represent only
the right to receive the Per Share Merger Consideration, without
interest. For the avoidance of doubt, the parties acknowledge
and agree that to the extent any Shares have been contributed to
Parent prior to or in connection with the Effective Time, such
contribution shall be deemed to have occurred immediately prior
to the Effective Time.
(b)
Merger Sub
.
At the Effective
Time, each share of common stock, par value $0.01 per share, of
Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into one share of common
stock, par value $0.01 per share, of the Surviving Corporation.
4.2.
Exchange of Certificates
.
(a)
Paying Agent
.
At or prior to
the Effective Time, Parent shall deposit, or shall cause to be
deposited, with a paying agent selected by Parent with the
Companys prior approval (such approval not to be
unreasonably withheld or delayed) (unless a paying agent
reasonably acceptable to the Parent and Company is not available
on commercially reasonable terms, in which case the Company
shall act as paying agent hereunder) (such paying agent or the
Company, as applicable, the
Paying
Agent
), for the benefit of the holders of Shares,
a cash amount in immediately available funds necessary for the
Paying Agent to make payments under Section 4.1(a) (such
cash being hereinafter referred to as the
Exchange
Fund
). The Paying Agent shall invest the Exchange
Fund as directed by Parent;
provided
that such
investments shall be in obligations of or guaranteed by the
United States of America or obligations of an agency of the
United States of America which are backed by the full faith and
credit of the United States of America. Any interest and other
income resulting from such investment shall become a part of the
Exchange Fund, and any amounts in excess of the amounts payable
under Section 4.1(a) shall be promptly returned to the
Surviving Corporation. To the extent that there are losses with
respect to any such investments, the Exchange Fund diminishes
for any reason below the level required to make prompt cash
payment under Section 4.1(a), Parent shall, or shall cause
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the Surviving Corporation to, promptly replace, restore or
increase the cash in the Exchange Fund so as to ensure that the
Exchange Fund is at all times maintained at a level sufficient
to make such payments under Section 4.1(a).
(b)
Exchange Procedures
.
Promptly
after the Effective Time (and in any event within two
(2) business days), the Surviving Corporation shall cause
the Paying Agent to mail to each holder of record of Shares
(i) a letter of transmittal in customary form specifying
that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the
Certificates (or affidavits of loss in lieu thereof as provided
in Section 4.2(e)) to the Paying Agent, such letter of
transmittal to be in such form and have such other provisions as
Parent and the Company may reasonably agree, and
(ii) instructions for use in effecting the surrender of the
Certificates (or affidavits of loss in lieu thereof as provided
in Section 4.2(e)) in exchange for the Per Share Merger
Consideration. Upon surrender of a Certificate (or affidavit of
loss in lieu thereof as provided in Section 4.2(e)) to the
Paying Agent in accordance with the terms of such letter of
transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor a cash amount in
immediately available funds (after giving effect to any required
Tax withholdings as provided in Section 4.2(g)) equal to
(x) the number of Shares represented by such Certificate
(or affidavit of loss in lieu thereof as provided in
Section 4.2(e)) multiplied by (y) the Per Share Merger
Consideration, and such Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on
any amount payable upon due surrender of the Certificates. In
the event of a transfer of ownership of Shares that is not
registered in the transfer records of the Company, if the
Certificate formerly representing such Shares is presented to
the Paying Agent, accompanied by all documents reasonably
required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid or are
not applicable, the Paying Agent shall deliver to such
transferee an amount of cash in immediately available funds to
be exchanged upon due surrender of such Certificate.
(c)
Transfers
.
All Per Share
Merger Consideration paid upon the surrender for exchange of
Certificates in accordance with the terms of this
Article IV
shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Shares formerly
represented by such Certificates. From and after the Effective
Time, there shall be no transfers on the stock transfer books of
the Company of the Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, any
Certificate is presented to the Surviving Corporation, Parent or
the Paying Agent for transfer, it shall be cancelled and
exchanged for the cash amount in immediately available funds to
which the holder thereof is entitled pursuant to this
Article IV. From and after the Effective Time, holders of
Certificates shall cease to have any rights as stockholders of
the Company, except as otherwise provided herein or by Law.
(d)
Termination of Exchange
Fund
.
Any portion of the Exchange Fund
(including the proceeds of any investments thereof) that remains
unclaimed by the stockholders of the Company for one year after
the Effective Time shall be delivered to the Surviving
Corporation. Any holder of Shares who has not theretofore
complied with this Article IV shall thereafter look only to
Parent and the Surviving Corporation for payment of the Per
Share Merger Consideration upon due surrender of its
Certificates (or affidavits of loss in lieu thereof as provided
in Section 4.2(e)), without any interest thereon.
Notwithstanding the foregoing, none of the Surviving
Corporation, Parent, the Paying Agent or any other Person shall
be liable to any former holder of Shares for any amount required
to be delivered to a public official pursuant to applicable
abandoned property, escheat or similar Laws. For the purposes of
this Agreement, the term
Person
shall
mean any individual, corporation (including
not-for-profit),
general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, Governmental
Entity or other entity of any kind or nature.
(e)
Lost, Stolen or Destroyed
Certificates
.
In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate
to be lost, stolen or destroyed and, if required by Parent, the
posting by such Person of a bond in customary amount and upon
such terms as may be required by Parent as indemnity against any
claim that may be made against it or the Surviving Corporation
with respect to such Certificate, the Paying Agent will deliver
to such Person cash in immediately available funds in the amount
(after giving effect to any required Tax withholdings as
provided in Section 4.2(g)) equal to the number of Shares
represented by such lost, stolen or destroyed Certificate
multiplied by the Per Share Merger Consideration.
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(f)
Appraisal Rights
.
In
accordance with the Companys charter and
Section 3-202(c)
of the MGCL, no stockholder of the Company shall have any
statutory rights to demand and receive payment of the fair value
of the stockholders Shares as a result of the transactions
contemplated by this Agreement or the Merger.
(g)
Withholding Rights
.
Each of
Parent and the Surviving Corporation shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant
to this Agreement to any holder of Shares such amounts as it is
required to deduct and withhold with respect to the making of
such payment under the Code, or any other applicable state,
local or foreign Tax Law. To the extent that amounts are so
withheld by the Surviving Corporation or Parent, as the case may
be, such withheld amounts shall (i) be remitted by Parent
or the Surviving Corporation, as applicable, to the applicable
Governmental Entity and (ii) be treated for all purposes of
this Agreement as having been paid to the holder of Shares in
respect of which such deduction and withholding was made by the
Surviving Corporation or Parent, as the case may be. Parent and
Merger Sub agree that no amounts will be withheld pursuant to
Code Section 1445 with respect to any amounts payable under
this Agreement.
4.3.
Treatment of Stock Plans and
Warrants
.
(a)
Options
.
Except as may be
separately agreed in writing prior to the Effective Time by
Parent and the holder of any option to purchase Shares (a
Company Option
) (with respect to such
holders Company Options only), at the Effective Time, each
outstanding Company Option under the Stock Plans shall become
fully exercisable and vested, shall be cancelled and shall only
entitle the holder thereof to receive, as soon as reasonably
practicable after the Effective Time (but in any event no later
than three (3) business days after the Effective Time), an
amount in cash equal to (x) the total number of Shares
subject to such Company Option immediately prior to the
Effective Time multiplied by (y) the excess, if any, of the
Per Share Merger Consideration over the exercise price per Share
under such Company Option, less applicable Taxes required to be
withheld with respect to such payment. The Company agrees to use
commercially reasonable efforts to take all actions reasonably
sufficient (including any action reasonably requested by Parent)
to effectuate immediately prior to the Effective Time the
cancellation of all Company Stock Options.
(b)
Restricted Stock
.
At the
Effective Time, each outstanding share of restricted stock
(
Restricted Stock
)
under the Stock
Plans shall become fully vested, shall be cancelled and shall
only entitle the holder thereof to receive, as soon as
reasonably practicable after the Effective Time (but in any
event no later than three (3) business days after the
Effective Time), an amount in cash equal to (x) the total
number of shares of such Restricted Stock immediately prior to
the Effective Time multiplied by (y) the Per Share Merger
Consideration, less applicable Taxes required to be withheld
with respect to such payment.
(c)
Warrants
.
At the Effective
Time, each outstanding Warrant shall be cancelled and shall only
entitle the holder thereof to receive, as soon as reasonably
practicable after the Effective Time (but in any event no later
than three (3) business days after the Effective Time), an
amount in cash equal to (x) the total number of Shares
subject to such Warrant immediately prior to the Effective Time
multiplied by (y) the excess, if any, of the Per Share
Merger Consideration over the exercise price per Share under
such Warrant, less applicable Taxes required to be withheld with
respect to such payment.
(d)
Corporate Actions
.
At or prior
to the Effective Time, the Company, the board of directors of
the Company (subject to the exercise of the directors
duties under applicable Law) and the compensation committee of
the board of directors of the Company (subject to the exercise
of the directors duties under applicable Law), as
applicable, shall adopt resolutions and take all actions
necessary to implement the provisions of Sections 4.3(a),
4.3(b), 4.3(c) and this Section 4.3(d). Except as otherwise
provided herein or agreed to in writing by Parent and the
Company or as may be necessary to administer Company Options or
Restricted Stock remaining outstanding following the Effective
Time, the Stock Plans shall be terminated effective as of the
Effective Time and no participant in the Stock Plans shall
thereafter be granted any rights thereunder to acquire any
equity securities of the Company, the Surviving Corporation,
Parent or any Subsidiary of any of the foregoing.
4.4.
Adjustments to Prevent
Dilution
.
In the event that the Company
changes the number of Shares or securities convertible or
exchangeable into or exercisable for Shares issued and
outstanding prior to the
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Effective Time as a result of a reclassification, stock split
(including a reverse stock split), stock dividend or
distribution, recapitalization, merger, issuer tender or
exchange offer or other similar transaction, the Per Share
Merger Consideration shall be equitably adjusted.
ARTICLE V
Representations
and Warranties
5.1.
Representations and Warranties of the
Company
.
Except as set forth in the
corresponding sections or subsections of the disclosure letter
delivered to Parent by the Company prior to or concurrently with
entering into this Agreement (the
Company Disclosure
Letter
), the Company hereby represents and
warrants to Parent and Merger Sub that:
(a)
Organization, Good Standing and
Qualification
.
Each of the Company and its
Subsidiaries is a legal entity duly organized, validly existing
and in good standing under the Laws of its respective
jurisdiction of organization and has all requisite corporate or
similar power and authority to own, lease and operate its
properties and assets and to carry on its business as presently
conducted and is qualified to do business and is in good
standing as a foreign corporation or similar entity in each
jurisdiction where the ownership, leasing or operation of its
assets or properties or conduct of its business requires such
qualification, except where the failure to be so organized,
qualified or in good standing, or to have such power or
authority, are not, individually or in the aggregate, reasonably
expected to have a Company Material Adverse Effect. The Company
has made available to Parent complete and correct copies of the
Companys and its Significant Subsidiaries charters
and bylaws or comparable governing documents, each as amended to
the date hereof, and each as so made available is in effect on
the date hereof. As used in this Agreement, the term
(i)
Subsidiary
means, with
respect to any Person, any other Person of which at least a
majority of the securities or ownership interests having by
their terms ordinary voting power to elect a majority of the
board of directors or other Persons performing similar functions
is directly or indirectly owned or controlled by such Person
and/or
by
one or more of its Subsidiaries and, unless otherwise indicated
herein, the term
Subsidiary
refers to a
Subsidiary of the Company, (ii)
Significant
Subsidiary
is as defined in Rule 1.02(w) of
Regulation S-X
promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the
Exchange Act
), and
(iii)
Company Material Adverse
Effect
means any event, circumstance, development,
change or effect that (i) has a material adverse effect on
the financial condition, properties, assets, liabilities,
business or results of operations of the Company and its
Subsidiaries taken as a whole or (ii) would reasonably be
expected to prevent the Company from consummating the Merger or
prevent the Company from performing its obligations under this
Agreement;
provided
,
however
, that none of the
following shall constitute or be taken into account in
determining whether there has been or is a Company Material
Adverse Effect:
(A) events, circumstances, developments, changes or effects
in the economy or financial markets generally in the United
States or other countries in which the Company or any of its
Subsidiaries conduct operations or that are the result of acts
of war or terrorism so long as such events, circumstances,
developments, changes or effects do not adversely affect the
Company or its Subsidiaries in a materially disproportionate
manner relative to participants in the pharmaceutical industry
or any industry in which the Company or its Subsidiaries operate;
(B) events, circumstances, developments, changes or effects
that are the result of factors generally affecting the
pharmaceutical industry or any industry in which the Company and
its Subsidiaries operate so long as such events, circumstances,
developments, changes or effects do not adversely affect the
Company or its Subsidiaries in a materially disproportionate
manner relative to participants in either the pharmaceutical
industry or any industry in which the Company or its
Subsidiaries operate, respectively;
(C) any loss or threatened loss of, or adverse change or
threatened adverse change in, the relationship of the Company or
any of its Subsidiaries with its customers, employees, financing
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sources or vendors caused by the pendency or the announcement of
the transactions contemplated by this Agreement;
(D) events, circumstances, developments, changes or effects
arising from the entry into, actions contemplated by or the
performance of obligations required by this Agreement, including
any litigation or other proceeding arising therefrom, and any
actions taken by the Company and its Subsidiaries to obtain
approval under applicable antitrust or competition laws for
consummation of the Merger;
(E) changes in any Laws or U.S. generally accepted
accounting principles
(
GAAP
)
, or
interpretation thereof after the date hereof;
(F) any failure by the Company to meet any estimates of
revenues or earnings for any period ending on or after
June 30, 2008,
provided
that the exception in this
clause shall not prevent or otherwise affect a determination
that any change, effect, circumstance or development underlying
such failure has resulted in, or contributed to, a Company
Material Adverse Effect;
(G) a decline in the price or trading volume of the
Companys voting common stock,
provided
that the
exception in this clause shall not prevent or otherwise affect a
determination that any change, effect, circumstance or
development underlying such decline has resulted in, or
contributed to, a Company Material Adverse Effect; and
(H) events, circumstances, developments, changes or effects
arising out of compliance by any of the parties with
Section 6.16.
(b)
Capital Structure
.
(i) The authorized capital stock of the Company consists of
60,000,000 shares of stock, of which 50,000,000 shares
are classified as voting common stock, par value $0.01 per
share; 5,000,000 shares are classified as non-voting common
stock, par value $0.01 per share, none of which were outstanding
as of the date hereof; and 5,000,000 shares are classified
as preferred stock, par value $0.01 per share, none of which
were outstanding as of the date hereof. 13,349,095 Shares
were outstanding as of the close of business on July 6,
2009. All of the outstanding Shares have been duly authorized
and are validly issued, fully paid and nonassessable. As of
July 6, 2009, other than (i) 1,950,000 Shares
reserved for issuance under the 2001 Equity Incentive Plan and
2004 Long Term Incentive Plan (collectively, the
Stock Plans
),
(ii) 1,471,900 Shares subject to issuance upon the
exercise of the warrants listed on Section 5.1(b)(i) of the
Company Disclosure Letter (the
Warrants
), the Company has no Shares
reserved for issuance. Section 5.1(b)(i) of the Company
Disclosure Letter contains a correct and complete list of
Warrants and options and restricted stock outstanding under the
Stock Plans in each case as of the date hereof, including the
holder, date of grant, term, number of Shares and, where
applicable, exercise price. Each of the outstanding shares of
capital stock or other equity securities of each of the
Companys Subsidiaries is duly authorized, validly issued,
fully paid and nonassessable and, except as would not,
individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect, owned by the Company or by a
direct or indirect wholly owned Subsidiary of the Company, free
and clear of any lien, charge, pledge, security interest, claim
or other encumbrance (each, a
Lien
).
(ii) There are no preemptive rights that obligate the
Company or any of its Significant Subsidiaries to issue or sell
any shares of capital stock or other equity securities of the
Company or any of its Significant Subsidiaries. There are no
other outstanding rights, options, warrants, conversion rights,
stock appreciation rights, redemption rights, repurchase rights,
agreements, arrangements, calls, commitments or rights of any
kind that obligate the Company or any of its Significant
Subsidiaries to issue or sell any shares of capital stock or
other equity securities of the Company or any of its Significant
Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a
right to subscribe for or acquire, any equity securities of the
Company or any of its Significant Subsidiaries, and no
securities or obligations evidencing such rights are authorized,
issued or outstanding, in each case except for the Warrants and
the Company Options. Upon any issuance of any Shares in
accordance with the terms of the Stock Plans or Warrants, as
applicable, such Shares will be duly
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authorized, validly issued, fully paid and nonassessable and
free and clear of any Liens. The Company does not have
outstanding any bonds, debentures or other obligations the
holders of which have the right to vote (or convertible into or
exercisable for securities having the right to vote) with the
stockholders of the Company on any matter. For purposes of this
Agreement, a wholly owned Subsidiary of the Company shall
include any Subsidiary of the Company all of the shares of
capital stock of which are owned by the Company (or a wholly
owned Subsidiary of the Company).
(iii) Neither the Company nor any Subsidiary owns an equity
interest in any entity, or an interest convertible into or
exchangeable or exercisable for an equity interest, constituting
50% or less of the total outstanding amount of the equity
interests of such entity (collectively, the
Investments
).
(c)
Corporate Authority; Approval and
Fairness
.
(i) The Company has all requisite corporate power and
authority and (assuming the representations of Parent and Merger
Sub set forth in Section 5.2(i) are true and correct) has
taken all corporate action necessary in order to execute and
deliver this Agreement and, subject only to the approval of the
Merger by (A) the holders of at least a majority of the
outstanding Shares entitled to vote on such matter at a
stockholders meeting duly called and held for such purpose
(the
Maryland Law Vote
) and (B) a
majority of the votes cast by holders of outstanding Shares
entitled to vote on such matter at a stockholders meeting
duly called and held for such purpose, not including for
purposes of this clause (B) any votes cast by Parent,
Merger Sub or any Interested Party (the
Neutralized
Vote
and, together with the Maryland Law Vote, the
Company Requisite Vote
), to perform
its obligations under this Agreement and to consummate the
Merger. This Agreement has been duly executed and delivered by
the Company and constitutes a valid and binding agreement of the
Company enforceable against the Company in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar Laws of general
applicability relating to or affecting creditors rights
and to general equity principles (the
Bankruptcy and
Equity Exception
). For purposes of this Section
5.1(c)(i),
Interested Party
means
(i) Andrew Baker, (ii) any Person who beneficially
owns Shares, if any, that has entered into an agreement,
arrangement or understanding with Parent or Merger Sub or any of
their respective affiliates to (x) provide equity financing
for the Merger or (B) vote or give any consents (or
withhold any such votes or consents) with respect to any Shares
in respect of the Merger or any similar transaction and
(iii) any officer, director, partner, member or employee of
Parent or Merger Sub.
(ii) The (A) board of directors of the Company has
(I) determined that the Merger is in the best interests of
the Company and its stockholders, approved and declared
advisable this Agreement and the Merger and the other
transactions contemplated hereby and resolved to recommend
approval of the Merger to the holders of Shares (the
Company Recommendation
), and
(II) subject to the terms of this Agreement, directed that
the Merger be submitted to the holders of Shares for their
approval at a stockholders meeting duly called and held
for such purpose and (B) special committee of the board of
directors of the Company has received the opinion of its
financial advisor to the effect that, based on and subject to
the various assumptions, matters considered and limitations
described in such opinion, the Per Share Merger Consideration to
be received by the holders of Shares (other than Parent, any
Interested Parties and their respective affiliates) in the
Merger is fair from a financial point of view, as of the date of
such opinion, to such holders. It is agreed and understood that
such opinion is for the benefit of the special committee of the
Companys board of directors and may not be relied on by
Parent or Merger Sub.
(d)
Governmental Filings; No Violations; Certain
Contracts
.
