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Exhibit 10.24
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement") is entered into as of
June 8, 1998, by and between, PMR CORPORATION, a Delaware corporation ("PMR"),
and XXXXXXXXXXX DRUG DISTRIBUTION COMPANY, INC., a Delaware corporation
("Xxxxxxxxxxx").
WHEREAS, PMR and Xxxxxxxxxxx propose to enter into an Operating
Agreement in connection with the issuance and acquisition of a membership
interest in Stadt Solutions, LLC (the "Company"), substantially in the form
attached hereto as Exhibit A (the "Operating Agreement");
WHEREAS, in connection with the formation of the Company, the parties
hereto propose to enter into a Transition and Services Agreement with the
Company in substantially the form attached hereto as Exhibit B (the "Transition
and Services Agreement"); and
WHEREAS, in order to induce each other to enter into the Operating
Agreement and the Transition and Services Agreement (collectively, the "Related
Agreements"), the parties desire to make certain representations, warranties and
covenants as set forth in this Agreement.
NOW, THEREFORE, in consideration of mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS; ORGANIZATION; CLOSING DATE
1.1 DEFINITIONS. Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Operating Agreement.
1.2 CLOSINGS. At the First Closing (the "First Closing") and subject to the
terms and conditions of this Agreement, the Company, PMR and each of Xxxxxxxxxxx
shall perform the covenants set forth in Section 4.1(a). At the Second Closing,
(the "Second Closing") each of PMR and Xxxxxxxxxxx shall perform the covenants
set forth in Section 4.1(b). Notwithstanding anything to the contrary herein, if
any party determines that it is necessary to postpone the First Closing for
purposes of complying with applicable regulatory clearance or waiting period(s),
then the First Closing shall be combined with the Second Closing, subject to the
applicable closing conditions herein.
1.3 CLOSING DATES. Subject to Section 1.2, the First Closing shall take
place at the offices of Xxxxxx Godward LLP, whose address is 0000 Xxxxxxxxx
Xxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000. The Closing shall be held at
1:00 p.m., local time, on July 1, 1998, or at such other time and place upon
which PMR and Xxxxxxxxxxx shall agree (the date of the First Closing is
hereinafter referred to as the "First Closing Date").
(a) Consummation of the Second Closing will take place at the
offices of Xxxxxx Godward LLP, 0000 Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxx,
Xxxxxxxxxx 00000, at such
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time and date which is as soon as practicable after the satisfaction of the
conditions set forth in Section 5.2 and Section 6.2 (the "Second Closing Date").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PMR
PMR makes the following representations and warranties, each of which
is true and correct on the date hereof, shall remain true and correct to and
including each Closing Date, and shall survive each Closing as provided herein:
2.1 ORGANIZATION AND STANDING; CERTIFICATE OF INCORPORATION AND BYLAWS. PMR
is a corporation duly organized and validly existing under, and by virtue of,
the laws of the State of Delaware and is in good standing under such laws. PMR
has all requisite corporate power and authority to own, lease and operate its
properties and assets, and to carry on its business as presently conducted. PMR
has furnished Xxxxxxxxxxx with copies of its Certificate of Incorporation and
Bylaws, each as amended. Said copies are true, correct and complete and shall
contain all amendments through the Closing Date.
2.2 CORPORATE POWER. PMR has and will have at the First Closing Date all
requisite legal and corporate power and authority to execute and deliver this
Agreement and the Related Agreements, and to carry out and perform its
obligations under the terms of this Agreement and the Related Agreements.
2.3 AUTHORIZATION. All corporate action on the part of PMR, its directors
and stockholders necessary for the authorization, execution, delivery and
performance of this Agreement and the Related Agreements by PMR, and the
performance of all of PMR's obligations hereunder and thereunder has been taken
or will be taken prior to the First Closing. This Agreement and the Related
Agreements, when executed and delivered by PMR, shall constitute valid and
binding obligations of PMR, enforceable in accordance with their terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
2.4 FINANCIAL. The audited consolidated balance sheet and consolidated
statements of stockholders' equity of PMR as of April 30, 1997 and the audited
consolidated statements of operations and statements of cash flows of PMR for
the fiscal year ended April 30, 1997, each certified by Ernst & Young LLP,
independent certified accountants, whose report thereon is included therein, and
the unaudited condensed consolidated balance sheet of PMR as of January 31, 1998
and the unaudited condensed consolidated statements of income and cash flows of
PMR for the fiscal quarter ended January 31, 1998 (as filed with the SEC)
present fairly the financial position of PMR as of the date of said balance
sheets and the results of operations of PMR for the periods covered by said
statements of operations, in accordance with generally accepted accounting
principles consistently applied, except as otherwise disclosed therein and
except, in the case of unaudited statements, for normally recurring year-end
adjustments.
