EXHIBIT 4(a)
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STOCK PURCHASE AGREEMENT
dated as of
July 15, 1996
--
by and between
CLINICOR, INC.
and
ORACLE PARTNERS, L.P.
and the
ADDITIONAL PURCHASERS SET FORTH
ON EXHIBIT "A" HERETO
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TABLE OF CONTENTS
Page No.
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ARTICLE I - PURCHASE AND SALE OF SHARES............................... 1
1.1 Purchase and Sale......................................... 1
ARTICLE II - PURCHASE PRICE AND CLOSING................................ 1
2.1 Purchase Price............................................ 1
2.2 The Closing............................................... 1
2.3 Deliveries................................................ 2
2.4 Legends and Transfer Restrictions......................... 2
2.5 Registration Rights....................................... 3
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER.................. 12
3.1 Corporate Existence and Power............................. 12
3.2 Corporate Authorization................................... 12
3.3 Governmental Authorization................................ 13
3.4 Non-Contravention......................................... 13
3.5 Financial Statements...................................... 13
3.6 Compliance with Law....................................... 14
3.7 No Defaults............................................... 14
3.8 Litigation................................................ 14
3.9 Absence of Certain Changes................................ 14
3.10 No Undisclosed Liabilities................................ 15
3.11 Receivables............................................... 16
3.12 Backlog................................................... 16
3.13 Taxes..................................................... 16
3.14 Interests of Officers, Directors and Other Affiliates..... 16
3.15 Intellectual Property..................................... 17
3.16 Restrictions on Business Activities....................... 17
3.17 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment.................................... 17
3.18 Vendors and Customers..................................... 18
3.19 Preemptive Rights......................................... 18
3.20 Insurance................................................. 18
3.21 Subsidiaries.............................................. 18
3.22 Capitalization............................................ 18
3.23 Rights, Warrants, Options................................. 19
3.24 Real Property............................................. 19
3.25 Labor Relations........................................... 20
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Page No.
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3.26 Employees, Employment Agreements and Employee
Benefit Plans....................................... 20
3.27 Absence of Certain Business Practices.................. 21
3.28 Services............................................... 21
3.29 Environmental Matters.................................. 22
3.30 Licenses; Compliance With Regulatory Requirements...... 22
3.31 Brokers................................................ 23
3.32 Arm's Length Transactions.............................. 23
3.33 Disclosure............................................. 23
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........ 23
4.1 Existence and Power.................................... 23
4.2 Authorization.......................................... 23
4.3 Governmental Authorization............................. 24
4.4 Non-Contravention...................................... 24
4.5 Litigation............................................. 24
4.6 Investment............................................. 24
ARTICLE V - COVENANTS OF THE SELLER................................ 24
5.1 Actions Requiring Purchaser's Consent.................. 24
5.2 Additional Covenants................................... 25
5.3 Reporting Obligations.................................. 26
5.4 Confidentiality........................................ 27
5.5 Public Announcements................................... 28
5.6 Exclusivity............................................ 28
5.7 Board Representation; Advisory Fees.................... 28
5.8 Registration Statement Under Exchange ................. 29
ARTICLE VI - CONDITIONS TO THE CLOSING.............................. 29
6.1 Conditions to Obligations of Purchasers................ 29
6.2 Conditions to Obligations of the Seller................ 31
ARTICLE VII - INDEMNIFICATION........................................ 31
7.1 Survival of Representations and Warranties: Indemnity.. 31
ARTICLE VIII - MISCELLANEOUS.......................................... 33
8.1 Further Assurances..................................... 33
8.2 Fees and Expenses...................................... 33
8.3 Notices................................................ 33
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Page No.
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8.4 Governing Law and Jurisdiction......................... 34
8.5 Binding upon Successors and Assigns.................... 35
8.6 Severability........................................... 35
8.7 Entire Agreement....................................... 35
8.8 Other Remedies......................................... 35
8.9 Amendment and Waivers.................................. 35
8.10 No Waiver.............................................. 35
8.11 Construction of Agreement; Knowledge................... 36
8.12 Counterparts........................................... 36
8.13 No Third Party Beneficiary............................. 36
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INDEX OF EXHIBITS AND SCHEDULES
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EXHIBITS
Exhibit "A" List of Purchasers and Amounts thereof
Exhibit "B-1" Certificate of Amendment to Articles of Incorporation
Exhibit "B-2" Amended Bylaws
SCHEDULES
Schedule 3.5 Liabilities Incurred Outside the Ordinary Course of
Business
Schedule 3.6 Judgments
Schedule 3.7 Defaults
Schedule 3.8 Litigation
Schedule 3.9 Absence of Certain Changes
Schedule 3.14 Related Interests
Schedule 3.15 Intellectual Property
Schedule 3.17 Title to Properties
Schedule 3.19 Preemptive Rights
Schedule 3.21 Subsidiaries
Schedule 3.23 Rights, Warrants, Options
Schedule 3.24A Addresses of Real Property Owned
Schedule 3.24B Addresses of Real Property Leased
Schedule 3.26A Employment Agreements
Schedule 3.26B Employee Benefit Plans
Schedule 3.32 Related Party Transactions
Schedule 3.33 Disclosure
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is dated as of July 15,
--
1996, by and between CLINICOR, INC., a Nevada corporation ("Seller"), and ORACLE
PARTNERS, L.P., a Delaware limited partnership ("Oracle"), and certain other
investors whose names are set forth on Exhibit "A" hereto (Oracle and the
investors set forth on Exhibit "A" hereto are collectively referred to herein as
the "Purchasers").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, each of the Purchasers, severally and not jointly, desires to
purchase from the Seller, and the Seller desires to sell to each of the
Purchasers, the number of shares of the Seller's Preferred Stock (as hereinafter
defined) as set forth on Exhibit "A" hereto.