(i) Other than the filings
and/or
notices (A) pursuant to Section 1.3, (B) under
the Exchange Act, including the filing of the Proxy Statement
and a
Schedule 13E-3
regarding the transactions contemplated hereby (such schedule,
including any amendment or supplement thereto, the
Schedule 13E-3
)
and (C) under the rules of NYSE Arca (collectively, the
Company Approvals
), no notices,
reports or other filings are required to be made by the Company
with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by the Company from, any
Governmental Entity in connection with the execution, delivery
and performance of this Agreement by the Company and the
consummation of the Merger and the other transactions
contemplated hereby, except those that the failure
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to make or obtain would not, individually or in the aggregate,
be reasonably expected to have a Company Material Adverse Effect
or materially impair the consummation of the transactions
contemplated by this Agreement. The term
Governmental Entity
means each
U.S. domestic or foreign governmental or regulatory
authority, agency, commission, body, court or other legislative,
executive or judicial governmental entity (including each and
every federal, state, local or foreign court, authority, agency,
commission, body or other legislative, executive or judicial
governmental entity with jurisdiction over enforcement of any
applicable antitrust or competition Laws (each a
Government Antitrust Entity
)).
Section 5.1(d)(i) of the Company Disclosure Letter sets
forth a true and correct list of all consents and waivers
required in respect of any Contract as a result of the Merger
(the
Required Consents
).
(ii) The execution, delivery and performance of this
Agreement by the Company do not, and the consummation of the
Merger and the other transactions contemplated hereby will not,
constitute or result in (A) a breach or violation of, or a
default under, the charter or bylaws of the Company or the
comparable governing instruments of any of its Significant
Subsidiaries, (B) with or without notice, lapse of time or
both, a breach or violation of, a termination (or right of
termination) or a default under, the creation or acceleration of
any obligations or the creation of a Lien on any of the assets
of the Company or any of its Significant Subsidiaries pursuant
to, any Contract binding upon the Company or any of its
Subsidiaries or (C) assuming compliance with the matters
referred to in Section 5.l(d)(i), a violation of any Laws
to which the Company or any of its Subsidiaries is subject,
except, in the case of clause (B) or (C) above, for
any such breach, violation, termination, default, creation,
acceleration or change that, individually or in the aggregate,
would not reasonably be expected to have a Company Material
Adverse Effect or prevent or materially impair the consummation
of the transactions contemplated by this Agreement. The term
Contract
means any agreement, lease,
license, contract, note, mortgage, indenture or other document
to which the Company or any Subsidiary is a party or by which
the Company or a Subsidiary or any property or asset of the
Company or any Subsidiary is bound (I) not otherwise
terminable by the other party thereto on sixty
(60) days or less notice and which involves payments
to or from the Company or any of its Subsidiaries of
$1.0 million or more in the aggregate during any year;
(II) on which the business of the Company and its
Subsidiaries is materially dependent; (III) between the
Company or a Subsidiary and any affiliate thereof (excluding the
Company or any other Subsidiary) of the type that would be
required to be disclosed under Item 404 of
Regulation S-K
(
Regulation S-K
)
promulgated by the SEC; (IV) which, if breached, violated
or terminated, would reasonably be expected to result in a
Company Material Adverse Effect; (V) which relates to or
evidences Specified Indebtedness (including any guarantee (to
the extent such guarantee itself constitutes Specified
Indebtedness) of Specified Indebtedness of any third party other
than a wholly-owned Subsidiary of the Company) with respect to
which $1.0 million or more in principal is outstanding
individually with respect to such Specified Indebtedness; and
(VI) which is required to be filed as an exhibit to the
Companys Annual Report on
Form 10-K
pursuant to Item 601(b)(10) of
Regulation S-K
promulgated by the SEC. The term
Specified
Indebtedness
means all items constituting
Indebtedness under clauses (i), (ii), (iii), (v), (vi),
(vii) and (ix) (but limited in the case of clause (ix)
to guarantees of items otherwise constituting Specified
Indebtedness as defined herein) of the definition of
Indebtedness in the Financing Agreement (as in
effect on the date thereof).
(iii) As of the date hereof and as of the Closing Date, no
Default (as defined in the Financing Agreement (the
Financing Agreement
) dated as of
March 1, 2006 among a Subsidiary of the Company, as
borrower, the Company, as guarantor, the other guarantors named
therein and the lenders from time to time party thereto, as in
effect on the date hereof) under Section 9.01(a),
(g) or (k) of the Financing Agreement or Event of
Default (as defined in the Financing Agreement as in effect on
the date hereof) has occurred and is continuing.
(e)
Company Reports; Financial Statements
.
(i) The Company has filed or furnished, as applicable, on a
timely basis all statements and reports required to be filed or
furnished by it with the Securities and Exchange Commission (the
SEC
) under the Exchange Act or the
Securities Act of 1933, as amended (the
Securities
Act
), since December 31, 2007 (the
Applicable Date
) (the statements and
reports filed or furnished since the Applicable Date
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and those filed or furnished subsequent to the date hereof,
including any amendments thereto, the
Company
Reports
). Each of the Company Reports, at the time
of its filing or being furnished, complied or, if not yet filed
or furnished, will comply as to form in all material respects
with the applicable requirements of the Securities Act and the
Exchange Act, and any rules and regulations promulgated
thereunder applicable to the Company Reports, except in each
case with respect to such exemptions granted or afforded to the
Company or its Subsidiaries by the SEC or its staff in
connection with confidentiality arrangements. As of their
respective dates (or, if amended prior to the date hereof, as of
the date of such amendment), the Company Reports did not, and
any Company Reports filed or furnished with the SEC subsequent
to the date hereof will not, contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein
(except in each case with respect to any redactions and
omissions permitted to be made by the Company pursuant to
confidentiality arrangements granted or afforded to the Company
or its Subsidiaries by the SEC or its staff), in light of the
circumstances in which they were made, not misleading.
(ii) Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports filed by the
Company with the SEC on or prior to the date hereof (including
the related notes and schedules) fairly presents in all material
respects the consolidated financial position of the Company and
its consolidated Subsidiaries as of its date, and each of the
consolidated statements of operations, stockholders equity
and cash flows included in or incorporated by reference into the
Company Reports filed by the Company with the SEC on or prior to
the date hereof (including any related notes and schedules)
fairly presents in all material respects the consolidated
results of operations, retained earnings and changes in
financial position, as the case may be, of the Company and its
consolidated Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to notes and
year-end adjustments), in each case in accordance with GAAP,
except as may be noted therein.
(iii) Except as and to the extent set forth on the
consolidated balance sheets of the Company and its consolidated
Subsidiaries as at December 31, 2008 or March 31,
2009, included in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 or the
Companys Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2009, as applicable,
neither the Company nor any Subsidiary has any liability or
obligation of any nature (whether accrued, absolute, contingent
or otherwise), except for liabilities and obligations
(i) incurred in the ordinary course of business and in a
manner consistent with past practice since March 31, 2009,
(ii) incurred in connection with the Merger or any other
transaction or agreement contemplated by this Agreement or
(iii) that have not had, and would not reasonably be
expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(iv) (A) As of the date hereof and at the Closing Date
(but prior to the Merger), the Company and its Subsidiaries
shall have no outstanding Specified Indebtedness other than
(w) not more than $56.0 million in principal amount of
the loans outstanding under the Financing Agreement,
(x) the Indebtedness and obligations under the Alconbury
Leases (as defined in the Financing Agreement as of the date
hereof) and (y) other Specified Indebtedness not to exceed
$4.5 million in the aggregate; (B) as of the date
hereof, the aggregate amount of cash and cash equivalents of the
Company and its direct and indirect wholly-owned Subsidiaries
(as determined in accordance with GAAP), is not less than
$34.0 million; and (C) as of the date hereof and as of
the Closing Date (but immediately prior to the Merger),
Qualified Cash of the Loan Parties (each as defined under the
Financing Agreement as in effect on the date hereof) shall be no
less than $20,000,000. For purposes of this Section 5.1(e)(iv),
(x) with respect to any assets or liabilities denominated
in UK pound sterling, all amounts expressed in US dollars shall
mean the equivalent amount in UK pound sterling using the
current exchange rate between US dollars and UK pound sterling
in effect on the date hereof; and (y) no guarantee of
Specified Indebtedness shall be included in the calculation of
Specified Indebtedness if the underlying Specified Indebtedness
subject to such guarantee is itself included in such calculation.
(v) The Company maintains disclosure controls and
procedures as required by
Rule 13a-15
or
15d-15
under the Exchange Act.
A-9
(f)
Absence of Certain
Changes
.
Since March 31, 2009, except
for matters expressly contemplated by this Agreement, the
Company and its Subsidiaries have conducted their respective
businesses only in, and have not engaged in any material
transaction other than according to, the ordinary course of such
businesses and there has not been:
(i) any change in the financial condition, properties,
assets, liabilities, business or results of their operations
that, individually or in the aggregate, has had or would
reasonably be expected to have a Company Material Adverse Effect;
(ii) any material damage, destruction or other casualty
loss with respect to any material asset or property owned or
leased by the Company or any of its Subsidiaries, to the extent
not covered by insurance, that, individually or in the
aggregate, has had or would reasonably be expected to have a
Company Material Adverse Effect;
(iii) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of
capital stock of the Company;
(iv) any material change in any method of accounting or
accounting practice by the Company or any of its
Subsidiaries; or
(v) any commitment made by the Company or any agreement
entered into by the Company in each case requiring the Company
to take any action that would be prohibited by
Section 6.1(a) hereof if taken after the date hereof.
(g)
Litigation
.
(i) As of the date of this Agreement, there are no civil,
criminal or administrative actions, suits, claims, hearings,
arbitrations, investigations or other proceedings pending (in
which service of process has been received by an employee of the
Company or any Subsidiary) or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries,
which, individually or in the aggregate, would reasonably be
expected to have a Company Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is a party to or subject to
the provisions of any judgment, order, writ, injunction, decree
or award of any Governmental Entity which, individually or in
the aggregate, would reasonably be expected to have a Company
Material Adverse Effect.
The term
Knowledge
when used in this
Agreement with respect to the Company shall mean the knowledge
of those Persons set forth in Section 5.1(g) of the Company
Disclosure Letter (after reasonable inquiry by such Persons of
other Persons that might reasonably be expected to have
knowledge of the subject matter).
(h)
Employee Benefits
.
(i) For purposes of this Agreement, Benefit
Plans means all benefit and compensation plans, contracts,
policies or arrangements covering current or former employees of
the Company and its Subsidiaries (the
Employees
) and current or former
directors or independent contractors of the Company and its
Subsidiaries under which there is or may be a continuing
financial obligation of the Company or a Subsidiary, including
employee benefit plans within the meaning of
Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended
(
ERISA
)
, and
deferred compensation, severance, vacation, stock option, stock
purchase, stock appreciation rights, stock based, incentive and
bonus plans, other than Benefit Plans maintained outside of the
United States primarily for the benefit of the Employees working
outside of the United States (such plans hereinafter being
referred to as
Non-U.S. Benefit
Plans
). All material Benefit Plans are listed on
Schedule 5.1(h)(i) of the Company Disclosure Letter, and each
Benefit Plan that has received a favorable determination or
opinion letter from the Internal Revenue Service (the
IRS
) has been separately identified.
True and complete copies of the following have been made
available to Parent: (i) all Benefit Plans listed on
Schedule 5.1(h)(i) of the Company Disclosure Letter,
(ii) each trust or funding arrangement prepared in
connection with each such Benefit Plan, (iii) the most
recently filed annual report on IRS Form 5500 for each
Benefit Plan for which such reports are required, (iv) the
most recently received IRS determination letter for each Benefit
A-10
Plan for which such a determination letter has been received,
(v) the most recently prepared actuarial report for each
Benefit Plan for which such a report is required, (vi) the
most recent summary plan description and any summaries of
material modification for each Benefit Plan, and (vii) any
employee handbooks.
(ii) All Benefit Plans, other than multiemployer
plans within the meaning of Section 3(37) of ERISA (each,
a
Multiemplover Plan
) and
Non-U.S. Benefit
Plans (collectively,
U.S. Benefit
Plans
), are in substantial compliance with ERISA,
the Internal Revenue Code of 1986, as amended (the
Code
), and other applicable Laws. Each
U.S. Benefit Plan which is subject to ERISA (an
ERISA Plan
) and that is an
employee pension benefit plan within the meaning of
Section 3(2) of ERISA (a
Pension
Plan
) intended to be qualified under
Section 401(a) of the Code, has received a favorable
determination or opinion letter from the IRS or has applied to
the IRS for such favorable determination or opinion letter under
Section 401(b) of the Code, and the Company is not aware of
any circumstances likely to result in the loss of the
qualification of such Pension Plan under Section 401(a) of
the Code. Neither the Company nor any of its Subsidiaries has
engaged in a transaction that could subject the Company or any
of its Subsidiaries to a tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA in
an amount that, individually or in the aggregate, has had or
would reasonably be expected to have a Company Material Adverse
Effect.
(iii) Neither the Company nor any of its Subsidiaries has
or is expected to incur any material liability under
Title IV of ERISA with respect to any ongoing, frozen or
terminated single-employer plan, within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly
maintained or contributed to by any of them, or the
single-employer plan of, or contributed to by, any entity which
is considered one employer with the Company or a Subsidiary
under Section 4001 of ERISA or Section 414 of the Code
(an
ERISA Affiliate
). At no time since
December 31 2002, has the Company, a Subsidiary or any ERISA
Affiliate, been required to contribute to a Multiemployer Plan.
Neither the Company, a Subsidiary nor any ERISA Affiliate has
incurred any withdrawal liability, within the meaning of
Section 4201 of ERISA to any Multiemployer Plan nor does
the Company, a Subsidiary or any ERISA Affiliate have any
potential withdrawal liability arising from a transaction
described in Section 4204 of ERISA. Neither the Company, a
Subsidiary nor any ERISA Affiliate has failed to satisfy the
minimum funding standards (within the meaning of
Section 412 or 430 of the Code) with respect to any
employee pension benefit plan (within the meaning of
Section 3(2) of ERISA) or has any liability for unpaid
contributions with respect to any such plan. For the avoidance
of doubt, this Section 5.1(h)(iii) does not apply to
Non-U.S. Benefit
Plans.
(iv) There is no material pending or, to the Knowledge of
the Company, threatened litigation relating to the Benefit
Plans, other than routine claims for benefits. No material
administrative investigation, audit or other administrative
proceeding by the Department of Labor, the Internal Revenue
Service, Pension Benefit Guaranty Corporation or other
Governmental Entity is pending or, to the Knowledge of the
Company, threatened.
(v) All
Non-U.S. Benefit
Plans comply in all material respects with applicable Law. All
material
Non-U.S. Benefit
Plans are listed on Schedule 5.1(h)(v) of the Company
Disclosure Letter. Each of the material
Non-U.S. Benefit
Plans has obtained from the government or governments having
jurisdiction with respect to such plan any material required
determinations that such plans are in compliance with the laws
and regulations of any government. Since January 1, 2003,
each material
Non-U.S. Benefit
Plan has been administered at all times, in all material
respects, in accordance with its terms. The transactions
contemplated by this Agreement will not result in any
accelerated or additional funding obligation with respect to any
Non-U.S. Benefit
Plan.
(vi) No payment which is or may be made by, from or with
respect to any Benefit Plan, to any employee, former employee,
director or agent of the Company, a Subsidiary or any ERISA
Affiliate, either alone or in conjunction with any other
payment, event or occurrence, will or could properly be
characterized as an excess parachute payment under
Section 280G of the Code. No Benefit Plan exists that would
reasonably be expected to result in the payment to any Employee,
director or independent
A-11
contractor of the Company or any Subsidiary of any money or
other property, result in a requirement to fund or accelerate
funding of any trust or other account or plan, result in the
forgiveness of indebtedness or accelerate or provide any other
rights or benefits (including the acceleration of the accrual or
vesting of any benefits under any Benefit Plan or the
acceleration or creation of any rights under any severance,
parachute or change in control agreement or the right to receive
any transaction bonus or other similar payment) to any Employee,
director or independent contractor of the Company or any
Subsidiary as a result of the consummation of the Merger or any
other transaction contemplated by this Agreement (whether alone
or in connection with any other event).
(vii) No Benefit Plan (other than the UK Pension Plan)
provides post-termination or retiree medical benefits, and
neither the Company nor any Subsidiary has any obligation to
provide any post-termination or retiree medical benefits other
than, in each case, for health care continuation as required by
Section 4980B of the Code or any similar statute. The term
UK Pension Plan
when used in this
Agreement means The LSR Pension and Life Assurance Scheme, which
is provided in the United Kingdom under a Trust Deed and
Rules dated December 14, 2001, as amended.
Notwithstanding any other representation or warranty in
Article V of this Agreement, the representations and
warranties contained in this Section 5.1(h) and in
Section 5.1(m) shall constitute the sole representations
and warranties of the Company relating to employee benefit
matters and labor relations.
(i)
Compliance with Laws; Licenses
.
(A) The businesses of each of the Company and its
Subsidiaries have not been since the Applicable Date, and are
not being, conducted in material violation of any federal,
state, local or foreign law, statute or ordinance, common law,
standard, or any rule, regulation, judgment, order, writ,
injunction, decree, arbitration award, agency requirement,
license or permit of any Governmental Entity (collectively,
Laws
). Except with respect to
regulatory matters described in Sections 5.1(d)(i) or 6.5,
no investigation or review by any Governmental Entity with
respect to the Company or any of its Subsidiaries is pending or,
to the Knowledge of the Company, threatened, except for those
the outcome of which are not, individually or in the aggregate,
reasonably expected to have a Company Material Adverse Effect.
The Company and its Subsidiaries each has obtained and is in
material compliance with all material permits, certifications,
approvals, registrations, consents, authorizations, franchises,
variances, exemptions and orders issued or granted by a
Governmental Entity
(
Licenses
)
necessary to conduct its business as presently conducted. Since
December 31, 2006, the Company has not received any written
notice from any Governmental Entity requiring the termination or
suspension or material modification of any animal study,
preclinical study or clinical trial conducted by or on behalf of
the Company and its Subsidiaries.
(B) The Company has disclosed, based on its
managements most recent evaluation of the Companys
internal control over financial reporting, to the Companys
auditors and the audit committee of the board of directors of
the Company and, to the extent required to be disclosed therein,
in its reports under the Exchange Act (i) any identified
significant deficiencies and material weaknesses (as such terms
are defined by the Public Company Accounting Oversight
Boards Auditing Standard No. 2) and
(ii) any fraud of which the Company has Knowledge that
involves management or other employees who have a significant
role in the Companys internal controls over financial
reporting. To the extent any such disclosure was made, the
Company has made available to Parent a summary of such
disclosure.
(C) To the Knowledge of the Company, since
December 31, 2006, the Company has not received any adverse
complaint, allegation, assertion or claim in writing from its
auditors or the SEC regarding the accounting practices,
procedures, methodologies or methods of the Company or its
internal control over financial reporting.
(j)
Takeover Statutes
.
Assuming
that the representations of Parent and Merger Sub set forth in
Section 5.2(i) are true and correct, the board of directors
of the Company has taken all necessary actions to render the
provisions of any fair price,
moratorium, control share acquisition or
any other state anti-takeover or similar statute, including
Subtitles 6 and 7 of Title 3 of the MGCL (collectively,
A-12
Takeover Statutes
), inapplicable to
this Agreement, the Merger and the transactions contemplated by
this Agreement.
(k)
Environmental Matters
.
(i) Except for such matters that, individually or in the
aggregate, would not reasonably be expected to have a Company
Material Adverse Effect: (A) the Company and its
Subsidiaries are in compliance with all applicable Environmental
Laws; (B) the Company and its Subsidiaries possess all
permits, licenses, registrations, identification numbers,
authorizations and approvals required under applicable
Environmental Law for the operation of their respective
businesses as presently conducted; (C) neither the Company
nor any of its Subsidiaries has received any written claim,
notice of violation or citation or notice of potential
responsibility concerning any violation or alleged violation of
or alleged or potential liability under any applicable
Environmental Law during the past two years; (D) there are
no writs, injunctions, decrees, orders or judgments outstanding,
or any actions, suits or proceedings pending or, to the
Knowledge of the Company, threatened, concerning compliance by
the Company or any of its Subsidiaries with, or liability of the
Company or any of its Subsidiaries under, any Environmental
Laws; and (E) to the Knowledge of the Company, there has
been no Release of Materials of Environmental Concern at, on,
under or from any of the properties or facilities currently or
formerly owned, leased or operated by the Company or any of its
Subsidiaries, in each case which could reasonably be expected to
result in material liability to the Company or its Subsidiaries
under Environmental Law.
(ii) Notwithstanding any other representation or warranty
in Article V of this Agreement, the representations and
warranties contained in this Section 5.1(k) constitute the
sole representations and warranties of the Company relating to
any Environmental Law.