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2.5 BUSINESS. PMR is in the business of developing and managing programs
and services for individuals with serious mental illnesses in the United States,
and as of the date hereof, operates programs in 13 states.
2.6 TRANSFERRED BUSINESS. Subject to the consent of third parties as
applicable, PMR has and shall have at the Second Closing, the right to assign
and transfer all of its rights in and to its clinical information initiative to
the Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF XXXXXXXXXXX
Xxxxxxxxxxx makes the following representations and warranties, each of
which is true and correct on the date hereof, shall remain true and correct to
and including each Closing Date, and shall survive the Closing as provided
herein:
3.1 ORGANIZATION AND STANDING; CERTIFICATE OF INCORPORATION AND BYLAWS.
Xxxxxxxxxxx is a corporation duly organized and validly existing under, and by
virtue of, the laws of the State of Delaware and is in good standing under such
laws. Xxxxxxxxxxx has all requisite corporate power and authority to own, lease
and operate its properties and assets, and to carry on its business as presently
conducted. Xxxxxxxxxxx has furnished PMR with copies of its Certificate of
Incorporation and Bylaws, each as amended. Said copies are true, correct and
complete and shall contain all amendments through the Closing Date.
3.2 CORPORATE POWER. Xxxxxxxxxxx has and will have at the First Closing
Date all requisite legal and corporate power and authority to execute and
deliver this Agreement and the Related Agreements, and to carry out and perform
its obligations under the terms of this Agreement and the Related Agreements.
3.3 AUTHORIZATION. All corporate action on the part of Xxxxxxxxxxx, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement and the Related Agreements by Xxxxxxxxxxx, and
the performance of all of Xxxxxxxxxxx'x obligations hereunder and thereunder has
been taken or will be taken prior to the First Closing. This Agreement and the
Related Agreements, when executed and delivered by Xxxxxxxxxxx, shall constitute
valid and binding obligations of Xxxxxxxxxxx, enforceable in accordance with
their terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
3.4 TRANSFERRED BUSINESS. Subject to any applicable regulatory approvals
and individual patient consents, Xxxxxxxxxxx has and shall have at the Second
Closing, the right to assign all of its rights in and to its mental health
business (as described in Section 4.1(b) below), which consists of the provision
of Clozaril and related products to a number of patients that is approximately
6,000.
3.5 CLOZARIL BASE OVERHEAD CALCULATION. The calculation of the Clozaril
Base Overhead set forth on Schedule B to the Operating Agreement is in all
material respects an accurate representation of the current operating and
overhead expenses for providing the
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pharmaceutical fulfillment and case management services to the customers of the
business to be transferred as identified in Section 3.4 above and Section 4.1(b)
below. Xxxxxxxxxxx is not currently aware of any factors that will likely result
in a material increase in the Clozaril Base Overhead assuming the current volume
of its Clozaril business.
ARTICLE 4
COVENANTS
4.1 CLOSING; DELIVERY.
(a) At the First Closing, each of PMR and Xxxxxxxxxxx shall
execute and deliver the Operating Agreement and the Transition and Services
Agreement, and each shall deliver its Initial Capital Contribution to the
Company under the Operating Agreement.
(b) At the Second Closing, each of PMR and Xxxxxxxxxxx shall
deliver its Second Capital Contribution to the Company under the Operating
Agreement. In addition, Company shall have the right to all of the information
for Xxxxxxxxxxx'x mental health business (which serves patients with a primary
designation of "diagnosed with a mental illness," but does not include
Xxxxxxxxxxx'x correctional pharmacy division) on Xxxxxxxxxxx'x information
system and databases. Following the Second Closing, the parties will act in good
faith to effect the transfer of information to Company and facilitate the use
thereof.
4.2 NONCOMPETITION. PMR and Xxxxxxxxxxx each acknowledge and agree that
upon the formation of the Company, they shall be subject to the noncompetition
provisions as set forth in Article 12 of the Operating Agreement.
4.3 ANNOUNCEMENTS. Announcements concerning the transactions provided for
in this Agreement and the Related Agreements by either PMR or Xxxxxxxxxxx shall
be subject to the approval of the other in all essential respects, except that
approval shall not be required as to any statements and other information which
may be submitted to the Securities and Exchange Commission or required to be
made pursuant to any rule or regulation of the Securities and Exchange
Commission or any other securities regulatory board, or otherwise required by
law.