As used herein, the term
Environmental
Law
means any applicable law, regulation, code,
license, permit, order, judgment, decree or injunction from any
Governmental Entity (A) concerning pollution, the
protection of the environment, (including ambient air, indoor
air, water, soil and natural resources) or (B) the Release
or threat of Release of any Materials of Environmental Concern,
in each case as presently in effect.
As used herein, the term
Materials of Environmental
Concern
means any substance, chemical, waste,
material, pollutant, contaminant, compound or constituent in any
form, including petroleum, friable asbestos, friable
asbestos-containing material, and polychlorinated biphenyls
regulated or which could reasonably be expected to give rise to
liability under applicable Environmental Laws.
As used herein, the term
Release
means
any release, spill, emission, leaking, pumping, emitting,
discharging, injecting, escaping, leaching, dumping, disposing
or migrating into or through the environment, or within or from
any structure or facility.
(l)
Taxes
.
(i) (A) The Company and each of its Subsidiaries
(1) have prepared in good faith and timely filed (taking
into account any extension of time within which to file) all Tax
Returns required to be filed on or before the Closing by any of
them and all such filed Tax Returns are complete and accurate,
except where failure to so prepare or file Tax Returns,
individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect,
(2) have paid all Taxes that are required to be paid or
that the Company or any of its Subsidiaries are obligated to
withhold from amounts owing to any employee, creditor or third
party, except where failure to so pay or withhold, individually
or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect, (3) have established
adequate reserves in accordance with GAAP for all Taxes not yet
due and payable, (4) have not waived any statute of
limitations with respect to any Taxes or agreed to any extension
of time with respect to any Tax assessment or deficiency and
(5) have no liability for the Taxes of any Person (other
than any of the Subsidiaries of the Company) under Treas. Reg.
Section 1.1502-6
(or any similar provision of state, local, or foreign law), or
as a transferee or successor, (B) to the Companys
Knowledge, there are no circumstances in existence on the date
hereof which would cause the disallowance of the carry forward
of any material trading losses of any Subsidiary of the Company
under
A-13
Schedule 20 of the Finance Act 2000, and (C) except as
would not, individually or in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect, all
material claims by any Subsidiary of the Company for research
and development relief or for a research and development tax
credit under and within the meaning of Schedule 20 to the
Finance Act 2000 have been duly made on a proper basis within
any applicable time limits and HM Revenue & Customs
have not disputed or challenged any Subsidiarys
entitlement to make any such claim
and/or
the
amount of any such clam. To the Companys Knowledge, any
material expenditure by any Subsidiary of the Company which has
been included in such a claim constitutes a qualifying
expenditure for the purposes of Schedule 20 of the
Finance Act 2000.
(ii) As of the date hereof, there are not pending or, to
the Knowledge of the Company, threatened in writing, any audits,
examinations, investigations or other proceedings in respect of
Taxes or Tax matters of the Company. The Company has made
available to Parent true and correct copies of the United States
federal income Tax Returns filed by the Company and its
Subsidiaries for each of the fiscal years ended
December 31, 2007 and 2006.
(iii) Neither the Company nor any Subsidiary is a party to
any indemnification, allocation or sharing agreement relating
principally to Taxes.
As used in this Agreement, (A) the term
Tax
(including, with correlative
meaning, the term
Taxes
) shall mean
all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital
stock, severances, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or
assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such
amounts and any interest in respect of such penalties and
additions, and (B) the term
Tax
Return
includes all returns and reports (including
elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Tax authority
relating to Taxes.
(m)
Labor Matters
.
(i) Neither the Company nor any of its Subsidiaries is a
party to or otherwise bound by any collective bargaining
agreement or other Contract with a labor union, trade union,
works council or other labor organization (a
CBA
), nor is the Company or any of its
Subsidiaries the subject of any material proceeding asserting
that the Company or any of its Subsidiaries has committed an
unfair labor practice or seeking to compel it to bargain with
any labor union or labor organization nor is there pending or,
to the Knowledge of the Company, threatened, nor has there been
since the Applicable Date, any labor strike, walk-out, work
stoppage or lockout involving the Company or any of its
Subsidiaries. The Company and its Subsidiaries are in compliance
with all applicable Laws pertaining to the hiring, employment
and termination of the employment of employees, labor relations,
equal employment opportunities, fair employment practices, terms
and conditions of employment, hours of work and payment of wages
or compensation, and granting of leaves of absences, except for
such non-compliance which would not, individually or in the
aggregate, reasonably be expected to result in a Company
Material Adverse Effect.
(ii) Neither the Company nor any Subsidiary is a party to
or bound by in respect of any of its directors or any employees
employed in the United Kingdom (the
UK
Employees
) any arrangement for the making of any
redundancy payments in addition to statutory redundancy pay;
(iii) No proceeding is outstanding between the Company or
any Subsidiary and any current or former UK Employee
relating to his or her employment or its termination and neither
the Company nor any Subsidiary has incurred any actual or
contingent liability in connection with any termination of
employment of any UK Employees (including redundancy payments)
or for failure to comply with any order for the reinstatement or
re-engagement of any UK Employee, except for such proceedings,
liabilities and other matters which would not, individually or
in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect;
A-14
(iv) The Merger and compliance by the Company with the
terms of this Agreement will not enable any UK Employees to
receive any material payment or other benefit as a result of the
consummation of the Merger;
(v) There are no material proceedings against the Company
or any of its Subsidiaries in any court of competent
jurisdiction, in each case in relation to any UK Employee or
former UK Employee and, to the Companys Knowledge, no such
material proceedings have been threatened and neither the
Company nor any Subsidiary has current material disciplinary
investigations, proceedings or appeals in respect of any
UK Employee or any former UK Employee and no UK Employee
has given the Company or any Subsidiary written notice of a
material grievance which remains unresolved; and
(vi) In the last three years, to the Knowledge of the
Company, neither the Company nor any Subsidiary has been a party
to a relevant transfer (as defined in the Transfer of
Undertakings (Protection of Employment) Regulations
2006) as a result of which any UK Employee has become an
employee of the Company or any Subsidiary which could,
individually or in the aggregate, reasonably be expected to
result in a Company Material Adverse Effect.
Notwithstanding any other representation or warranty in
Article V of this Agreement, the representations and
warranties contained in this Section 5.1(m) and in
Section 5.1(h) constitute the sole representations and
warranties of the Company relating to labor relations and
employee benefit matters.
(n)
Intellectual Property
.
(i) To the Knowledge of the Company, (A) the Company
and its Subsidiaries have valid rights to use all Intellectual
Property used in its business as presently conducted, and
(B) all of such rights shall survive unchanged the
consummation of the transactions contemplated by this Agreement,
except in each case as would not, individually or in the
aggregate, reasonably be expected to result in a Company
Material Adverse Effect. No material claim is pending or, to the
Knowledge of the Company, threatened against the Company or its
Subsidiaries concerning the ownership, validity, enforceability,
infringement or use of any Intellectual Property which,
individually or in the aggregate, would reasonably be expected
to result in a Company Material Adverse Effect. To the Knowledge
of the Company, no person has engaged in any activity that has
infringed upon material Intellectual Property owned by the
Company and its Subsidiaries. Neither the Company nor its
Subsidiaries has exclusively licensed any Intellectual Property
owned by the Company and its Subsidiaries.
(ii) Section 5.1(n) of the Company Disclosure
Schedules sets forth a true and complete list of all
(i) registered trademarks, service marks, trade dress, and
domain names, and applications to register the foregoing,
(ii) copyright registrations and applications, and
(iii) patents and patent applications, in each case which
are currently owned by the Company and its Subsidiaries
(collectively,
Scheduled Intellectual
Property
). All prosecution, maintenance, renewal
and other similar fees for the Scheduled Intellectual Property
have been paid and are current, and all registrations and
applications therefor remain in full force and effect.
(iii) To the Knowledge of the Company, the Company and its
Subsidiaries use Intellectual Property under license from third
parties only pursuant to valid, effective written license
agreements (collectively, the
Third Party
Licenses
).
(iv) The Company and its Subsidiaries have taken
commercially reasonable actions to protect, preserve and
maintain its material Intellectual Property and to maintain the
confidentiality and secrecy of and restrict the improper use of
material confidential information, trade secrets and proprietary
information under applicable Law. To the Knowledge of the
Company, (i) there has been no unauthorized disclosure of
any material confidential information, trade secrets or
proprietary information of the Company or any Subsidiary, and
(ii) there has been no material breach of the
Companys or any Subsidiarys security procedures
wherein any material Company or Subsidiary confidential
information, trade secrets or proprietary information has been
disclosed to a third Person.
A-15
(v) For purposes of this Agreement, the following term has
the following meaning:
Intellectual Property
means all
(A) trademarks, service marks, certification marks,
collective marks, Internet domain names, logos, trade dress,
trade names, corporate names, and other indicia of origin, all
applications and registrations for the foregoing, and all
goodwill associated therewith and symbolized thereby, including
all renewals of same; (B) inventions and discoveries, and
all patents, registrations, invention disclosures and
applications therefor, including divisions, continuations,
continuations-in-part
and renewal applications, and including renewals, extensions and
reissues; (C) confidential information, trade secrets and
know-how; and (D) published and unpublished works of
authorship, copyrights therein and thereto, computer software,
rights in data, databases, and registrations and applications
therefor, and all renewals, extensions, restorations and
reversions thereof, and (E) all similar rights, however
denominated, throughout the world.
(vi) Notwithstanding any other representation or warranty
in Article V of this Agreement, the representations and
warranties contained in this Section 5.1(n) constitute the
sole representations and warranties of the Company relating to
Intellectual Property related matters.
(o)
Insurance
.
All material fire
and casualty, general liability and business interruption
insurance policies maintained by the Company or any of its
Subsidiaries
(
Insurance Policies
)
are
in full force and effect and all premiums due with respect to
all Insurance Policies have been paid, with such exceptions
that, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect.
(p)
Real Property
.
Neither the
Company nor any of its Subsidiaries owns any real property. The
Company or its Subsidiaries lease, as lessee, all of the real
properties (including all improvements thereon) listed in
Section 5.1(p)
of the Company Disclosure Letter (the
Company Leases
).
(q)
Contracts
.
(i) Neither
the Company nor any of its Subsidiaries is, and to the
Companys Knowledge, no counterparty is, in violation of or
default under any Contract, except in each case for violations
that would not individually or in the aggregate reasonably be
expected to result in a Company Material Adverse Effect;
(ii) none of the Company nor any of the Subsidiaries has
received any written claim of default under any Contract or any
written notice of an intention to terminate, not renew or
challenge the validity or enforceability of any Contract which
would, individually or in the aggregate, reasonably be expected
to result in a Company Material Adverse Effect and (iii) to
the Companys Knowledge, no event has occurred or condition
exists which would result in or constitute a breach, violation
or default of, or a basis for
force majeure
under, any
Contract (in each case, with or without notice or lapse of time
or both), except for any breach, violation, default or basis
which would not individually or in the aggregate reasonably be
expected to result in a Company Material Adverse Effect. A true
and complete list of the Contracts in effect on the date hereof
is set forth in
Section 5.1(q)
of the Company Disclosure
Letter, except for Contracts filed as exhibits to filings made
with the SEC (or incorporated by reference therein) (subject to
any redactions and omissions permitted to be made by the Company
or Parent pursuant to confidentiality arrangements granted or
afforded to the Company or its Subsidiaries by the SEC or its
staff).
(r)
Related Party Matters
.
Except
as disclosed in the Company Reports and except for ordinary
course advances to employees, set forth in
Section 5.1(r)
of the Company Disclosure Letter is a
list of all Contracts entered into by the Company or any of
Subsidiary under which continuing obligations exist with any
Person who is an officer, director or affiliate (the term
affiliate
,
for purposes of this
Agreement, has the meaning given to such term in
Rule 12b-2
promulgated under the Exchange Act) of the Company or any of the
Subsidiaries.
(s)
Brokers and Finders
.
Neither
the Company nor any of its officers, directors or employees has
employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders fees in connection with
the Merger or the other transactions contemplated in this
Agreement except as set forth in Section 5.1(s) of the
Company Disclosure Letter.
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(t)
Regulatory Compliance
.
(i) The Company and its Subsidiaries have complied in all
material respects with all applicable Laws and regulations of
any Governmental Entity (including the United States Food and
Drug Administration (
FDA
) and the Medicines
and Healthcare Products Regulatory Agency
(
MHRA
) and the European Medicines Agency
(
EMEA
)) applicable to their respective
businesses and operations. Neither the Company nor, to the
Companys Knowledge, any Person acting on behalf of the
Company has, directly or indirectly, on behalf of the Company
(i) made or received any illegal political contribution,
(ii) to the Companys Knowledge, made or received any
payment that was not legal to make or receive,
(iii) created or used any off-book bank account
or slush fund in material violation of applicable
Law or (iv) engaged in any conduct constituting a material
violation of the Foreign Corrupt Practices Act of 1977, as
amended or any equivalent Laws applicable in any other
jurisdiction.
(ii) All animal studies and other preclinical tests
conducted by the Company and its Subsidiaries since
January 1, 2006 were, and if still pending, are being
conducted in all material respects in accordance with all
applicable experimental protocols, informed consents, procedures
and controls of Company and the relevant Subsidiary and in
accordance in all material respects with all applicable Laws and
the regulations of any Governmental Entity (including without
limitation the FDA, the Clinical Laboratory Improvement
Amendments Act of 1988 (
CLIA
), the MHRA, the
EMEA and the Animals (Scientific Procedures) Act 1986 in the UK,
good clinical practice and good laboratory practice
regulations). Since January 1, 2006, the Company has not
received any written notice from the FDA, MHRA, EMEA or any
other Governmental Entity requiring the termination or
suspension or material modification of any animal study,
preclinical study or clinical trial conducted by or on behalf of
the Company other than such notices which would not reasonably
be expected to have a Company Material Adverse Effect. The
Company is not subject to any pending or, to the Knowledge of
the Company, threatened material investigation by the FDA, MHRA
or EMEA or any other Governmental Entity.
(iii) To the Knowledge of the Company, neither the Company
nor any of its Subsidiaries has a relationship with a customer
or supplier who is, or is a party to any Contract with any
Person that is, (i) on the U.S. Department of Treasury
Office of Foreign Assets Control (
OFAC
) list
of specially designated nationals and blocked Persons (the
SDN List
); or (ii) owned or controlled
by or acting on behalf of a Person on the SDN List.
5.2.
Representations and Warranties of Parent
and Merger Sub
.
Except as set forth in the
corresponding sections or subsections of the disclosure letter
delivered to the Company by Parent prior to or concurrently with
entering into this Agreement (the
Parent Disclosure
Letter
and together with the Company Disclosure
Letter, collectively, the
Disclosure
Letters
), Parent and Merger Sub each hereby
represents and warrants to the Company that:
(a)
Organization, Good Standing and
Qualification
.
Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good
standing under the Laws of Delaware and Maryland, respectively,
and has all requisite corporate or similar power and authority
to own, lease and operate its properties and assets and to carry
on its business as presently conducted and is qualified to do
business and is in good standing as a foreign corporation or
similar entity in each jurisdiction where the ownership, leasing
or operation of its assets or properties or conduct of its
business requires such qualification, except where the failure
to be so organized, qualified or in such good standing, or to
have such power or authority, are not, individually or in the
aggregate, reasonably expected to prevent or materially impair
the ability of Parent and Merger Sub to consummate the Merger
and the other transactions contemplated by this Agreement.
Parent has made available to the Company a complete and correct
copy of the certificate of incorporation and bylaws or
comparable governing documents of Parent and Merger Sub.
(b)
Corporate Authority
.
No vote
of holders of capital stock of Parent is necessary to approve or
adopt this Agreement, the Merger or the other transactions
contemplated hereby. Each of Parent and Merger Sub has all
requisite corporate power and authority and has taken all
corporate action necessary (including stockholder approval) in
order to execute and deliver this Agreement and to perform its
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obligations under this Agreement and to consummate the Merger.
This Agreement has been duly executed and delivered by each of
Parent and Merger Sub and is a valid and binding agreement of
Parent and Merger Sub, enforceable against each of Parent and
Merger Sub in accordance with its terms, subject to the
Bankruptcy and Equity Exception.
(c)
Governmental Filings: No Violations: Etc
.
(i) Other than the filings
and/or
notices pursuant to Section 1.3 and under the Exchange Act,
including the filing of the
Schedule 13E-3
(collectively, the
Parent Approvals
),
no notices, reports or other filings are required to be made by
Parent or Merger Sub with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by
Parent or Merger Sub from, any Governmental Entity in connection
with the execution, delivery and performance of this Agreement
by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the Merger and the other transactions contemplated
hereby, except those that the failure to make or obtain would
not, individually or in the aggregate, reasonably be expected to
prevent or materially impair the ability of Parent or Merger Sub
to consummate the Merger and the other transactions contemplated
by this Agreement.
(ii) The execution, delivery and performance of this
Agreement by Parent and Merger Sub do not, and the consummation
by Parent and Merger Sub of the Merger and the other
transactions contemplated hereby will not, constitute or result
in (A) a breach or violation of, or a default under, the
certificate of incorporation or bylaws or comparable governing
documents of Parent or Merger Sub or the comparable governing
instruments of any of Parents Subsidiaries (other than
Merger Sub), (B) with or without notice, lapse of time or
both, a breach or violation of, a termination (or right of
termination) or a default under, the creation or acceleration of
any obligations or the creation of a Lien on any of the assets
of Parent or any of its Subsidiaries pursuant to, any material
agreement, contract or other document binding upon Parent or any
of its Subsidiaries or, assuming that all Parent Approvals have
been obtained or made, any Laws or governmental or
non-governmental permit or license to which Parent or any of its
Subsidiaries is subject, or (C) any change in the rights or
obligations of any party under any of such agreements, contracts
or documents, except, in the case of clause (B) or
(C) above, for any such breach, violation, termination,
default, creation, acceleration or change that, individually or
in the aggregate, would not reasonably be expected to prevent or
materially impair the ability of Parent or Merger Sub to
consummate the Merger and the other transactions contemplated by
this Agreement.
(d)
Litigation
.
There are no
civil, criminal or administrative actions, suits, claims,
hearings, arbitrations, investigations or other proceedings
pending or, to the knowledge of the officers of Parent,
threatened against Parent or Merger Sub that seek to enjoin or
would reasonably be expected to have the effect of preventing,
making illegal or otherwise interfering with any of the
transactions contemplated by this Agreement, except as would
not, individually or in the aggregate, reasonably be expected to
prevent or materially impair the ability of Parent and Merger
Sub to consummate the Merger and the other transactions
contemplated by this Agreement.
(e)
Financing
.
Section 5.2(e)
of the Parent Disclosure Letter sets forth true and complete
copies of (i) the debt financing commitments (collectively,
the
Debt Financing Commitments
),
pursuant to which lenders party thereto have agreed, subject to
the terms and conditions set forth therein, to lend the amounts
set forth therein for the purposes of financing the transactions
contemplated by this Agreement and related fees and expenses
(the
Debt Financing
), and
(ii) the equity financing commitments (collectively, the
Equity Financing Commitments
and
together with the Debt Financing Commitments, the
Financing Commitments
), pursuant to
which the investor parties thereto have committed, subject to
the terms and conditions set forth therein, to invest the amount
set forth therein (the
Equity
Financing
and together with the Debt Financing,
the
Financing
). As of the date hereof,
none of the Financing Commitments has been amended or modified,
no such amendment or modification is contemplated, and the
respective commitments contained in the Financing Commitments
have not been withdrawn or rescinded in any respect. Parent has
fully paid any and all commitment fees or other fees in
connection with the Financing Commitments that are payable on or
prior to the date hereof, and the Financing Commitments are in
full force and effect and are the valid, binding and enforceable
obligations of Parent
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and Merger Sub and, to the knowledge of Parent and Merger Sub,
the Equity Financing Commitments are the valid, binding and
enforceable obligations of the other parties thereto. There are
no conditions precedent or other contingencies related to the
funding of the full amount of the Financing, other than as set
forth in or contemplated by the Financing Commitments. No event
has occurred which, with or without notice, lapse of time or
both, would constitute a default on the part of Parent or Merger
Sub under any of the Financing Commitments, and Parent has no
reason to believe that any of the conditions to the Financing
contemplated by the Financing Commitments will not be satisfied
or that the Financing will not be made available to Parent on
the Closing Date. Upon the funding of the Financing in
accordance with the terms and conditions of the Financing
Commitments and this Agreement, and assuming the accuracy of the
representation of the Company set forth in
Section 5.1(e)(iv), Parent and Merger Sub will have at and
after the Closing funds sufficient to pay the aggregate Per
Share Merger Consideration (and any repayment, refinancing or
replacement of debt contemplated by this Agreement or the
Financing Commitments) and any other amounts required to be paid
in connection with the consummation of the transactions
contemplated hereby, and to pay all related fees and expenses.
Notwithstanding the foregoing, the obligations of Parent and
Merger Sub hereunder are not subject to any conditions regarding
Financing, or the ability of Parent or Merger Sub to obtain
Financing.
(f)
Capitalization
.
The authorized
capital stock of Merger Sub consists solely of
10,000 shares of common stock, par value $0.01 per share,
all of which are validly issued and outstanding. All of the
issued and outstanding capital stock of Merger Sub is, and at
the Effective Time will be, owned by Parent or a direct or
indirect wholly owned Subsidiary of Parent. Merger Sub has not
conducted any business prior to the date hereof and has no, and
prior to the Effective Time will have no, assets, liabilities or
obligations of any nature other than those incident to its
formation and pursuant to this Agreement and the Merger and the
other transactions contemplated by this Agreement. On or prior
to the date hereof, Parent has provided to the Company a summary
that is accurate and complete in all material respects as of the
date hereof of the agreements, arrangements or understandings
with respect to the direct and indirect equity interests in, and
governance mechanisms with respect to, Parent, Merger Sub and
Guarantor in effect on the date hereof.
(g)
Brokers and Finders
.
No agent,
broker, finder or investment banker is entitled to any
brokerage, finders or other fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Merger
Sub for which the Company could have any liability.
(h)
Guarantee
.
Concurrently with
the execution of this Agreement, Parent has caused LAB Holdings
LLC (the
Guarantor
) to deliver to the
Company a duly executed guarantee (the
Guarantee
) with respect to certain
matters on the terms set forth therein. As of the date hereof
and at all times hereafter until the earlier of the Closing and
the date on which all obligations of the Parent, Merger Sub and
Guarantor under Section 8.5 shall have been satisfied, the
Guarantor has and will have funds sufficient to pay all of the
obligations of the Parent, Merger Sub and Guarantor under
Sections 8.5(c) and 8.5(d). Notwithstanding the foregoing,
the obligations of Parent and Merger Sub hereunder are not
subject to any conditions regarding Financing, or the ability of
Parent or Merger Sub to obtain Financing. The Guarantee is in
full force and effect and is the valid, binding and enforceable
obligation of the Guarantor, and no event has occurred, which,
with or without notice, lapse of time or both, would constitute
a default on the part of the Guarantor under the Guarantee.
(i)
Title 3, Subtitle 6 of the
MGCL
.
To the knowledge of Parent, all prior
issuances of Shares, if any, by the Company directly to Parent
and/or
Merger Sub or any affiliate of either of them previously
identified to the Company, were duly approved by the board of
directors of the Company. On that basis, neither Parent nor
Merger Sub, nor any affiliate of either of them, is, and at no
time during the last five years has been, an interested
stockholder of the Company as defined in Title 3,
Subtitle 6 of the MGCL.
(j)
Parent Confidentiality
Documents
.
Parent has delivered to the
Company true, correct and complete copies of all agreements
(including the Financing Commitments) to which Parent or Merger
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Sub is a party as of the date hereof which contain
confidentiality provisions with respect to this Agreement and
the transactions contemplated hereby (such agreements, together
with the third amendment and consent to the Financing Agreement
entered into on or about the date hereof, each as in effect on
the date hereof, collectively, the
Parent
Confidentiality Documents
).
ARTICLE VI
Covenants
6.1.
Interim Operations
.
(a) The Company covenants and agrees as to itself and its
Subsidiaries that, from the date of this Agreement until the
Effective Time (unless Parent shall otherwise approve in writing
and except as otherwise expressly contemplated by this Agreement
and except as required by applicable Laws), the business of it
and its Subsidiaries shall be conducted in the ordinary and
usual course and, to the extent consistent therewith, it and its
Subsidiaries shall use their respective commercially reasonable
efforts to preserve the assets and properties of the Company and
to preserve their business organizations intact and maintain
existing relations and goodwill with Governmental Entities,
customers, vendors, employees and business associates. Without
limiting the generality of the foregoing and in furtherance
thereof, from the date of this Agreement until the Effective
Time, except (A) as otherwise contemplated or required by
this Agreement, (B) as Parent may approve in writing,
(C) as required by applicable Laws or any Governmental
Entity or (D) as set forth in Section 6.1(a) of the
Company Disclosure Letter, the Company will not, and will not
permit its Subsidiaries, to:
(i) adopt or propose any change in its charter or bylaws or
other applicable governing instruments;
(ii) merge or consolidate the Company or any of its
Subsidiaries with any other Person, except for any such
transactions among Subsidiaries of the Company, or restructure,
reorganize or completely or partially liquidate the Company;
(iii) acquire assets outside of the ordinary course of
business from any other Person with a value or purchase price in
the aggregate in excess of $1,000,000 in any transaction or
series of related transactions, other than acquisitions pursuant
to agreements, contracts or other documents in effect as of the
date of this Agreement or the creation and ownership of newly
formed wholly owned Subsidiaries;
(iv) issue, sell, pledge, dispose of, grant, transfer,
encumber, or authorize the issuance, sale, pledge, disposition,
grant, transfer or encumbrance of, any shares of capital stock
of the Company or any its Subsidiaries (other than (A) the
issuance of Shares upon the exercise of Company Options or
Warrants, and the settlement of Restricted Stock (and dividend
equivalents thereon, if applicable), in each case pursuant to
the terms of the Stock Plans and Warrants as in effect on the
date hereof, (B) the issuance of shares of capital stock by
a wholly owned Subsidiary of the Company to the Company or
another wholly owned Subsidiary of the Company or (C) the
pledge of shares of capital stock of Subsidiaries of the Company
in connection with the Financing Agreement), or securities
convertible or exchangeable into or exercisable for any shares
of such capital stock, or any options, warrants or other rights
of any kind to acquire any shares of such capital stock or such
convertible, exchangeable or exercisable securities;
(v) make any loans, advances or capital contributions to or
investments in any Person (other than the Company or any direct
or indirect wholly owned Subsidiary of the Company) in excess of
$500,000 in the aggregate;
(vi) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise,
with respect to any of its capital stock (except for dividends
paid by any direct or indirect wholly owned Subsidiary of the
Company to the Company or to any other direct or indirect wholly
owned Subsidiary of the Company) or enter into any agreement
with respect to the voting of its capital stock;
(vii) reclassify, split, combine, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of
its capital stock or securities convertible or exchangeable into
or exercisable for any
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shares of its capital stock (other than the (A) acquisition
of any Shares tendered by current or former employees or
directors consistent with past practices pursuant to the Stock
Plans (including in order to pay Taxes in connection with the
exercise of Company Options or the settlement of Restricted
Stock) or (B) acquisition of any shares of capital stock of
a wholly owned Subsidiary of the Company by the Company or any
wholly owned Subsidiary of the Company);
(viii) incur any Specified Indebtedness or guarantee such
Specified Indebtedness of another Person (other than a wholly
owned Subsidiary of the Company), or issue or sell any debt
securities or warrants or other rights to acquire any debt
security of the Company or any of its Subsidiaries, except in
each case for incurrences, guarantees, issuances or sales of
Specified Indebtedness to the extent that
Section 5.1(e)(iv) would not be breached as a result
thereof and except for transactions between or among the Company
or any of its Subsidiaries, with or among the Company and any
other Subsidiaries;
(ix) adopt or enter into a plan of complete or partial
liquidation, dissolution, restructuring, recapitalization or
other reorganization of the Company or any Subsidiary (other
than this Agreement, the Merger or as otherwise permitted
hereunder pursuant to Section 6.2);
(x) except as set forth in the capital budgets set forth in
Section 6.1(a)(ix) of the Company Disclosure Letter, make
or authorize any capital expenditure in excess of $1,000,000 in
the aggregate;
(xi) make any material changes with respect to accounting
policies or procedures, except as required by changes in GAAP or
a Governmental Entity;
(xii) settle any litigation or other proceedings before a
Governmental Entity for an amount in excess of $500,000 or any
obligation or liability of the Company in excess of such amount;
(xiii) other than in the ordinary course of business and
consistent with past practice, make, change or rescind any
material Tax election, change any method of Tax accounting,
settle or compromise any material Tax liability, file any
material amended Tax Return, enter into any closing agreement
relating to Taxes, or waive or extend any material Tax statute
of limitations;
(xiv) transfer, sell, lease, license, mortgage, pledge,
surrender, encumber, divest, cancel, abandon or allow to lapse
or expire or otherwise dispose of any assets, product lines or
businesses of the Company or its Subsidiaries, including capital
stock of any of its Subsidiaries, in each case which are
material to the Company and its Subsidiaries taken as a whole,
other than (A) in the ordinary course of business and
consistent with past practice, (B) pursuant to agreements,
contracts or other documents in effect prior to the date of this
Agreement, and (C) transactions between or among the
Company or any of its Subsidiaries, with or among the Company
and any other Subsidiaries;
(xv) except as required pursuant to Benefit Plans,
agreements, contracts or other documents in effect prior to the
date of this Agreement disclosed or made available to Parent, or
as otherwise required by applicable Laws, (A) grant or
provide any severance or termination payments or benefits to any
director or officer of the Company or any of its Subsidiaries,
or to any other employee of the Company or any of its
Subsidiaries except in the ordinary course of business
consistent with past practice, (B) increase the
compensation or make any new equity awards to any director,
officer or other employee of the Company or any of its
Subsidiaries, except for increases in compensation to employees
that are not officers in the ordinary course of business and
consistent with past practice, (C) establish, adopt,
terminate or materially amend any Benefit Plan (other than
routine changes to welfare plans for 2009), (D) make any
equity-based
or other compensation awards to any director, officer or other
employee of the Company or any of its Subsidiaries, except
pursuant to commitments or agreements in effect on the date
hereof or (E) take any action to fund, or require the
funding of, any compensation or benefits under any Benefit Plan;
(xvi) enter into or amend in any material respect any
transaction or agreement between (i) the Company or any
Subsidiaries, on the one hand, and (ii) any affiliate of
the Company (other than any of the Companys Subsidiaries),
on the other hand, of the type that would be required to be
disclosed under Item 404 of
Regulation S-K
promulgated by the SEC;
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(xvii) knowingly take or permit any of its Subsidiaries to
take any action that is intended to or reasonably likely to
prevent the consummation of the Merger (other than as permitted
pursuant to Section 6.2); or
(xviii) agree, authorize or commit to do any of the
foregoing.
(b) Parent shall not knowingly take or permit any of its
Subsidiaries to take any action that is intended to or
reasonably likely to prevent the consummation of the Merger.
6.2.
Acquisition Proposals
.
(a) Subject to Sections 6.2(b), 6.2(c), 6.2(d) and
6.2(e), from the date hereof until the time the Effective Time
or, if earlier, the termination of this Agreement in accordance
with Article VIII, the Company shall not, and shall not
direct, authorize or permit any of its Subsidiaries or any of
their directors, officers, employees, investment bankers,
attorneys, accountants and other advisors and representatives
(such directors, officers, employees, investment bankers,
attorneys, accountants and other advisors and representatives,
collectively, the
Representatives
) to,
directly or indirectly, (i) initiate, solicit or knowingly
encourage any inquiries or the making of any inquiry, proposal
or offer that constitutes or would reasonably be expected to
lead to an Acquisition Proposal (including by way of providing
access to non-public information) (other than an Acquisition
Proposal submitted by an Excluded Party), (ii) engage in or
otherwise participate in any discussions or negotiations
regarding any proposal or offer that constitutes or would
reasonably be expected to lead to an Acquisition Proposal (other
than an Acquisition Proposal submitted by an Excluded Party) or
(iii) otherwise knowingly facilitate (including taking any
action (other than any action taken prior to the date hereof) to
exempt any Person (other than Parent and Merger Sub and their
respective affiliates) from the restrictions on business
combinations contained in Title 3, Subtitle 6 of the MGCL
and/or
the
restrictions on control share acquisitions contained in
Title 3, Subtitle 7 of the MGCL or otherwise cause such
restrictions not to apply) any effort or attempt to make any
proposal or offer that constitutes or would reasonably be
expected to lead to an Acquisition Proposal (other than an
Acquisition Proposal submitted by an Excluded Party). The term
Excluded Party
means any Person
submitting any Acquisition Proposal with respect to which the
special committee of the board of directors of the Company has
determined in good faith based on the information then available
and after consultation with its financial advisor and its
outside legal counsel that such Acquisition Proposal either
constitutes a Superior Proposal or could reasonably be expected
to result in a Superior Proposal.
(b) Subject to Sections 6.2(c), 6.2(d) and 6.2(e), on
the date hereof, the Company shall, and shall cause its
Subsidiaries and its and their respective Representatives to
(i) immediately cease and cause to be terminated any
existing solicitation, initiation, encouragement, discussion or
negotiation with any Persons (other than Parent and its
affiliates), (ii) not modify, waive, amend or release any
standstill, confidentiality or similar agreements entered into
by the Company prior to the date hereof and (iii) enforce
the provisions of any such agreements.
(c) Notwithstanding anything to the contrary contained in
this Agreement, prior to the time the Company Requisite Vote is
obtained the Company may provide information in response to a
request therefor by a Person who has after the date hereof made
an unsolicited bona fide written Acquisition Proposal or engage
or participate in any discussions or negotiations with any
Person who has made such an unsolicited bona fide written
Acquisition Proposal, if and only to the extent that, in each
case (A) the Company has not breached this
Section 6.2, (B) prior to taking any such action, the
special committee of the board of directors of the Company
determines in good faith after consultation with outside legal
counsel that failure to take such action would be inconsistent
with the directors duties under applicable Law,
(C) in each such case, the special committee of the board
of directors of the Company has determined in good faith based
on the information then available and after consultation with
its financial advisor that such Acquisition Proposal either
constitutes a Superior Proposal or would reasonably be expected
to result in a Superior Proposal and (D) in connection with
providing such information (x) the Company shall have
received from the Person so requesting such information an
executed confidentiality agreement on customary terms (it being
understood that such confidentiality agreement need not prohibit
the making, or amendment, of an Acquisition Proposal) and
(y) the
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Company at least concurrently shall provide to Parent any
non-public information provided to such Person which was not
previously provided to Parent.
(d) The board of directors of the Company shall not:
(i) withhold, withdraw, qualify or modify (or publicly
propose or resolve to withhold, withdraw, qualify or modify), in
a manner adverse to Parent, the Company Recommendation with
respect to the Merger unless the board of directors of the
Company (prior to obtaining the Company Requisite Vote)
determines in good faith, after consultation with outside
counsel, that failure to do so would be inconsistent with its
duties under applicable Law (a
Change of
Recommendation
); or
(ii) subject to Section 6.2(d)(i) or
Section 6.2(e), approve or recommend, or publicly propose
to approve or recommend, an Acquisition Proposal or cause or
permit the Company to enter into any acquisition agreement,
merger agreement, letter of intent or other similar agreement
relating to an Acquisition Proposal or enter into any agreement
requiring the Company to abandon, terminate or fail to
consummate the transactions contemplated hereby or resolve,
propose or agree to do any of the foregoing.
(e) Notwithstanding anything to the contrary set forth in
Section 6.2(d)(ii), prior to the time the Company Requisite
Vote is obtained, if the Company receives an unsolicited bona
fide Acquisition Proposal which the special committee of the
board of directors of the Company concludes in good faith after
consultation with outside legal counsel and its financial
advisors constitutes a Superior Proposal after giving effect to
all of the adjustments to the terms of this Agreement which may
be offered by Parent including pursuant to this
Section 6.2(e), the Company may (prior to obtaining the
Company Requisite Vote) terminate this Agreement to enter into a
definitive agreement with respect to such Superior Proposal;
provided that the Company shall not terminate this Agreement
pursuant to the foregoing clause, and any purported termination
pursuant to the foregoing clause shall be void and of no force
or effect, unless in advance of or concurrently with such
termination the Company pays the Termination Fee, as required by
Section 8.5(b);
provided
,
further
, that the
Company shall not terminate this Agreement pursuant to the
foregoing clause unless (A) the Company shall not have
materially breached this Section 6.2; (B) the Company
shall have provided prior written notice to Parent, at least
five calendar days (or three calendar days in the event of each
subsequent material revision to such Superior Proposal) in
advance (the
Notice Period
), of its
intention to take such action with respect to such Superior
Proposal, which notice shall specify the material terms and
conditions of any such Superior Proposal (the
Alternative Acquisition Agreement
);
and (C) prior to terminating this Agreement to enter into a
definitive agreement with respect to such Superior Proposal, the
Company shall, and shall cause its financial and legal advisors
to, during the Notice Period, negotiate with Parent in good
faith (to the extent Parent desires to negotiate) to make such
adjustments in the terms and conditions of this Agreement so
that such Acquisition Proposal ceases to constitute a Superior
Proposal.
(f) The Company agrees that it will, from and after the
date hereof, promptly (and, in any event, within 48 hours)
notify Parent if any proposals or offers, or material
modifications thereto, with respect to an Acquisition Proposal
are received by, any non-public information is requested from,
or any discussions or negotiations are sought to be initiated or
continued with, it or, to the Knowledge of the Company, any of
its Representatives indicating, in connection with such notice,
the material terms and conditions of any proposals or offers. It
is agreed that any violation of the restrictions set forth in
this Section 6.2 by any of the Companys
Representative at the direction of the Company shall constitute
a breach of this Section 6.2 by the Company.
(g) For purposes of this Agreement,
Acquisition
Proposal
means any proposal or offer with respect
to (i) a merger, joint venture, partnership, consolidation,
dissolution, liquidation, tender offer, recapitalization,
reorganization, share exchange, business combination or similar
transaction involving the Company or any of its Subsidiaries or
(ii) any other direct or indirect acquisition, in the case
of clause (i) or (ii), involving 15% or more of the total
voting power or of any class of equity securities of the Company
or any of its Subsidiaries, or 15% or more of the consolidated
net revenue, consolidated net income or consolidated total
assets (including equity securities of its Subsidiaries) of the
Company and its Subsidiaries, in each case other than the
transactions contemplated by this Agreement.
A-23
(h) For purposes of this Agreement,
Superior
Proposal
means a bona fide Acquisition Proposal
involving (x) more than 50% of the assets (on a
consolidated basis) of the Company and its Subsidiaries taken as
a whole or (y) more than 50% of the total voting power of
the equity securities of the Company or any of its Subsidiaries
that represents 50% or more of the assets (on a consolidated
basis) of the Company and its Subsidiaries taken as a whole,
that the special committee of the board of directors of the
Company has determined in its good faith judgment is reasonably
likely to be consummated in accordance with its terms, taking
into account all legal, financial and regulatory aspects of the
proposal, and if consummated, would result in a transaction more
favorable to the Companys stockholders from a financial
point of view than the transaction contemplated by this
Agreement (taking into account any alterations to this Agreement
agreed to by Parent or Merger Sub in response thereto in
accordance with Section 6.2(e)(C)).
(i) Nothing contained in this Section 6.2 shall be
deemed to prohibit the Company or the board of directors of the
Company from (i) complying with its disclosure obligations
under U.S. federal or state Law with regard to an
Acquisition Proposal, including taking and disclosing to its
stockholders a position contemplated by
Rule 14d-9
and
Rule 14e-2(a)
promulgated under the Exchange Act (or any similar communication
to the stockholders of the Company), (ii) making any
disclosures as to factual matters that are required by
applicable Law or which a majority of a committee composed of
disinterested members of the board of directors of the Company,
after consultation with legal counsel, determines in good faith
is required in the exercise of its duties under applicable Law
or (iii) making any stop-look-and-listen
communication to the stockholders of the Company pursuant to
Rule 14d-9(f)
promulgated under the Exchange Act (or any similar
communications to the stockholders of the Company).
6.3.
Information
Supplied
.
Promptly after the date of this
Agreement, (a) the Company shall prepare and file with the
SEC, a proxy statement in preliminary form relating to the
Stockholders Meeting (such proxy statement, including any
amendment or supplement thereto, the
Proxy
Statement
) and (b) the Company, Parent and
Merger Sub shall jointly prepare and file the
Schedule 13E-3.