4.4 THIRD PARTY CONSENTS. Each party shall use its best efforts to obtain
all applicable third party consents (including regulatory consents or waivers,
as applicable) necessary to consummate the Second Closing.
ARTICLE 5
CONDITIONS TO CLOSING OF PMR
5.1 CONDITIONS TO FIRST CLOSING. The obligation of PMR to enter into the
Related Agreements at the First Closing is, at the option of PMR, subject to the
fulfillment of the following conditions:
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(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by Xxxxxxxxxxx in Article 3 hereof shall be true and correct
when made, and shall be true and correct as of the Closing in all material
respects.
(b) COVENANTS. The Company and Xxxxxxxxxxx shall have performed or
complied with in all material respects with all covenants, agreements and
conditions of this Agreement to be performed by them under this Agreement on or
prior to the Closing.
5.2 CONDITIONS TO SECOND CLOSING. The obligation of PMR to make its Second
Contribution under the Operating Agreement is, at the option of PMR, subject to
fulfillment of the following conditions:
(a) The parties shall have received all such governmental or other
third party approvals, consents, authorizations as may be required to
permit the Second Contribution of both PMR and Xxxxxxxxxxx.
(b) If the parties are required to file notifications of the
transaction under the HSR Act, the waiting period required pursuant to the HSR
Act and the regulations promulgated thereunder shall have expired or any
approvals required in connection with the HSR Act and the regulations
promulgated thereunder shall have been obtained.
(c) There shall have been no material change in Xxxxxxxxxxx'x mental
health business described in Section 3.4 above.
ARTICLE 6
CONDITIONS TO CLOSING OF XXXXXXXXXXX
6.1 CONDITIONS TO FIRST CLOSING. The obligation of Xxxxxxxxxxx to enter
into the Related Agreements at the First Closing is, at the option of
Xxxxxxxxxxx, subject to the fulfillment of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by PMR in Article 2 hereof shall be true and correct when made,
and shall be true and correct as of the Closing in all material respects.
(b) COVENANTS. The Company and PMR shall have performed or complied
with in all material respects all covenants, agreements and conditions of this
Agreement to be performed by them under this Agreement on or prior to the
Closing.
6.2 CONDITIONS TO SECOND CLOSING. The obligation of Xxxxxxxxxxx to make its
Second Contribution under the Operating Agreement is, at the option of
Xxxxxxxxxxx, subject to fulfillment of the following conditions:
(a) The parties shall have received all such governmental or other
third party approvals, consents, authorizations as may be required to permit the
Second Capital Contribution of both Xxxxxxxxxxx and PMR.
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(b) If the parties are required to file notifications of the
transaction under the HSR Act, the waiting period required pursuant to the HSR
Act and the regulations promulgated thereunder shall have expired or any
approvals required in connection with the HSR Act and the regulations
promulgated thereunder shall have been obtained.
(c) There shall have been no material change in PMR's clinical
information initiative described in Section 2.6.
ARTICLE 7
INVESTMENT REPRESENTATIONS
7.1 REPRESENTATIONS. Each of PMR and Xxxxxxxxxxx hereby makes the following
certifications and representations with respect to the acquisition of its
interests in the Company:
(a) It understands that the interests it is acquiring in the Company
(the "Interests") have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), on the basis that no distribution or public
offering of the Interests is to be effected. It understands that its Interest is
deemed to constitute "restricted securities" under Rule 144 promulgated under
the Securities Act.
(b) It is acquiring its Interest solely for its account for investment
and it has no intention of distributing or selling the Interest or any part
thereof except as may be permitted under the Securities Act and any applicable
state securities laws. Each party also represents that the entire legal and
beneficial interests of the Interest it is acquiring is being acquired for, and
will be held for its account only.
(c) It recognizes that each Interest being acquired by it must be held
indefinitely unless the Interest is subsequently registered under the Securities
Act or an exemption from such registration is available. It recognizes that the
Company has no obligation to register the Interests or to comply with any
exemption from such registration.
(d) It has either (i) a preexisting personal or business relationship
with the Company or any of its members, officers, directors, managers, or
controlling persons, or (ii) the capacity to protect its own interests in
connection with the purchase of the Interests by virtue of its professional
business or financial experience (or the business or financial experience of its
professional advisers who are unaffiliated with and who are not compensated by
the Company or any affiliate or selling agent of the Company, directly or
indirectly).