The Company agrees, as to itself and its Subsidiaries, that at
the date of mailing to stockholders of the Company and at the
time of the Stockholders Meeting, the Proxy Statement will
comply in all material respects with the applicable provisions
of the Exchange Act and the rules and regulations thereunder.
Each of the Parent and the Company agrees, as to itself and its
Subsidiaries, that none of the information supplied by it or any
of its Subsidiaries for inclusion or incorporation by reference
in the Proxy Statement or
Schedule 13E-3
will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading
(except in each case with respect to any redactions and
omissions permitted to be made by the Company or Parent pursuant
to confidentiality arrangements granted or afforded to the
Company or its Subsidiaries by the SEC or its staff).
6.4.
Stockholders
Meeting
.
Subject to the duties of the
Companys board of directors under applicable Laws, the
Company will take, in accordance with applicable Laws and its
charter and bylaws, all reasonable action necessary to convene a
meeting of the holders of Shares (the
Stockholders
Meeting
) promptly after the filing of the
definitive Proxy Statement with the SEC to consider and vote
upon the approval of the Merger pursuant to this Agreement.
Subject to Section 6.2 hereof, the Company shall
(i) take all reasonable lawful action to solicit such
approval of the Merger pursuant to this Agreement,
(ii) make the Company Recommendation in the Proxy Statement
and (iii) at the reasonable request of Parent, use
customary and commercially reasonable efforts to solicit from
its stockholders proxies in favor of the approval of the Merger
pursuant to this Agreement,
provided
that if the board of
directors of the Company or a committee thereof determines in
good faith, after consultation with outside counsel, that any of
the foregoing actions would be inconsistent with their duties
under applicable Laws, the Company shall not to be required to
take any such action
and/or
the
board of directors of the Company may withhold, withdraw,
qualify, modify or change in a manner adverse to Parent all or
any portion of the Company Recommendation. The Company shall
keep Parent updated with respect to proxy solicitation results
as reasonably requested by Parent. Unless and until this
Agreement is terminated in accordance with it terms, subject to
the provisions of this Agreement (including Section 6.2),
the Company shall not submit to the vote of its stockholders any
Acquisition Proposal other than the transactions contemplated by
this Agreement.
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6.5.
Filings; Other Actions;
Notification
.
(a)
Proxy Statement;
Schedule 13E-3
.
Each
party shall promptly notify the other parties of the receipt of
all comments of the SEC with respect to the Proxy Statement
and/or
Schedule 13E-3,
and of any request by the SEC for any amendment or supplement
thereto or for additional information and shall promptly provide
to the other parties copies of all correspondence between such
party
and/or
any of its Representatives and the SEC with respect to the Proxy
Statement and
Schedule 13E-3.
The Company and Parent shall each use its reasonable best
efforts to promptly provide responses to the SEC with respect to
all comments received on the Proxy Statement and
Schedule 13E-3
from the SEC, and the Company shall cause the definitive Proxy
Statement to be mailed promptly after the date the SEC staff
advises that it has no further comments on the Proxy Statement
and
Schedule 13E-3
or that the Company may commence mailing the Proxy Statement.
(b)
Cooperation
.
Subject to the
terms and conditions set forth in this Agreement, the Company
and Parent shall cooperate with each other and use (and shall
cause their respective Subsidiaries to use) their respective
commercially reasonable efforts to take or cause to be taken all
actions, and do or cause to be done all things reasonably
necessary, proper or advisable on its part under this Agreement
and applicable Laws to consummate and make effective the Merger
and the other transactions contemplated by this Agreement as
soon as practicable, including preparing and filing as promptly
as practicable all documentation to effect all necessary
notices, reports and other filings, and to obtain as promptly as
practicable all consents, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any
third party
and/or
any
Governmental Entity in order to consummate the Merger or any of
the other transactions contemplated by this Agreement. Subject
to applicable Laws relating to the exchange of information,
Parent and the Company shall have the right to review in
advance, and to the extent practicable each will consult with
the other on and consider in good faith the views of the other
in connection with, all of the information relating to Parent or
the Company, as the case may be, and any of their respective
Subsidiaries, that appears in any filing made with, or written
materials submitted to, any third party
and/or
any
Governmental Entity in connection with the Merger and the other
transactions contemplated by this Agreement (including the Proxy
Statement and
Schedule 13E-3).
In exercising the foregoing rights, each of the Company and
Parent shall act reasonably and as promptly as practicable.
(c)
Information
.
Subject to
applicable Laws, the Company and Parent each shall, upon request
by the other, furnish the other with all information concerning
itself, its Subsidiaries, directors, officers and stockholders
and such other matters as may be reasonably necessary or
advisable in connection with the Proxy Statement, the
Schedule 13E-3
or any other statement, filing, notice or application made by or
on behalf of Parent, the Company or any of their respective
Subsidiaries to any third party
and/or
any
Governmental Entity in connection with the Merger and the other
transactions contemplated by this Agreement.
(d)
Status
.
Subject to applicable
Laws and the instructions of any Governmental Entity, the
Company and Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions
contemplated hereby, including promptly furnishing the other
with copies of notices or other communications received by
Parent or the Company, as the case may be, or any of their
respective Subsidiaries, from any third party
and/or
any
Governmental Entity with respect to the Merger and the other
transactions contemplated by this Agreement. Neither the Company
nor Parent shall permit any of its officers or any other
Representatives to participate in any meeting with any
Governmental Entity in respect of any filings, investigation or
other inquiry unless it consults with the other party in advance
and, to the extent permitted by such Governmental Entity, gives
the other party the opportunity to attend and participate
thereat.
(e)
Antitrust Matters
.
Subject to
the provisions of this Agreement, the Company and Parent shall
(i) use reasonable best efforts to cooperate with each
other in (A) determining whether any filings are required
to be made with, or consents, permits, authorizations, waivers,
clearances, approvals, and expirations or terminations of
waiting periods are required to be obtained from, any third
parties or other Governmental Entities in connection with the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and (B) timely making
all such filings and timely obtaining all such consents,
permits, authorizations or approvals; and (ii) supply to
any Governmental Entity as promptly as practicable any
additional information or documents that may be requested
pursuant to any applicable Law or by such
A-25
Governmental Entity. The Company and Parent shall permit counsel
for the other party reasonable opportunity to review in advance,
and consider in good faith the views of the other party in
connection with, any proposed written communication to any
Governmental Entity. Each of the Company and Parent agrees not
to participate in any substantive meeting or discussion, either
in person or by telephone, with any Governmental Entity in
connection with the proposed Merger or the other transactions
contemplated hereby unless it consults with the other party in
advance and, to the extent not prohibited by such Governmental
Entity, gives the other party the opportunity to attend and
participate. Subject to and in furtherance and not in limitation
of the covenants of the parties contained in this
Section 6.5(e), if any administrative or judicial action or
proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging the
Merger or any other transaction contemplated by this Agreement
as violative of any applicable Law, each of the Company and
Parent shall cooperate in all respects with each other and
Parent shall use commercially reasonable efforts to contest and
resist any such action or proceeding and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction
or other order, whether temporary, preliminary or permanent,
that is in effect and that prohibits, prevents or restricts
consummation of the Merger or any other transactions
contemplated hereby.
6.6.
Access and
Reports
.
Subject to applicable Laws, upon
reasonable notice, the Company shall (and shall cause its
Subsidiaries to) afford Parents officers and other
authorized Representatives reasonable access, during normal
business hours throughout the period prior to the Effective
Time, to its employees, properties, books, contracts and records
and, during such period, the Company shall (and shall cause its
Subsidiaries to) furnish promptly to Parent all information
concerning its business, properties and personnel as may
reasonably be requested,
provided
that no investigation
pursuant to this Section 6.6 shall affect or be deemed to
modify any representation or warranty made by the Company
herein, and
provided
,
further
, that the foregoing
shall not require the Company (i) to permit any inspection,
or to disclose any information, that in the reasonable judgment
of the Company would result in the disclosure of any trade
secrets of third parties or violate any of its obligations with
respect to confidentiality if the Company shall have used
commercially reasonable efforts to obtain the consent of such
third party to such inspection or disclosure or (ii) to
disclose any privileged information of the Company or any of its
Subsidiaries. All requests for information made pursuant to this
Section 6.6 shall be directed to the executive officer of
or other Person designated by the Company. All such information,
and the rights and obligations under this
Section 6.6
, shall be governed by the terms of the
Confidentiality Agreement.
6.7.
NYSE Arca
De-listing
.
Prior to the Closing Date, the
Company shall cooperate with Parent and use commercially
reasonable efforts to take, or cause to be taken, all actions,
and do or cause to be done all things, reasonably necessary,
proper or advisable on its part under applicable Laws and rules
and policies of NYSE Arca to enable the delisting by the
Surviving Corporation of the Shares from NYSE Arca and the
deregistration of the Shares under the Exchange Act as promptly
as practicable after the Effective Time.
6.8.
Publicity
.
The initial
press release regarding the Merger shall be a joint press
release and thereafter the Company and Parent each shall consult
with each other prior to issuing any press releases or otherwise
making public announcements with respect to the Merger and the
other transactions contemplated by this Agreement and prior to
making any filings with any third party
and/or
any
Governmental Entity (including any securities exchange or
interdealer quotation service) with respect thereto, except as
may be required by applicable Laws or by obligations pursuant to
any listing agreement with or rules of any securities exchange
or interdealer quotation service or by the request of any
Government Entity.
6.9.
Employee Benefits
.
(a) During the period commencing at the Effective Time and
ending on the date which is twelve (12) months following
the Effective Time, Parent shall, or shall cause any of its
applicable Subsidiaries, to provide each Employee with
(i) base salary and bonus opportunities (including annual
and quarterly bonus opportunities and long-term incentive
opportunities) that are no less than the base salary and bonus
opportunities provided by the Company and its Subsidiaries to
such Employee immediately prior to the Effective Time,
(ii) Benefit Plans that are no less favorable in the
aggregate than those provided to such Employee by the Company
and its Subsidiaries immediately prior to the Effective Time and
(iii) severance benefits that are no less favorable than
the benefits set forth in such Employees employment or
service
A-26
agreement
and/or
severance plan applicable to such Employee as identified in
Section 6.9(c) of the Company Disclosure Letter.
(b) Nothing herein shall be deemed to be a guarantee of
employment for any Employee, or to restrict the right of the
Company or any Subsidiary to terminate any Employee.
Notwithstanding the foregoing, nothing contained in this
Section 6.9, whether express or implied, (i) shall be
treated as an amendment or other modification of any employee
benefit plan, or (ii) shall limit the right of the Company
or any of its Subsidiaries to amend, terminate or otherwise
modify any Benefit Plan following the Closing Date. Parent,
Merger Sub and the Company acknowledge and agree that all
provisions contained in this Section 6. 9 with respect to
Employees are included for the sole benefit of Parent, Merger
Sub and the Company, and that nothing herein, whether express or
implied, shall create any third party beneficiary or other
rights (x) in any other Person, including, without
limitation, any Employees, former Employees, any participant in
any Benefit Plan, or any dependent or beneficiary thereof, or
(y) to continued employment with Parent, the Company, and
Subsidiary, or any of their respective affiliates or continued
participation in any Benefit Plan.
6.10.
Expenses
.
Except as
otherwise provided in Section 6.14(b), in the second
sentence of Section 8.5(e) or Section 9.6(d), if the
Merger is not consummated (it being understood that Merger
Subs obligations are being assumed by the Surviving
Corporation upon the consummation of the Merger), all costs and
expenses incurred in connection with this Agreement and the
Merger and the other transactions contemplated by this Agreement
shall be paid by the party incurring such expense.
6.11.
Indemnification; Directors and
Officers Insurance
.
(a) From and after the Effective Time until six years
following the Effective Time, each of Parent and the Surviving
Corporation agrees that it will indemnify and hold harmless, to
the fullest extent permitted under applicable Laws, each present
and former director and officer of the Company and its
Subsidiaries (collectively, the
Indemnified
Parties
and individually, an
Indemnified Party
) against any costs
or expenses (including reasonable attorneys fees),
judgments, fines, losses, claims, damages or liabilities
(collectively,
Costs
) incurred in
connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative, arising out of or related to such Indemnified
Parties service as a director, officer, employee or agent
of the Company or its Subsidiaries or services performed by such
Indemnified Parties at the request of the Company or its
Subsidiaries at or prior to the Effective Time, whether asserted
or claimed prior to, at or after the Effective Time, including
the transactions contemplated by this Agreement. Each of Parent
and the Surviving Corporation shall also pay expenses (including
attorneys fees) incurred by an Indemnified Party in
advance of the final disposition of any such claim, action,
suit, proceeding or investigation to the fullest extent
permitted under applicable Laws,
provided
that the Person
to whom expenses are advanced provides, to the extent permitted
by applicable Laws, an undertaking to repay such advances if it
is ultimately determined that such Person is not entitled to
indemnification.
(b) Prior to the Effective Time, the Company shall, and if
the Company is unable to, Parent shall cause the Surviving
Corporation as of the Effective Time to, obtain and fully pay
the premium for the extension of (i) the Side A coverage
part (directors and officers liability) of the
Companys existing directors and officers
insurance policies and (ii) the Companys existing
fiduciary liability insurance policies, in each case for a
claims reporting or discovery period of at least six years from
and after the Effective Time from an insurance carrier with the
same or better credit rating as the Companys current
insurance carrier with respect to directors and
officers liability insurance and fiduciary liability
insurance (collectively,
D&O
Insurance
) with terms, conditions, retentions and
limits of liability that are at least as favorable as the
Companys existing policies with respect to any actual or
alleged error, misstatement, misleading statement, act,
omission, neglect, breach of duty or any matter claimed against
a director or officer of the Company or any of its Subsidiaries
by reason of him or her serving in such capacity that existed or
occurred at or prior to the Effective Time (including in
connection with this Agreement or the transactions or actions
contemplated hereby). If the Company and the Surviving
Corporation for any reason fail to obtain such tail
insurance policies as of the Effective Time, the Surviving
Corporation shall, and Parent shall cause the Surviving
Corporation to, continue to maintain in effect for a period of
at least six years from and after the Effective Time the
D&O Insurance in place as of the date hereof with terms,
conditions, retentions and limits of liability that are at least
as favorable
A-27
as provided in the Companys existing policies as of the
date hereof, or the Surviving Corporation shall, and Parent
shall cause the Surviving Corporation to, use reasonable best
efforts to purchase comparable D&O Insurance for such
six-year period with terms, conditions, retentions and limits of
liability that are at least as favorable as provided in the
Companys existing policies as of the date hereof;
provided
,
however
, that in no event shall Parent
or the Surviving Corporation be required to expend for such
policies an annual premium amount in excess of 300% of the
annual premiums currently paid by the Company for such
insurance; and
provided
,
further
, that if the
annual premiums of such insurance coverage exceed such amount,
the Surviving Corporation shall obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(c) If Parent or the Surviving Corporation or any of their
respective successors or assigns (i) shall consolidate with
or merge into any other corporation or entity and shall not be
the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any
individual, corporation or other entity, then, and in each such
case, proper provisions shall be made so that the successors and
assigns of Parent or the Surviving Corporation shall assume all
of the obligations of Parent and the Surviving Corporation set
forth in this Section 6.11.
(d) The provisions of this Section 6.11 are intended
to be for the benefit of, and shall be enforceable by, each of
the Indemnified Parties.
(e) The rights of the Indemnified Parties under this
Section 6.11 shall be in addition to any rights such
Indemnified Parties may have under the charter or bylaws of the
Company or any of its Subsidiaries, or under any applicable
agreements, contracts or other documents, or Laws. Parent,
Merger Sub and the Surviving Corporation hereby agree that all
provisions relating to exculpation, advancement of expenses and
indemnification for acts or omissions occurring prior to the
Effective Time now existing in favor of an Indemnified Party as
provided in the charter or bylaws of the Company or of any of
its Subsidiaries, in each case as of the date hereof, shall
remain in full force and effect for a six-year period beginning
at the Effective Time.
6.12.
Takeover Statutes
.
If
any Takeover Statute is or may become applicable to the Merger
or the other transactions contemplated by this Agreement, the
Company and its board of directors shall, to the fullest extent
practicable, grant such approvals and take such actions as are
necessary so that such transactions may be consummated as
promptly as practicable on the terms contemplated by this
Agreement and otherwise act to eliminate or minimize the effects
of such statute or regulation on such transactions.
6.13.
Rule 16b-3
.
The
board of directors of the Company (or the compensation committee
of such board of directors) and Parent shall each grant all
approvals and take all other actions required pursuant to
Rules 16b-3(d)
and
16b-3(e)
under the Exchange Act to cause the disposition in the Merger of
the Shares and the Company Options to be exempt from the
provisions of Section 16(b) of the Exchange Act.
6.14.
Financing
.
(a) Parent shall use its commercially reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable to arrange
the Financing on the terms and conditions described in the
Financing Commitments (provided that Parent and Merger Sub may
replace or amend the Debt Financing Commitments to add lenders,
lead arrangers, bookrunners, syndication agents or similar
entities which had not executed the Debt Financing Commitments
as of the date hereof, or otherwise so long as the terms would
not adversely impact the ability of Parent or Merger Sub to
timely consummate the transactions contemplated hereby or the
likelihood of consummation of the transactions contemplated
hereby), including using commercially reasonable efforts to
(i) maintain in effect the Financing Commitments,
(ii) satisfy on a timely basis all conditions applicable to
Parent and Merger Sub to obtaining the Financing set forth in
the Financing Commitments (including by consummating the
financing pursuant to the terms of the Equity Financing
Commitments), (iii) enter into definitive agreements with
respect thereto on the terms and conditions contemplated by the
Financing Commitments or on other terms that would not adversely
impact the ability or likelihood of Parent or Merger Sub to
timely consummate the transactions contemplated hereby and
(iv) consummate the Financing at or prior to the Closing.
Except in the manner set forth in the parenthetical to the first
sentence of this Section 6.14, neither Parent nor Merger
Sub shall amend or modify any Financing Commitment without the
prior written consent of the Company. Parent shall give the
Company prompt notice
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of any material breach by any party to the Financing
Commitments, of which Parent or Merger Sub becomes aware, or any
termination of the Financing Commitments. Parent shall keep the
Company informed on a reasonably current basis of the status of
its efforts to arrange the Financing and provide copies of all
documents (including amendments thereto, promptly after any such
amendment is made) related to the Financing (other than any
ancillary documents which by their terms are confidential or
documents subject to confidentiality agreements) to the Company.
(b) Prior to the Closing, the Company shall provide to
Parent and Merger Sub, and shall cause its Subsidiaries to, and
shall use its commercially reasonable efforts to cause the
respective officers, employees and advisors, including legal and
accounting, of the Company and its Subsidiaries to, provide to
Parent and Merger Sub, all cooperation reasonably requested in
writing by Parent that is necessary in connection with the
Financing, including using commercially reasonable efforts to
(i) participate in meetings, presentations and due
diligence sessions, (ii) assist with the preparation of
materials for offering documents, private placement memoranda,
bank information memoranda, prospectuses and similar documents
necessary, proper or advisable in connection with the Financing,
(iii) furnish Parent and Merger Sub with financial and
other pertinent information regarding the Company as may be
reasonably requested by Parent and which are customary for such
purposes, (iv) provide and execute documents as may be
reasonably requested by Parent which are customary for
transactions similar to the transactions contemplated hereby and
(v) execute and deliver any customary pledge and security
documents and otherwise use commercially reasonable efforts to
facilitate the pledging of collateral;
provided
,
however
, that nothing herein shall require such
cooperation to the extent it would, individually or in the
aggregate, materially interfere with the business or operations
of the Company or its Subsidiaries. Parent shall, promptly upon
request by the Company, reimburse the Company for all reasonable
out-of-pocket
costs incurred by the Company or its Subsidiaries in connection
with such cooperation.
(c) To facilitate the Financing, the Company shall furnish
to Parent, promptly upon such information becoming available,
copies of all information delivered to the lenders pursuant to
Section 7.01(a)(iii) of the Financing Agreement as in
effect on the date hereof.
(d) Parent acknowledges and agrees that the consummation of
the transactions contemplated by this Agreement is not
conditional upon the receipt by Parent of the proceeds of the
Financing Commitments and that any failure by Parent to have
available at the time the conditions to Closing set forth in
Article VII are satisfied or capable of satisfaction all
funds contemplated by the Financing Commitments shall constitute
a breach of this Agreement by Parent and entitle the Company to
terminate this Agreement in accordance with Section 8.3(f)
and to the remedies and relief set forth in Section 8.5.
6.15.
Stockholder
Litigation
.
In the event that any stockholder
litigation related to this Agreement, the Merger or the related
transactions contemplated hereby is brought, or, to the
Knowledge of the Company, threatened, against the Company
and/or, to the Knowledge of the Company, the members of the
Companys board of directors prior to the Effective Time,
the Company shall promptly notify Parent of any such stockholder
litigation brought, or threatened (to the Knowledge of the
Company), against the Company and/or, to the Knowledge of the
Company, members of the Companys board of directors and
keep Parent reasonably informed with respect to the status
thereof. No settlement of such litigation shall be agreed to
without Parents prior written consent (such consent not to
be unreasonably withheld, conditioned or delayed).
6.16.
Confidentiality
.
Notwithstanding
any provision in this Agreement to the contrary (and regardless
of the absence of a specific reference to this Section 6.16
elsewhere in this Agreement) but subject to the last sentence of
this Section 6.16, each of the Company, Parent and Merger
Sub hereby agrees that no obligation of the Company, Parent or
Merger Sub in this Agreement shall require disclosure of and
each of the Company, Parent and Merger Sub hereby agrees that it
shall not disclose, any information in contravention of the
confidentiality provisions of any Parent Confidentiality
Documents, and each of the Company, Parent and Merger Sub hereby
agrees that it shall not disclose any information if such
disclosure would give any party to a Parent Confidentiality
Document the right to terminate such Parent Confidentiality
Document, except that information may be disclosed to
regulators, courts, securities exchanges (and their regulatory
affiliates) or other governmental authorities to the extent that
confidential treatment (pursuant to a protective order or
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similar confidentiality arrangement) will be accorded to the
disclosed information (each a
Protected
Disclosure
), in a manner reasonably satisfactory
to Parent, and the parties agree to cooperate to obtain such
orders
and/or
similar confidentiality arrangement providing that such
confidential treatment will be accorded the disclosed
information. Notwithstanding any provision in this Agreement to
the contrary but subject to the last sentence of this
Section 6.16, any breach by Company, Parent and Merger Sub
of any covenant or agreement set forth in this Agreement (other
than this Section 6.16) primarily as a result of compliance
with this Section 6.16 shall not be deemed an intentional
or willful breach of this Agreement and may only result in a
termination of this Agreement pursuant to Section 8.3(d) or
8.4(c). Notwithstanding anything to the contrary herein, in the
event that any party discloses any information that it is not
permitted to disclose under this Section 6.16 because it is
legally compelled to disclose such information, then such
disclosing party shall not be deemed to have breached this
Agreement and shall have no liability or obligations under this
Agreement as a result of such disclosure, provided that
(i) such disclosure shall constitute a breach of this
Agreement if such party shall have failed to use its
commercially reasonable efforts to cooperate with the other
parties to obtain an appropriate protective order or similar
confidentiality arrangement providing that confidential
treatment will be accorded the disclosed information and
(ii) unless the applicable disclosure is a Protected
Disclosure, as set forth in Section 8.1 hereof, this
Agreement shall automatically, and without any action required
by the parties hereto, terminate immediately prior to any such
disclosure, whereupon the Parent shall promptly pay to the
Company the payments described in Section 8.5(c)(ii).
6.17.
Resignations
.
The
Company shall use commercially reasonable efforts to obtain and
deliver to Parent at the Closing evidence reasonably
satisfactory to Parent of the resignation effective as of the
Effective Time, of those directors of the Company or any
Subsidiary designated by Parent to the Company in writing at
least ten business days prior to the Closing.
6.18.
Capitalization; Related
Matters
.
(a) At the request of Parent,
the Company shall use commercially reasonable efforts to amend
or otherwise modify each outstanding Warrant to provide that
(i) the holders of such Warrants shall not be entitled to
require the Surviving Corporation to assume any obligation
thereunder (other than the obligation to pay the consideration
described in the following clause (ii)); and (ii) the only
consideration available to the holders of such Warrants in
connection with the Merger shall be the consideration (if any is
payable) set forth in Section 4.3(c) hereof.
(b) Parent and Merger Sub agree that, as of the Closing
Date, the definitive agreements with respect to the control of
Parent, Merger Sub and Guarantor shall be consistent in all
material respects with the information supplied to the Company
on the date hereof unless changes are approved in advance by the
Company in writing (such changes not to be unreasonably
withheld, conditioned or delayed; it being understood that,
among other things, withholding, conditioning or delaying any
approval of any change which would require a modification to the
Proxy Statement or
Schedule 13E-3
is not unreasonable).
ARTICLE VII
Conditions
7.1.
Conditions to Each Partys Obligation
to Effect the Merger
.
The respective
obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each
of the following conditions:
(a)
Stockholder Approval
.
The
Merger pursuant to this Agreement shall have been duly approved
by holders of Shares constituting the Company Requisite Vote in
accordance with this Agreement and with applicable Laws and the
charter and bylaws of the Company.
(b)
Order
.
No court or other
Governmental Entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any Law
(whether temporary, preliminary or permanent) that is in effect
and restrains, enjoins or otherwise prohibits consummation of
the Merger (collectively, an
Order
).
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7.2.
Conditions to Obligations of Parent and
Merger Sub
.
The obligations of Parent and
Merger Sub to effect the Merger are also subject to the
satisfaction or waiver by Parent at or prior to the Effective
Time of the following conditions:
(a)
Representations and
Warranties
.
(i) The representations and
warranties of the Company set forth in this Agreement that are
qualified by reference to Company Material Adverse Effect shall
be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of such date and time
(except to the extent that any such representation and warranty
expressly speaks as of a specific date, in which case such
representation and warranty shall be true and correct as of such
specific date); (ii) the representations and warranties of
the Company set forth in this Agreement that are not qualified
by reference to Company Material Adverse Effect shall be true
and correct as of the date of this Agreement and as of the
Closing Date as though made on and as of such date and time
(except to the extent that any such representation and warranty
expressly speaks as of a specific date, in which case such
representation and warranty shall be true and correct as of such
specific date);
provided
,
however
, that
notwithstanding anything herein to the contrary, the condition
set forth in this Section 7.2(a)(ii) shall be deemed to
have been satisfied even if any representations and warranties
of the Company are not so true and correct (except in the case
of Sections 5.1(b)(i), 5.1(b)(ii), 5.1(d)(iii) and
5.1(e)(iv)(C)) unless the failure of such representations and
warranties of the Company to be so true and correct,
individually or in the aggregate, has had or would reasonably be
expected to have a Company Material Adverse Effect;
provided
, that the representations and warranties of the
Company set forth in the penultimate sentence of
Section 5.1(b)(i) (other than information relating to
number of shares and exercise price) shall be true and correct
in all material respects as of the date of this Agreement and as
of the Closing Date as though made on and as of such date and
time; and (iii) Parent shall have received at the Closing a
certificate signed on behalf of the Company by an executive
officer of the Company to the effect that such officer has read
this Section 7.2(a) and the conditions set forth in this
Section 7.2(a) have been satisfied.
(b)
Performance of Obligations of the
Company
.
The Company shall have performed in
all material respects all obligations required to be performed
by it under this Agreement at or prior to the Effective Time,
and Parent shall have received at the Closing a certificate
signed on behalf of the Company by an executive officer of the
Company to such effect.
7.3.
Conditions to Obligation of the
Company
.
The obligation of the Company to
effect the Merger is also subject to the satisfaction or waiver
by the Company at or prior to the Effective Time of the
following conditions:
(a)
Representations and
Warranties
.
(i) The representations and
warranties of Parent and Merger Sub set forth in this Agreement
shall be true and correct as of the date of this Agreement and
as of the Closing Date as though made on and as of such date and
time (except to the extent that any such representation and
warranty expressly speaks as of a specific date, in which case
such representation and warranty shall be true and correct as of
such specific date); provided, however, that notwithstanding
anything herein to the contrary, the condition set forth in this
Section 7.3(a)(i) shall be deemed to have been satisfied
even if any representations and warranties of the Parent and
Merger Sub are not so true and correct unless the failure of
such representations and warranties of the Parent and Merger Sub
to be so true and correct, individually or in the aggregate,
prevents or materially impairs, or is reasonably likely to
prevent or materially impair, the ability of Parent and Merger
Sub to consummate the Merger and the other transactions
contemplated by this Agreement and (ii) the Company shall
have received at the Closing a certificate signed on behalf of
Parent by an executive officer of Parent to the effect that such
officer has read this Section 7.3(a) and the conditions set
forth in this Section 7.3(a) have been satisfied.
(b)
Performance of Obligations of Parent and Merger
Sub
.
Each of Parent and Merger Sub shall have
performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the
Effective Time, and the Company shall have received a
certificate signed on behalf of Parent by an executive officer
of Parent to such effect.
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ARTICLE VIII
Termination
8.1.
Termination by Mutual Consent; Automatic
Termination
.
This Agreement may be terminated
and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after the approval of the
Merger pursuant to this Agreement by the stockholders of the
Company referred to in Section 7.1(a), by mutual written
consent of the Company and Parent by action of their respective
boards of directors. In addition, this Agreement shall
automatically terminate pursuant to and in accordance with the
last sentence of Section 6.16, whereupon the Parent shall
pay to the Company the payments described in Section 8.5(c).
8.2.
Termination by Either Parent or the
Company
.
This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective
Time by action of the board of directors of either Parent or the
Company if;
(a) the Merger shall not have been consummated by
December 8, 2009, whether such date is before or after the
date of approval of the Merger pursuant to this Agreement by the
stockholders of the Company referred to in Section 7.1(a)
(the
Termination Date
);
(b) the approval of the Merger pursuant to this Agreement
by the stockholders of the Company referred to in
Section 7.1(a) shall not have been obtained at the
Stockholders Meeting, including any adjournment or postponement
thereof; or
(c) any Order permanently restraining, enjoining or
otherwise prohibiting consummation of the Merger shall become
final and non-appealable (whether before or after the approval
of the Merger pursuant to this Agreement by the stockholders of
the Company referred to in Section 7.1(a));
provided
that the right to terminate this Agreement
pursuant to this Section 8.2 shall not be available to any
party that has breached in any material respect its obligations
under this Agreement in any manner that shall have proximately
contributed to the occurrence of the failure of a condition to
the consummation of the Merger.
8.3.
Termination by the
Company
.
This Agreement may be terminated and
the Merger may be abandoned by the Company at any time prior to
the Effective Time:
(a) at any time prior to the time the Company Requisite
Vote is obtained, if (i) the board of directors of the
Company authorizes the Company, subject to complying with the
terms of this Agreement, to enter into an Alternative
Acquisition Agreement with respect to a Superior Proposal;
(ii) immediately prior to or concurrently with the
termination of this Agreement the Company enters into an
Alternative Acquisition Agreement with respect to a Superior
Proposal; and (iii) the Company immediately prior to or
concurrently with such termination pays to Parent in immediately
available funds any fees required to be paid pursuant to
Section 8.5;
(b) if there has been a breach of any representation,
warranty, covenant or agreement made by Parent or Merger Sub in
this Agreement, or any such representation and warranty shall
have become untrue after the date of this Agreement, such that
Section 7.3(a) or 7.3(b) would not be satisfied, and such
breach or failure to be true is not curable or, if curable, is
not cured prior to the earlier of (i) thirty (30) days
after written notice thereof is given by the Company to Parent
or (ii) two (2) business days prior to the Termination
Date;
(c) if (i) the board of directors of the Company shall
have made a Change in Recommendation and (ii) the Company
immediately prior to or concurrently with such termination pays
to Parent in immediately available funds any fees required to be
paid pursuant to Section 8.5;
(d) if any condition set forth in Sections 7.1, 7.2 or
7.3 has not been satisfied or cannot be satisfied on or prior to
the date that is 5 business days prior to the Termination Date
(excluding conditions that, by their terms, cannot be satisfied
until the Closing) primarily as a result of compliance by the
Company, Parent or Merger Sub in all material respects with its
obligations under Section 6.16;
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(e) if Parent or Merger Sub shall have willfully or
intentionally breached this Agreement, such that
Section 7.3(a) or 7.3(b) would not be satisfied, and such
breach or is not curable or, if curable, is not cured prior to
the earlier of (i) thirty (30) days after written
notice thereof is given by the Company to Parent or
(ii) two (2) business days prior to the Termination
Date; or
(f) if the conditions set forth in Sections 7.1 and
7.2 (excluding conditions that, by their terms, cannot be
satisfied until the Closing) have been satisfied or waived on
the date which is five (5) business days prior to the
Termination Date, and Parent or Merger Sub fails to obtain the
proceeds pursuant to the Financing sufficient to consummate the
transactions contemplated by this Agreement on such date.
8.4.
Termination by
Parent
.
This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective
Time by action of the board of directors of Parent if:
(a) the board of directors of the Company shall have
(i) made a Change of Recommendation, (ii) recommended
to the stockholders of the Company the approval of an
Acquisition Proposal other than the Merger or (iii) failed
to include in the Proxy Statement distributed to stockholders
its recommendation that stockholders approve the Merger pursuant
to this Agreement or failed to call the Stockholders Meeting in
breach of its obligations under this Agreement;
(b) there has been a breach of any representation,
warranty, covenant or agreement made by the Company in this
Agreement, or any such representation and warranty shall have
become untrue after the date of this Agreement, such that
Section 7.2(a) or 7.2(b) would not be satisfied and such
breach or failure to be true is not curable or, if curable, is
not cured prior to the earlier of (i) thirty (30) days
after written notice thereof is given by Parent to the Company
or (ii) two (2) business days prior to the Termination
Date;
(c) if any condition set forth in Sections 7.1, 7.2 or
7.3 has not been satisfied or cannot be satisfied on or prior to
the date that is 5 business days prior to the Termination Date
(excluding conditions that, by their terms, cannot be satisfied
until the Closing) primarily as a result of compliance by the
Company, Parent or Merger Sub in all material respects with its
obligations under Section 6.16;
(d) if the Company shall have willfully or intentionally
breached this Agreement, such that Section 7.2(a) or 7.2(b)
would not be satisfied and such breach is not curable or, if
curable, is not cured prior to the earlier of (i) thirty
(30) days after written notice thereof is given by Parent
to the Company or (ii) two (2) business days prior to
the Termination Date; or
(e) if the Company shall have breached Section 6.16 in
any material respect and such breach constitutes an Inadvertent
Breach.
8.5.
Effect of Termination and
Abandonment
.
(a) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article VIII,
this Agreement shall become void and of no effect with no
liability to any Person on the part of any party hereto (or of
any of its Representatives or affiliates);
provided
,
however
, and notwithstanding anything to the contrary
herein, that except as otherwise provided herein, (i) no
such termination shall relieve any party hereto of any liability
or damages to the other party hereto resulting from any willful
or intentional material breach of this Agreement, in which case
the provisions of Section 8.5(d) will apply and shall be
the sole remedy therefor (it being agreed that, other than with
respect to an Inadvertent Breach, any other violation or breach
of Section 6.16 by the Company or any violation or breach
of Section 6.18(b) shall be deemed a willful and
intentional breach of this Agreement by the Company in the case
of Section 6.16 and Parent and Merger Sub in the case of
Section 6.18(b); it being further agreed that any breach by
Company, Parent and Merger Sub of any covenant or agreement set
forth in this Agreement (other than Section 6.16) primarily
as a result of compliance with Section 6.16 shall not be
deemed an intentional or willful breach of this Agreement) and
(ii) the provisions set forth in the second sentence of
Section 9.1 shall survive the termination of this
Agreement. Notwithstanding anything to the contrary herein, to
the extent that any breach of any representation, warranty,
covenant or agreement of the Company in this Agreement is as a
result of the action or inaction by Andrew Baker (solely to the
extent acting in a manner that is not (x) at the direction
of the Companys
A-33
board of directors or a committee thereof, or (y) as
required by the terms of this Agreement or under applicable Law
or pursuant to any requirement of any Governmental Entity), the
Company shall not be deemed to have breached such
representation, warranty, covenant or agreement for all purposes
under this Agreement (including in determining whether any
condition has been satisfied hereunder). For purposes of this
Agreement, the term
Inadvertent Breach
means a violation or breach of Section 6.16 by the Company
or any of its Subsidiaries which is not willful and intentional
and with respect to which the applicable disclosure (A) is
not made in a public filing, filing with a regulator or press
release by the Company or any of its Subsidiaries and
(B) is not otherwise publicly available, unless it was not
reasonably foreseeable, at the time the applicable disclosure
was made, that the applicable information disclosed would become
publicly available.
(b) In the event that:
(i) after the date of this Agreement, a bona fide
Acquisition Proposal shall have been made to the Company, any of
its Subsidiaries or any of its stockholders, or any Person shall
have publicly announced an intention (whether or not
conditional) to make an Acquisition Proposal with respect to the
Company or any of its Subsidiaries (and such Acquisition
Proposal or publicly announced intention shall not have been
publicly withdrawn prior to the Termination Date) and thereafter
this Agreement is terminated by either Parent or the Company
pursuant to Section 8.2(a) or 8.2(b);
(ii) this Agreement is terminated by Parent pursuant to
Section 8.4(a);
(iii) this Agreement is terminated by the Company pursuant
to Section 8.3(a) or Section 8.3(c); or
(iv) this Agreement is terminated by Parent pursuant to
Section 8.4(e);
then (x) if the Termination Fee is payable pursuant to
clause (iii) of this Section 8.5(b), the Company shall
pay Parent the Termination Fee upon a termination pursuant to
Section 8.3(a) or 8.3(c) in accordance with
Section 8.3(a) or 8.3(c), as applicable, by wire transfer
of same day funds; (y) if the Termination Fee is payable
pursuant to clause (i) or (ii) of this
Section 8.5(b), the Company shall pay Parent the
Termination Fee promptly following the date on which the Company
or any of its Subsidiaries shall have consummated an Acquisition
Proposal (substituting 50% for 15% in
the definition thereof) as long as such Acquisition Proposal
(substituting 50% for 15% in the
definition thereof) is consummated within twelve
(12) months of such termination;
provided
,
however
, that if no such Acquisition Proposal
(substituting 50% for 15% in the
definition thereof) is consummated within twelve
(12) months of such termination, then the Company shall not
be required to pay, and neither Parent nor Merger Sub shall be
entitled to receive, the Termination Fee; and (z) in the
event of termination of this Agreement pursuant to
Section 8.4(e), Company shall pay to the Parent the
Applicable Fee by wire transfer of immediately available funds
no later than three business days after such termination by
Parent. For purposes of this Agreement, the term
Termination Fee
means $2,230,000.
(c) In the event of termination of this Agreement pursuant
to (i) Section 8.3(f) and at the time of such
termination, the Company is not in material breach of any
representation, warranty, covenant or agreement contained herein
and no representation or warranty of the Company contained
herein shall have become untrue in any material respect, in each
case such that any of the conditions set forth in
Section 7.2(a) or Section 7.2(b) would not be
satisfied on or prior to the Termination Date (excluding
conditions that, by their terms, cannot be satisfied until the
Closing), Parent shall pay to the Company an amount equal to
$2,230,000 (the
Parent Fee
) by wire
transfer of immediately available funds no later than three
business days after such termination by the Company; or
(ii) Sections 8.3(d) or 8.4(c) or the last sentence of
Section 8.1, Parent shall pay to the Company an amount
equal to $1,000,000 (the
Applicable
Fee
) by wire transfer of immediately available
funds no later than three business days after such termination,
provided
, that the Applicable Fee shall not be payable if
the Company has breached any of its obligations under
Section 6.16 of this Agreement.
(d) In the event of termination of this Agreement by the
Company pursuant to Section 8.3(e), Parent shall promptly
(but in no event later than three (3) business days after
the date of such termination) pay, or cause to be paid, to the
Company an amount equal to $4,460,000 (the
Intentional Breach Fee
), payable by
wire transfer of immediately available funds. In the event of
termination of this Agreement by the Parent pursuant
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to Section 8.4(d), Company shall promptly (but in no event
later than three (3) business days after the date of such
termination) pay, or cause to be paid, to the Parent an amount
equal to the Intentional Breach Fee, payable by wire transfer of
immediately available funds.