(e) It is aware that an Interest may not be sold pursuant to Rule 144
adopted under the Securities Act ("Rule 144") unless certain conditions are met
and until it has held the Interest for at least one year. Among the conditions
for use of Rule 144 is the availability of current information to the public
about the issuer of the Interest. It understands that there is no such
information available and that the Company has no plans to make such information
available.
(f) It further agrees not to make any disposition of all or any part
of any Interests being acquired in any event unless and until: (i) the Interest
is transferred pursuant to
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Rule 144, and the Company shall have received from it documentation
acceptable to the Company that a sale of the Interest has occurred in accordance
with all of the provisions of Rule 144, as in effect from time to time; or (ii)
there is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or (iii) (A) it shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
(B) it shall have complied with all applicable provisions of the Operating
Agreement, (C) it shall have furnished the Company with an opinion of counsel
for the party to the effect that such disposition will not require registration
of such Interest under the Securities Act, and (D) such opinion of counsel for
the party shall have been concurred in by the Company's counsel and the Company
shall have advised the party of such concurrence.
(g) It understands and agrees that all certificates evidencing the
Interest to be issued to it may bear (and if no certificate evidencing the
Interest is issued by the Company, an initial transaction statement, if
required, shall include) a legend substantially in the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
7.2 NO TRANSFER. The Company shall not be required (i) to transfer on its
books any Interest which shall have been sold or transferred in violation of any
of the provisions set forth in this Agreement or the Operating Agreement or (ii)
to treat as owner of such Interest or to accord the right to vote as such owner
or to make any distributions to any transferee to whom such Interest shall have
been so transferred.
ARTICLE 8
MISCELLANEOUS
8.1 GOVERNING LAW. This Agreement shall be governed in all respects by the
internal laws of the State of California.
8.2 ARBITRATION. The parties agree that they shall submit any disputes
arising under this Agreement to binding arbitration pursuant to Section 14.1 of
the Operation Agreement, which section is incorporated herein by reference.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of PMR or Xxxxxxxxxxx to purchase its
interests of the Company shall not be assignable without the consent of the
other parties hereto.
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8.4 THIRD PARTY BENEFICIARY. The Company shall be a third party beneficiary
with respect to the representations and warranties of PMR and Xxxxxxxxxxx
hereunder.
8.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the Related Agreements,
and other documents delivered pursuant hereto and thereto at each Closing
constitute the full and entire understanding and agreement among the parties
with regard to the subjects hereof and thereof, and no party shall be liable or
bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth herein or therein. Except as
expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.
8.6 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing (including telecopy or similar
electronic transmission) and shall be sent by telecopy or other electronic
facsimile transmission or by registered or certified mail, postage prepaid, or
otherwise delivered by hand or by messenger, addressed:
(a) if to PMR, to:
PMR Corporation
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxx, XX 00000
Attn: President
Tel: (000) 000-0000
Fax: (000) 000-0000
or to such other address as PMR shall have furnished to the Company and
Xxxxxxxxxxx in writing;
(b) if to Xxxxxxxxxxx, to:
Xxxxxxxxxxx Drug Distribution Company, Inc.
000 Xxxx Xxxxxx Xxxxxxxxx
Xxxxxxxxxx, XX 00000
Attn: President
Tel: (000) 000-0000
Fax: (000) 000-0000
or to such other address as Xxxxxxxxxxx shall have furnished to PMR and the
Company in writing.
Each such notice or other communication shall for all purposes of this Agreement
be treated as effective or having been given when received if delivered
personally or by facsimile, or, if sent by mail, at the earlier of its receipt
or 72 hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.
8.7 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing hereunder upon any
breach of any party under this Agreement, shall impair any such right, power or
remedy nor shall it be construed to be a
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waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring, nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any party hereto of any breach or default
under this Agreement, or any waiver on the part of any party hereto of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party hereto, shall be cumulative and not alternative.
8.8 EXPENSES. Each party bears its own expenses incurred by it with respect
to this Agreement and the transactions contemplated hereby.
8.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.10 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision, provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
8.11 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the date first above written.
PMR:
PMR CORPORATION
a Delaware corporation
By: /s/ Xxxx Xxxxx
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Title: Chief Financial Officer
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XXXXXXXXXXX:
XXXXXXXXXXX DRUG DISTRIBUTION COMPANY INC.
a Delaware corporation
By: /s/ Xxxxxx Xxxxxx
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Title: President and Chief Executive Officer
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[EXHIBITS EXCLUDED]