(e) Each of the Company, Parent and Merger Sub acknowledges
that the agreements contained in this Section 8.5 are an
integral part of the transactions contemplated by this
Agreement. In the event that the Company or Parent shall fail to
pay the Termination Fee, Parent Fee, Applicable Fee or
Intentional Breach Fee, as applicable, when due, the Company or
Parent, as appropriate, shall reimburse the other party for all
reasonable and documented
out-of-pocket
costs and expenses actually incurred or accrued by such party
(including reasonable and documented fees and expenses of
outside counsel) in connection with the collection under and the
enforcement of this Section 8.5;
provided
, that the
maximum amount payable by Parent or Company in respect of the
Termination Fee, Parent Fee, Applicable Fee or Intentional
Breach Fee, as applicable,
plus
the foregoing
reimbursement of expenses shall not exceed the amount of the
Intentional Breach Fee. Notwithstanding anything to the contrary
set forth in this Agreement, each of the parties expressly
acknowledges and agrees that:
(A) payment of the Termination Fee, Parent Fee, Applicable
Fee or Intentional Breach Fee, as applicable, shall constitute
liquidated damages with respect to any claim for damages or any
other claim against Parent, Merger Sub or Company hereunder, as
applicable, and (B) a partys right to receive payment
of the Termination Fee, Parent Fee, Applicable Fee or
Intentional Breach Fee, as applicable, pursuant to this
Section 8.5, if payable pursuant to this Section 8.5,
shall be the sole and exclusive remedy of such party in contract
or in tort against the other party or the Guarantor and their
respective equityholders, partners, members, affiliates,
directors, officers, employees, financing sources or agents, and
their respective assets, with respect to this Agreement, the
Guarantee and the transactions contemplated hereby and thereby
(including any breach by Company, Parent or Merger Sub or the
failure of Parent and Merger Sub to obtain financing or the
failure of any financing parties to provide the Financing), the
termination of this Agreement, the failure to consummate the
transactions contemplated by this Agreement and any claims or
actions under applicable Law arising out of any such breach,
termination or failure, and whether or not the Termination Fee,
Parent Fee, Applicable Fee or Intentional Breach Fee is payable
pursuant to this Section 8.5, Company, Merger Sub, the
Guarantor or Parent, and their respective equityholders,
partners, members, affiliates, directors, officers, employees,
financing sources or agents, as the case may be, shall have no
further liability or obligation relating to or arising out of
this Agreement, the Guarantee or the transactions contemplated
hereby and thereby (including any breach by Company, Parent or
Merger Sub or the failure of Parent and Merger Sub to obtain
financing or the failure of any financing parties to provide the
Financing), the termination of this Agreement, the failure to
consummate the transactions contemplated by this Agreement or
any claims or actions under applicable Law arising out of any
such breach, termination or failure;
(B) in light of the difficulty of accurately determining
actual damages with respect to the foregoing, upon any such
termination of this Agreement, the payment of the Termination
Fee, Parent Fee, Applicable Fee or Intentional Breach Fee, as
applicable, in such circumstance: (A) constitutes a
reasonable estimate of the damages that will be suffered by the
Company or Parent and Merger Sub, as applicable, by reason of
breach or termination of this Agreement or the Guarantee, and
(B) shall be in full and complete satisfaction of any and
all damages of the Company, Parent and Merger Sub arising out of
or related to this Agreement and the Guarantee, the transactions
contemplated hereby and thereby (including any breach by
Company, Parent or Merger Sub or the failure of Parent and
Merger Sub to obtain financing or the failure of any financing
parties to provide the Financing), the termination of this
Agreement, the failure to consummate the transactions
contemplated by this Agreement, and any claims or actions under
applicable Law arising out of any such breach, termination or
failure;
(C) in no event shall the Company be entitled to seek or
obtain any recovery or judgment in addition to the Parent Fee,
Applicable Fee or Intentional Breach Fee (plus, in the case the
Parent Fee, Applicable Fee or Intentional Breach Fee is not
timely paid, the amounts described in the second sentence of
Section 8.5(e)) against Merger Sub, the Guarantor or
Parent, or any of their respective equityholders, partners,
members, affiliates, directors, officers, employees, financing
sources or agents or any of their
A-35
respective assets, and in no event shall the Company be entitled
to seek or pursue or be granted any specific performance or
other equitable relief or obtain any damages, other than the
Parent Fee, Applicable Fee or Intentional Breach Fee (plus the
amounts described in the second sentence of
Section 8.5(e)), as applicable, of any kind, including
compensatory, consequential, special, direct, indirect or
punitive damages or other type of recovery of any kind (whether
in contract, tort or otherwise) for, or with respect to, this
Agreement or the Guarantee or the transactions contemplated
hereby and thereby (including any breach by Parent or Merger Sub
or the failure to obtain financing), the termination of this
Agreement, the failure to consummate the transactions
contemplated by this Agreement or any claims or actions under
applicable Law arising out of any such breach, termination or
failure; and
(D) in no event shall Parent or Merger Sub be entitled to
seek or obtain any recovery or judgment in addition to the
Termination Fee or Intentional Breach Fee (plus, in the case the
Termination Fee or Intentional Breach Fee is not timely paid,
the amounts described in the second sentence of
Section 8.5(e)) against Company or any of its Subsidiaries,
or any of their respective equityholders, affiliates, directors,
officers, employees, financing sources or agents or any of their
respective assets, and in no event shall Parent or Merger Sub be
entitled to seek or pursue or be granted any specific
performance or other equitable relief or obtain any damages,
other than the Termination Fee or Intentional Breach Fee (plus
the amounts described in the second sentence of
Section 8.5(e)), as applicable, of any kind, including
compensatory, consequential, special, direct, indirect or
punitive damages or other type of recovery of any kind (whether
in contract, tort or otherwise) for, or with respect to, this
Agreement or the Guarantee or the transactions contemplated
hereby and thereby, the termination of this Agreement, the
failure to consummate the transactions contemplated by this
Agreement or any claims or actions under applicable Law arising
out of any such breach, termination or failure.
ARTICLE IX
Miscellaneous
9.1.
Survival
.
This
Article IX and the agreements of the Company, Parent and
Merger Sub contained in Article IV and Sections 6.9
(Employee Benefits), 6.10 (Expenses) and 6.11 (Indemnification;
Directors and Officers Insurance) shall survive the
consummation of the Merger. This Article IX and the
agreements of the Company, Parent and Merger Sub contained in
Section 6.10 (Expenses) and Section 8.5 (Effect of
Termination and Abandonment) and the Confidentiality Agreement
shall survive the termination of this Agreement. All other
representations, warranties, covenants and agreements in this
Agreement shall not survive the consummation of the Merger or
the termination of this Agreement.
9.2.
Modification or
Amendment
.
Subject to the provisions of
applicable Law, at any time prior to the Effective Time, the
parties hereto may modify or amend this Agreement, by written
agreement executed and delivered by duly authorized officers of
the respective parties;
provided
,
however
, that
after the approval of the Companys stockholders has been
obtained, there shall not be made any amendment that by Law
requires further approval by the stockholders of the Company
without such further approval having been obtained.
9.3.
Extensions; Waivers
.
At
any time prior to the Effective Time, a party may, by action
taken or authorized by the board of directors of such party
(a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) to the
extent permitted by applicable law, waive any inaccuracies in
the representations and warranties of the other parties
contained in this Agreement or in any document delivered
pursuant to this Agreement or (c) subject to the proviso of
Section 9.2 and to the extent permitted by law, waive
compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf
of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
9.4.
Counterparts
.
This
Agreement may be executed in any number of counterparts and by
facsimile or portable document format, each such
counterpart being deemed to be an original instrument, and all
such counterparts shall together constitute the same agreement.
A-36
9.5.
Governing Law
.
THIS
AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE LAW OF THE STATE OF MARYLAND WITHOUT REGARD
TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
9.6.
Arbitration
.
All
disputes, controversies or claims based on, arising out of or
relating to this Agreement or the breach, termination or
validity thereof
(
Disputes
)
shall be
resolved exclusively according to the procedures set forth in
this Section 9.6 through binding arbitration pursuant to
the Commercial Arbitration Rules and the Procedures for Complex
Cases of the American Arbitration Association
(
AAA
)
then in effect (the
Rules
):
(a) The arbitration demand shall be delivered to the AAA
and respondents in accordance with the Rules. A single, neutral
arbitrator shall be selected by the joint agreement of all the
parties, but if they do not so agree within fifteen
(15) days of receipt by respondent(s) of a copy of the
arbitration demand, the following procedures shall apply. Each
party shall appoint one neutral and impartial arbitrator within
thirty (30) days of receipt by respondent of a copy of the
demand for arbitration, and the arbitrators so appointed shall
appoint an arbitrator within fifteen (15) days of the
appointment of the final arbitrator, who shall serve as the
arbitrator of the Dispute. Any arbitrators not timely selected
shall be appointed by the AAA in accordance with the Rules. Any
arbitrator appointed by the AAA shall be a practicing attorney
admitted for at least fifteen (15) years, with significant
experience as an arbitrator of large, complex commercial cases,
or be a retired federal judge. In addition, if practicable, any
arbitrator appointed by the AAA shall have experience with
mergers and acquisitions involving public companies. The
arbitrator shall have a conference with the parties within ten
(10) days of appointment and shall design and implement a
schedule for the prompt and fair adjudication of the Dispute.
The hearing shall be held as soon as possible, if practicable,
no later than ninety (90) days after the appointment of the
arbitrator. The arbitrator may extend any time limit contained
herein for good cause shown. The award of the arbitrator shall
be made in a written opinion.
(b) This provision for arbitration shall be specifically
enforceable by the parties and the decision of the arbitrator in
accordance herewith shall be final and binding on the parties
and there shall be no right of appeal therefrom, except in
accordance with the provisions of the Federal Arbitration Act,
9 U.S.C. § 1, et seq. The arbitrator shall be
instructed to adhere to and be bound by the terms of this
Agreement (including, without limitation, provisions relating to
confidentiality) and Maryland law and may not limit, expand or
otherwise modify the terms of this Agreement. The arbitrator
shall be empowered to (a) determine the scope of his
jurisdiction and all questions relating to the amenability of a
Dispute to arbitration under this Agreement, whether or not
arbitration is the exclusive method of dispute resolution, and
the authority of the arbitrator to make any award, and
(b) award equitable relief of any nature, including,
without limitation, the types of remedies described elsewhere in
this Section 9.6.
(c) Judgment upon the award rendered by the arbitrator may
be entered by any court having jurisdiction thereof, and if the
award of the arbitrator includes equitable relief, the judgment
may include an order or injunction for such equitable relief.
(d) Each partys costs and expenses of arbitration,
including attorneys fees and expenses of the arbitrator,
shall be borne entirely by that party; however, at the
discretion of the arbitrator, all or a portion of the prevailing
partys costs and expenses (including reasonable
attorneys fees) shall be reimbursed to it by the
non-prevailing party or parties;
provided
, that the
maximum amount payable by Parent or Company in respect of the
foregoing reimbursement of expenses
plus
the payment of
any fees and expenses pursuant to Section 8.5 shall not
exceed the amount of the Intentional Breach Fee. The arbitrator
shall not be permitted to award punitive or similar
non-compensatory damages under any circumstances.
(e) The place of arbitration shall be New York, New York.
The language of the arbitration shall be English.
9.7.
Notices
.
Any notice,
request, instruction or other document to be given hereunder by
any party hereto to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage
A-37
prepaid, or by facsimile to the address or facsimile number
provided by the parties to each other party in writing. Any
notice, request, instruction or other document given as provided
above shall be deemed given to the receiving party upon actual
receipt, if delivered personally; three (3) business days
after deposit in the mail, if sent by registered or certified
mail; upon confirmation of successful transmission if sent by
facsimile (provided that if given by facsimile such notice,
request, instruction or other document shall be followed up
within one (1) business day by dispatch pursuant to one of
the other methods described herein); or on the next business day
after deposit with an overnight courier, if sent by an overnight
courier.
9.8.
Entire Agreement
.
This
Agreement (including any exhibits hereto), the Guarantee, the
Company Disclosure Letter, the Parent Disclosure Letter and the
Confidentiality Agreements and the related letter agreements
identified on Section 9.8 of the Parent Disclosure Letter
(the
Confidentiality Agreements
)
constitute the entire agreement, and supersede all other prior
agreements, understandings, representations and warranties both
written and oral, among the parties, with respect to the subject
matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT,
NEITHER PARENT AND MERGER SUB NOR THE COMPANY MAKES ANY OTHER
REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS ANY
OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OR AS
TO THE ACCURACY OR COMPLETENESS OF ANY OTHER INFORMATION, MADE
BY, OR MADE AVAILABLE BY, ITSELF OR ANY OF ITS REPRESENTATIVES,
WITH RESPECT TO, OR IN CONNECTION WITH, THE NEGOTIATION,
EXECUTION OR DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE
TO THE OTHER OR THE OTHERS REPRESENTATIVES OF ANY
DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR
MORE OF THE FOREGOING.
9.9.
No Third Party
Beneficiaries
.
Except for the Guarantor (as
to whom it is agreed that the Guarantor is an intended third
party beneficiary under this Agreement) and as provided in
Section 6.11 (Indemnification; Directors and
Officers Insurance) and Section 8.5(e) (Effect of
Termination and Abandonment) (it being agreed that the Persons
expressly identified in such Sections 6.11 and 8.5(e) are
intended third party beneficiaries of such Sections 6.11
and 8.5(e), as applicable), Parent, Merger Sub and the Company
hereby agree that their respective representations, warranties
and covenants set forth herein are solely for the benefit of the
parties hereto and their permitted assigns (to the extent such
assignment is permitted hereunder), in accordance with and
subject to the terms of this Agreement, and this Agreement is
not intended to, and does not, confer upon any Person other than
the parties hereto (and their permitted assigns (to the extent
such assignment is permitted hereunder)) any rights or remedies
hereunder, including the right to rely upon the representations
and warranties set forth herein. The parties hereto further
agree that the rights of third party beneficiaries under
Section 6.11 shall not arise unless and until the Effective
Time occurs. The representations and warranties in this
Agreement are the product of negotiations among the parties
hereto and are for the sole benefit of the parties hereto (and
their permitted assigns (to the extent such assignment is
permitted hereunder)). Any inaccuracies in such representations
and warranties are subject to waiver by the parties hereto in
accordance with Section 9.3 without notice or liability to
any other Person. In some instances, the representations and
warranties in this Agreement may represent an allocation among
the parties hereto of risks associated with particular matters
regardless of the knowledge of any of the parties hereto.
Consequently, Persons other than the parties hereto (and their
permitted assigns (to the extent such assignment is permitted
hereunder)) may not rely upon the representations and warranties
in this Agreement as characterizations of actual facts or
circumstances as of the date of this Agreement or as of any
other date.
9.10.
Obligations of Parent and of the
Company
.
Whenever this Agreement requires a
Subsidiary of Parent to take any action, such requirement shall
be deemed to include an undertaking on the part of Parent to
cause such Subsidiary to take such action. Whenever this
Agreement requires a Subsidiary of the Company to take any
action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary
to take such action and, after the Effective Time, on the part
of the Surviving Corporation to cause such Subsidiary to take
such action.
9.11.
Definitions
.
Each of
the terms set forth in Annex A is defined in the page of
this Agreement set forth opposite such term.
A-38
9.12.
Severability
.
The
provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect
the validity or enforceability of the other provisions hereof.
If any provision of this Agreement, or the application thereof
to any Person or any circumstance, is invalid or unenforceable,
(a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or
unenforceable provision, and (b) the remainder of this
Agreement and the application of such provision to other Persons
or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
9.13.
Interpretation; Construction
.
(a) The table of contents and headings herein are for
convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect
any of the provisions hereof. Where a reference in this
Agreement is made to a Section or Exhibit, such reference shall
be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words include,
includes or including are used in this
Agreement, they shall be deemed to be followed by the words
without limitation. The definitions contained in
this Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to
the feminine and neuter genders of such term. References to a
Person are also to its permitted successors and assigns.
(b) The parties have participated jointly in negotiating
and drafting this Agreement. In the event that an ambiguity or a
question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties, and no
presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any
provision of this Agreement.
(c) Each party hereto has or may have set forth information
in its respective Disclosure Letter in a section thereof that
corresponds to the section of this Agreement to which it
relates. The fact that any item of information is disclosed in a
Disclosure Letter to this Agreement shall not be construed to
mean that such information is required to be disclosed by this
Agreement.
9.14.
Assignment
.
This
Agreement shall not be assignable by operation of law or
otherwise;
provided
,
however
, that prior to the
mailing of the Proxy Statement to the Companys
stockholders, Parent may designate, by written notice to the
Company, another wholly owned direct or indirect subsidiary of
the Parent to be a Constituent Corporation in lieu of Merger
Sub, in which event all references herein to Merger Sub shall be
deemed references to such other subsidiary, except that all
representations and warranties made herein with respect to
Merger Sub as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other
subsidiary as of the date of such designation, provided that any
such designation shall not impede or delay the consummation of
the transactions contemplated by this Agreement or otherwise
materially impede the rights of the Company or the stockholders
of the Company under this Agreement. Any purported assignment in
violation of this Agreement is void.
*********
A-39
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been
duly executed and delivered by the duly authorized officers of
the parties hereto as of the date first written above.
LIFE SCIENCES RESEARCH, INC.
Name:
Title:
LION HOLDINGS, INC.
Name:
Title:
LION MERGER CORP.
Name:
Title:
A-40
ANNEX A
DEFINED
TERMS
|
|
|
|
|
Terms
|
|
Page
|
|
AAA
|
|
|
A-37
|
|
Acquisition Proposal
|
|
|
A-23
|
|
affiliate
|
|
|
A-16
|
|
Agreement
|
|
|
A-1
|
|
Alternative Acquisition Agreement
|
|
|
A-23
|
|
Applicable Date
|
|
|
A-8
|
|
Applicable Fee
|
|
|
A-34
|
|
Articles of Merger
|
|
|
A-1
|
|
Bankruptcy and Equity Exception
|
|
|
A-7
|
|
Benefit Plans
|
|
|
A-10
|
|
business day
|
|
|
A-1
|
|
By laws
|
|
|
A-2
|
|
CBA
|
|
|
A-14
|
|
Certificate
|
|
|
A-2
|
|
Change of Recommendation
|
|
|
A-23
|
|
Charter
|
|
|
A-1
|
|
CLIA
|
|
|
A-17
|
|
Closing
|
|
|
A-1
|
|
Closing Date
|
|
|
A-1
|
|
Code
|
|
|
A-11
|
|
Company
|
|
|
A-1
|
|
Company Approvals
|
|
|
A-7
|
|
Company Disclosure Letter
|
|
|
A-5
|
|
Company Leases
|
|
|
A-16
|
|
Company Material Adverse Effect
|
|
|
A-5
|
|
Company Option
|
|
|
A-4
|
|
Company Recommendation
|
|
|
A-7
|
|
Company Reports
|
|
|
A-9
|
|
Company Requisite Vote
|
|
|
A-7
|
|
Confidentiality Agreement
|
|
|
A-38
|
|
Constituent Corporations
|
|
|
A-1
|
|
Contract
|
|
|
A-8
|
|
Costs
|
|
|
A-27
|
|
D&O Insurance
|
|
|
A-27
|
|
Debt Financing
|
|
|
A-18
|
|
Debt Financing Commitments
|
|
|
A-18
|
|
Disputes
|
|
|
A-37
|
|
Disclosure Letters
|
|
|
A-17
|
|
Effective Time
|
|
|
A-1
|
|
Employees
|
|
|
A-10
|
|
Environmental Law
|
|
|
À-13
|
|
A-41
|
|
|
|
|
Terms
|
|
Page
|
|
Equity Financing
|
|
|
A-18
|
|
Equity Financing Commitments
|
|
|
A-18
|
|
EMEA
|
|
|
A-17
|
|
ERISA
|
|
|
A-10
|
|
ERISA Affiliate
|
|
|
A-11
|
|
ERISA Plan
|
|
|
A-11
|
|
Exchange Act
|
|
|
A-5
|
|
Exchange Fund
|
|
|
A-2
|
|
Excluded Party
|
|
|
A-22
|
|
FDA
|
|
|
A-17
|
|
Financing
|
|
|
A-18
|
|
Financing Agreement
|
|
|
A-8
|
|
Financing Commitments
|
|
|
A-18
|
|
GAAP
|
|
|
A-6
|
|
Government Antitrust Entity
|
|
|
A-8
|
|
Governmental Entity
|
|
|
A-8
|
|
Guarantee
|
|
|
A-19
|
|
Guarantor
|
|
|
A-19
|
|
Inadvertent Breach
|
|
|
A-34
|
|
Indemnified Parties
|
|
|
A-27
|
|
Indemnified Party
|
|
|
A-27
|
|
Insurance Policies
|
|
|
A-16
|
|
Intellectual Property
|
|
|
A-16
|
|
Intentional Breach Fee
|
|
|
A-34
|
|
Investments
|
|
|
A-7
|
|
IRS
|
|
|
A-10
|
|
Knowledge
|
|
|
A-10
|
|
Laws
|
|
|
A-12
|
|
Licenses
|
|
|
A-12
|
|
Lien
|
|
|
A-6
|
|
Maryland Law Vote
|
|
|
A-7
|
|
Materials of Environmental Concern
|
|
|
A-13
|
|
Merger
|
|
|
A-1
|
|
Merger Consideration
|
|
|
A-2
|
|
Merger Sub
|
|
|
A-1
|
|
MGCL
|
|
|
A-1
|
|
MHRA
|
|
|
A-17
|
|
Multiemplover Plan
|
|
|
A-11
|
|
Neutralized Vote
|
|
|
A-7
|
|
Non-U.S.
Benefit Plans
|
|
|
A-10
|
|
Notice Period
|
|
|
A-23
|
|
OFAC
|
|
|
A-17
|
|
Order
|
|
|
A-30
|
|
Parent
|
|
|
A-1
|
|
A-42
|
|
|
|
|
Terms
|
|
Page
|
|
Parent Approvals
|
|
|
A-18
|
|
Parent Confidentiality Documents
|
|
|
A-20
|
|
Parent Disclosure Letter
|
|
|
A-17
|
|
Parent Fee
|
|
|
A-34
|
|
Paying Agent
|
|
|
A-2
|
|
Pension Plan
|
|
|
A-11
|
|
Per Share Merger Consideration
|
|
|
A-2
|
|
Person
|
|
|
A-3
|
|
Protected Disclosure
|
|
|
A-30
|
|
Proxy Statement
|
|
|
A-24
|
|
Release
|
|
|
A-13
|
|
Regulation S-K
|
|
|
A-8
|
|
Representatives
|
|
|
A-22
|
|
Required Consents
|
|
|
A-8
|
|
Restricted Stock
|
|
|
A-4
|
|
Rules
|
|
|
A-37
|
|
SDN List
|
|
|
A-17
|
|
SEC
|
|
|
A-8
|
|
Securities Act
|
|
|
A-8
|
|
Schedule 13E-3
|
|
|
A-7
|
|
Scheduled Intellectual Property
|
|
|
A-15
|
|
Share
|
|
|
A-2
|
|
Shares
|
|
|
A-2
|
|
Significant Subsidiary
|
|
|
A-5
|
|
Specified Indebtedness
|
|
|
A-8
|
|
Stock Plans
|
|
|
A-6
|
|
Stockholders Meeting
|
|
|
A-24
|
|
Subsidiary
|
|
|
A-5
|
|
Superior Proposal
|
|
|
A-24
|
|
Surviving Corporation
|
|
|
A-1
|
|
Takeover Statutes
|
|
|
A-13
|
|
Tax
|
|
|
A-14
|
|
Tax Return
|
|
|
A-14
|
|
Taxes
|
|
|
A-14
|
|
Termination Date
|
|
|
A-32
|
|
Termination Fee
|
|
|
A-34
|
|
Third Party Licenses
|
|
|
A-15
|
|
UK Employees
|
|
|
A-14
|
|
UK Pension Plan
|
|
|
A-12
|
|
U.S. Benefit Plans
|
|
|
A-11
|
|
Warrants
|
|
|
A-6
|
|
A-43
Appendix A-1
AMENDMENT
NO. 1 TO
AGREEMENT
AND PLAN OF MERGER
AMENDMENT No. 1, dated as of October 20, 2009 (this
Amendment
), to the Merger Agreement (as
defined below), by and among Life Sciences Research, Inc., a
Maryland corporation (the
Company
), Lion
Holdings, Inc., a Delaware corporation
(
Parent
), and Lion Merger Corp., a Maryland
corporation and a wholly owned subsidiary of Parent
(
Merger Sub
).
WHEREAS, the Company, Merger Sub and the Parent have entered
into the Agreement and Plan of Merger, dated as of July 8,
2009 (the
Merger Agreement
), whereby Merger
Sub shall be merged with and into the Company and the separate
corporate existence of Merger Sub shall cease, and the Company
shall continue as the surviving corporation of such merger.
WHEREAS, in accordance with
Section 9.2
of the
Merger Agreement, the Company, Merger Sub and the Parent desire
to amend certain sections of the Merger Agreement as set forth
herein.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein and in the Merger
Agreement, and intending to be legally bound, the Company,
Merger Sub and the Parent hereby agree as follows:
ARTICLE I
AMENDMENT
Section
1.01.
Amendment
.
The
final sentence of
Section 8.5(b)
of the Merger
Agreement is hereby deleted and replaced with the following
sentence:
For purposes of this Agreement, the term
Termination Fee
means $1,533,333.
ARTICLE II
MISCELLANEOUS
Section
2.01.
Capitalized
Terms
.
Capitalized terms used herein but not
defined herein have the meanings given to such terms in the
Merger Agreement.
Section
2.02.
Effect
of Amendment; No Other Amendments
.
This
Amendment shall form a part of the Merger Agreement for all
purposes, and each party hereto and thereto shall be bound
hereby. This Amendment is effective on the date hereof upon
execution of the parties hereto. From and after the execution of
this Amendment by the parties hereto, any reference to the
Merger Agreement shall be deemed a reference to the Merger
Agreement as amended hereby. Except as specifically amended
hereby, the Merger Agreement (and all of the other covenants,
agreements, representations, warranties, promises or other terms
and conditions therein) shall remain in full force and effect
without any change whatsoever. This Amendment is limited
precisely as written and shall not be deemed to be an amendment
to any other term or condition of the Merger Agreement or any of
the documents referred to therein. For the avoidance of doubt,
the phrases as of the date hereof, as of the
date of this Agreement or words of similar import as used
in the Merger Agreement (as amended pursuant to this Amendment)
shall mean as of July 8, 2009 (i.e., the date
the Merger Agreement was executed).
Section
2.03.
Governing
Law
.
THIS AMENDMENT SHALL BE DEEMED TO BE
MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND
GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF
MARYLAND WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF.
Section
2.04.
Counterparts
.
This
Amendment may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall
constitute one and the same agreement, and any one of which may
be delivered by facsimile or by electronic mail in
portable document format.
* * * * * * *
IN WITNESS WHEREOF, each of the parties has caused this
Amendment to be executed on its behalf by its respective officer
thereunto duly authorized, all as of the day and year first
above written.
LIFE SCIENCES RESEARCH, INC.
Name:
Title:
[Signature Page to Amendment No. 1 to Agreement and Plan
of Merger]
LION HOLDINGS, INC.
Name:
Title:
LION MERGER CORP.
Name:
Title:
[Signature Page to Amendment No. 1 to Agreement and Plan
of Merger]
Appendix
B
PLYMOUTH
PARTNERS LLC
July 7,
2009
The Special Committee of the Board of Directors
Life Sciences Research, Inc.
PO Box 2360
Mettlers Road
East Millstone, NJ 08875
Members of the Special Committee of the Board of Directors:
We understand that Life Sciences Research, Inc.
(LSR) proposes to enter into an Agreement and Plan
of Merger (the Agreement) among LSR, Lion Holdings,
Inc. (Lion) and Lion Merger Corp., a wholly owned
subsidiary of Lion (Merger Sub), pursuant to which,
among other things, Merger Sub will merge with and into LSR (the
Merger) and each outstanding share of the voting
common stock, par value $0.01 per share, of LSR (LSR
Common Stock), other than shares of LSR Common Stock that
are owned by Lion, Merger Sub, any of their respective
subsidiaries and by any subsidiary of LSR, will be converted
into the right to receive $8.50 in cash (the
Consideration). The terms and conditions of the
Merger are more fully set forth in the Agreement.
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of LSR Common Stock
(other than Lion, any Interested Parties and their respective
affiliates) of the Consideration to be received by such holders
in the Merger. For purposes of this opinion, the term
Interested Party shall mean (i) Andrew Baker,
(ii) any person or entity who beneficially owns any shares
of LSR Common Stock, if any, that has entered into an agreement,
arrangement or understanding with Lion or Merger Sub or any of
their respective affiliates to (x) provide financing for
the Merger or (y) vote or give any consents (or withhold
any such votes or consents) with respect to any shares of LSR
Common Stock in respect of the Merger or any similar transaction
and (iii) any officer, director, partner, member or
employee of Lion or Merger Sub.
In connection with this opinion, we
have
1
:
1. reviewed a draft, dated July 2, 2009, of the
Agreement (the Draft Agreement) and related
documents;
2. reviewed certain publicly available business and
financial information relating to LSR;
3. reviewed certain internal financial and operating
information with respect to the business, operations and
prospects of LSR furnished to or discussed with us by the
management of LSR, including certain financial forecasts
relating to LSR prepared by the management of LSR (such
forecasts, LSR Forecasts);
4. discussed the past and current business, operations,
financial condition and prospects of LSR with members of senior
management of LSR;
5. reviewed the trading history for LSR Common Stock and a
comparison of that trading history with the trading histories of
other companies that we deemed relevant;
6. compared certain financial and stock market information
of LSR with similar information of other companies that we
deemed relevant;
7. compared certain financial terms of the Merger to
financial terms, to the extent publicly available, of other
transactions that we deemed relevant;
1
Reference
in this opinion to we, us or
our includes Plymouth Partners LLC
(Plymouth) and employees or representatives of
Plymouth and/or its affiliates.
B-1
8. considered the results of our efforts to solicit, at
your direction, indications of interest from third parties with
respect to a possible transaction with LSR; and
9. performed such other analyses and studies and considered
such other information and factors as we deemed appropriate.
We have assumed, based on our discussions with LSRs
management and with your consent, the following facts relating
to LSR as of the date hereof:
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Since December 1999, LSR has been, and employees, directors,
stockholders, customers, suppliers and advisors of LSR and
financial firms directly or indirectly associated with LSR, in
each case on account of such relationship with LSR, have been,
the target of actions by animal rights activists, such actions
including physical violence, harassment, vandalism, bomb and
death threats, protests and demonstrations. No other publicly
traded company in the contract research organization
(CRO) industry has been affected by the actions of
animal rights activists to a similar extent.
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On account of pressure by animal rights activists, LSR has
historically had limited access to debt financing and other
banking services, has no bank lenders and has existing financing
that is more expensive than financing currently available to
other publicly traded companies of similar size and leverage,
including those in the CRO industry. LSR may have difficulty
refinancing its existing debt, either upon the maturity thereof
or a default thereunder, or obtaining other sources of debt
financing, in each case, that may be necessary to
fund LSRs ongoing, independent operations. Absent an
agreement with its lenders, LSR would fail to meet one or more
covenants related to its existing debt during 2009. In addition,
the liquidity, market price and trading multiples of LSR Common
Stock are adversely affected by the limited and more expensive
financing available, currently and prospectively, to LSR, as
compared to other publicly traded companies in the CRO industry.
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Animal rights activists have harassed and caused the fear of
harassment to individuals and entities in the financial
community associated with the trading of LSR Common Stock,
including stockholders of LSR, the New York Stock Exchange,
market makers, stockbrokers, research analysts, auditors, and
trading platforms. As a result, and based on certain other
factors (including, but not limited to, LSRs negative
stockholders equity, small market capitalization, low
liquidity and limited investor interest), LSR believes there is
a reasonable possibility of a delisting of LSR Common Stock from
NYSE Arca, Inc., the exchange on which LSR Common Stock is
publicly traded. In addition, the liquidity, market price and
trading multiples of LSR Common Stock are adversely affected by
such actions and circumstances, as compared to other publicly
traded companies in the CRO industry.
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Animal rights activists have harassed and caused the fear of
harassment to other third parties that do business with LSR,
including customers, suppliers and advisors, and the liquidity,
market price and trading multiples of LSR Common Stock are
adversely affected by such actions, as compared to other
publicly traded companies in the CRO industry.
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Trading multiples of LSR Common Stock have historically
reflected a significant discount to the trading multiples of
other publicly traded companies in the CRO industry that we
deemed relevant, and the intrinsic value of LSR reflects a
similar discount.
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At your direction, we have taken into account, among other
things, the foregoing facts and assumptions (together with the
other facts and assumptions set forth in this opinion) when
determining the meaning of fairness for purposes of
this opinion.
In arriving at our opinion, we have assumed and relied upon,
without independent verification, the accuracy and completeness
of the financial and other information and data publicly
available or provided to or otherwise reviewed by or discussed
with us and have relied upon the assurances of the management of
LSR that it is not aware of any facts or circumstances that
would make such information or data inaccurate or misleading in
any material respect. With respect to the LSR Forecasts, we have
been advised by LSR, and have assumed, that such forecasts have
been reasonably prepared on bases reflecting the best currently
available estimates and good faith judgments of the management
of LSR as to the future financial performance
B-2
of LSR. We have not made or been provided with any independent
evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of LSR, nor have we made any physical inspection
of the properties or assets of LSR. We have not evaluated the
solvency of LSR or Lion under any state, federal or other laws
relating to bankruptcy, insolvency or similar matters. We have
assumed, at your direction, that the Merger will be consummated
in accordance with its terms, without waiver, modification or
amendment of any material term, condition or agreement and that,
in the course of obtaining the necessary governmental,
regulatory and other approvals, consents, releases and waivers
for the Merger, no delay, limitation, restriction or condition
will be imposed that would have an adverse effect on LSR or the
contemplated benefits of the Merger. We also have assumed, at
your direction, that that the final executed Agreement will not
differ in any material respect from the Draft Agreement reviewed
by us.
We express no view or opinion as to any terms or other aspects
of the Merger (other than the Consideration to the extent
expressly specified herein), including, without limitation, the
form or structure of the Merger. Our opinion is limited to the
fairness, from a financial point of view, of the Consideration
to be paid to the holders of LSR Common Stock (other than Lion,
any Interested Parties and their respective affiliates) and no
opinion or view is expressed with respect to any consideration
received in connection with the Merger by the holders of any
other class of securities, creditors or other constituencies of
LSR. In addition, no opinion or view is expressed with respect
to the fairness of the amount, nature or any other aspect of any
compensation to any of the officers, directors or employees of
any party to the Merger, or class of such persons, relative to
the Consideration. Furthermore, no opinion or view is expressed
as to the relative merits of the Merger in comparison to other
strategies or transactions that might be available to LSR or in
which LSR might engage or as to the underlying business decision
of LSR to proceed with or effect the Merger. In addition, we
express no opinion or recommendation as to how any stockholder
should vote or act in connection with the Merger.
We have provided financial advisory services to the Special
Committee of the Board of Directors of LSR in connection with
the Merger and we will receive a fee for such services, a
portion of which fee is payable in connection with the execution
of the Agreement and a significant portion of which is
contingent upon consummation of the Merger. In addition, LSR has
agreed to reimburse our expenses and indemnify us against
certain liabilities arising out of our engagement.
During the two years preceding the date of this opinion, neither
we nor our affiliates have been engaged by, performed any
services for or received any compensation from LSR, Lion, Merger
Sub or any of their respective affiliates (other than in
connection with the Merger).
It is understood that this letter is for the sole benefit and
use of the Special Committee of the Board of Directors of LSR in
connection with and for purposes of its evaluation of the Merger
and may not be used for any other purpose without our prior
written consent, except that this opinion may, if required by
law, be included in its entirety in any proxy or other
information statement or registration statement to be mailed to
the stockholders of LSR in connection with the Merger. Our
opinion is necessarily based on financial, economic, monetary,
market and other conditions and circumstances as in effect on,
and the information made available to us as of, the date hereof,
including the unique factors relating to LSR described in this
opinion. It should be understood that subsequent developments
may affect this opinion, and we do not have any obligation to
update, revise, or reaffirm this opinion. The issuance of this
opinion was approved by an authorized opinion committee.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, we are of the
opinion on the date hereof that the Consideration to be received
in the Merger by holders of LSR Common Stock (other than Lion,
any Interested Parties and their respective affiliates) is fair,
from a financial point of view, to such holders.
Very truly yours,
/s/ Plymouth Partners LLC
PLYMOUTH PARTNERS LLC
B-3
WE ENCOURAGE YOU TO TAKE
ADVANTAGE OF INTERNET OR
TELEPHONE
VOTING. BOTH ARE AVAILABLE 24
HOURS A DAY, 7 DAYS A WEEK.
VOTE BY INTERNET -
www.proxyvote.com
LIFE SCIENCES RESEARCH, INC. Use the Internet to transmit your voting instructions and for
electronic delivery of P.O. BOX 2360 METTLERS ROAD information up until 11:59 P.M. Eastern
Time the day before the meeting date.
Have your proxy card in hand when you access the web site and follow the EAST
MILLSTONE, NJ 08875 instructions to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to
transmit your voting
instructions up until 11:59
P.M. Eastern Time the day
before the meeting date. Have
your proxy card in hand when
you call and then follow the
instructions.
VOTE BY MAIL
Mark, sign and date your proxy
card and return it in the
postage-paid envelope we have
provided or return it to Life
Sciences Research, c/o
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Broadridge, 51 Mercedes Way,
Edgewood, NY 11717.
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If you vote by
Internet or
telephone, please
DO NOT mail your
proxy card.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M17559-S50520 KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
LIFE SCIENCES RESEARCH, INC.
Vote on Proposal
For Against Abstain
The Board of Directors recommends you vote FOR the following proposal:
1. Proposal to approve the merger of Lion Merger Corp. with and into Life Sciences
Research, Inc. pursuant to the Agreement and 0 0 0 Plan of Merger, dated as of July 8,
2009, by and among Life Sciences Research, Inc., Lion Holdings, Inc., and Lion Merger
Corp., as amended.
IMPORTANT: Please sign exactly as your name or names appear(s) on this Proxy. When shares are
held jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a corporation, please sign
full corporate name by duly authorized officer, giving full title as such. If the signer is a
partnership, please sign in partnership name by authorized person.
For address changes and/or comments, please check this box
and 0 write them on the back where indicated.
Please indicate if you plan to attend this meeting. 0 0
Yes No
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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M17560-S50520
PROXY
LIFE SCIENCES RESEARCH, INC.
SPECIAL MEETING OF STOCKHOLDERS NOVEMBER 23, 2009 THIS PROXY IS
SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Mark Bibi and Richard Michaelson, and each of them, as proxies of
the undersigned, each with full power of substitution, to vote all of the shares of voting common
stock of Life Sciences Research, Inc. (LSR) held of record by the undersigned as of October I,
2009 at the Special Meeting of Stockholders of LSR to be held at 53 Street Urbanizacion Obarrio,
Panama, Republic of Panama on November 23, 2009, commencing at 9:00 A.M., local time, and at any
adjournment or postponement of the Special Meeting, with all powers that the undersigned would
possess if personally present, upon and in respect of the following matter and in accordance with
the following instructions, and in the discretion of said proxies with respect to any procedural
matters that may properly come before the Special Meeting and any adjournments or postponements
thereof.
IF YOU SIGN YOUR PROXY CARD WITHOUT INDICATING YOUR VOTE, YOUR SHARES WILL BE VOTED FOR THE
APPROVAL OF THE MERGER. HOWEVER, IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED
IN ACCORDANCE WITH THOSE INSTRUCTIONS.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE SPECIAL MEETING.
Important Notice for Participants in the Huntingdon Life Sciences, Inc. Savings and Investment Plan
(the Plan): This proxy also constitutes your voting instructions for shares held in the Plan. The
undersigned hereby authorizes the trustee of the Plan to vote the shares of LSR voting common stock
allocated to his or her account. The trustee will vote shares allocated to a participants account
for which it receives no instructions and any unallocated shares in the same proportion that the
trustee votes shares for which it receives instructions. Plan participants must vote by Internet or
telephone or complete, date, sign and return this proxy card by 11:59 P.M., on November 18, 2009,
for shares of LSR voting common stock represented by this Proxy to be voted as directed.
Participants in the Plan may attend the special meeting but may NOT vote their shares of common
stock at the meeting. Information relating to the voting of the shares is maintained in accordance
with procedures that are designed to safeguard the confidentiality of such information, except to
the extent required to satisfy any legal requirement.
Address Changes/Comments:
(If you noted any Address Changes/Comments above, please mark
corresponding box on the reverse side.)
(Continued and to be marked, dated and signed, on the other side)
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