NOW, THEREFORE, in consideration of the mutual promises and
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
SECTION 1.1 PURCHASE AND SALE. On the terms and subject to the
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conditions set forth in this Agreement, at the Closing (as defined in Section
2.2), the Seller will sell and each of the Purchasers, severally and not
jointly, will purchase the number of shares of the Seller's Convertible
Preferred Stock, without par value (the "Preferred Stock"), as is set forth
opposite such Purchaser's name on Exhibit "A" attached hereto. The terms and
provisions of the Preferred Stock are set forth in the Certificate of Amendment
to the Articles of Incorporation of the Seller, a true and correct copy of
which is attached hereto as Exhibit "B" (as so amended, the "Articles of
Incorporation"). The shares of Preferred Stock purchased or otherwise acquired
pursuant to this Agreement and the transactions contemplated hereby are referred
to herein as the "Shares."
ARTICLE II
PURCHASE PRICE AND CLOSING
SECTION 2.1 PURCHASE PRICE. The purchase price (the "Purchase Price")
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to be paid by the Purchasers to the Seller to acquire the Shares shall be $1,000
per Share, for an aggregate Purchase Price of $3,500,000.
SECTION 2.2 THE CLOSING. The closing of the transactions contemplated
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under this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇
▇▇▇▇▇▇▇, P.C., 1350 Avenue of the Americas, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at
10:00 a.m., New York time, on
July 15, 1996 or at such other place, time or date as may be mutually agreed
--
upon in writing by the parties hereto (the "Closing Date").
SECTION 2.3 DELIVERIES.
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(A) DELIVERIES BY SELLER. At the Closing, the Seller will deliver or cause
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to be delivered to each Purchaser the following:
1. A stock certificate representing the Shares purchased by such
Purchasers, with all necessary stock issuance or transfer stamps
affixed thereto, duly completed and registered in the name of
each Purchaser (as set forth on Exhibit "A" hereto) on the stock
transfer book of the Seller.
2. A legal opinion of Graves, Dougherty, ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to
the Seller, in form and substance satisfactory to the Purchasers.
3. The Certificates and documents contemplated by Section 6.1(b);
4. A wire transfer (not to exceed $30,000) representing the
Purchasers' legal fees.
5. Such other documents as the Purchasers shall reasonably request.
(B) DELIVERIES BY PURCHASER. At the Closing, each Purchaser,
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severally and not jointly, will deliver or cause to be delivered to the Seller
the following:
1. Payment of the Purchase Price in cash by either wire transfer of
immediately available funds or certified or cashier's check or in
accordance with the Seller's instructions (which instructions
shall be given to the Purchasers in writing no later than 3
business days prior to the Closing Date).
2. Such other documents as the Seller shall reasonably request.
SECTION 2.4 LEGENDS AND TRANSFER RESTRICTIONS. The Shares to be
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delivered by Seller at the Closing shall be subject to certain restrictions on
transfer and each certificate representing the Shares shall contain the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, ASSIGNED OR
TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH
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REGISTRATION IS NOT, IN THE CIRCUMSTANCES, REQUIRED, OR EVIDENCE
SATISFACTORY TO THE COMPANY THAT THE SHARES HAVE BEEN SOLD IN
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SAID ACT."
SECTION 2.5 REGISTRATION RIGHTS.
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(A) COVENANT TO REGISTER. As soon as the Seller is eligible to do so, but
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in no event later than 13 months following the date that the Seller has been
subject to the requirements of Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided, however, that such 13-month
period may be extended by the Purchasers in their sole and absolute discretion,
Seller shall file a registration statement with the Securities and Exchange
Commission (the "Commission") to register the shares of Common Stock, par value
$.001 per share (the "Common Stock"), that are issuable by the Seller upon the
conversion of the Shares (the "Common Shares") for an offering to be made on a
continuous or delayed basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), covering all of the Common Shares.
Such registration statement shall be on Form S-3 under the Securities Act, if
such Form is then available for use by the Seller, or another appropriate form
that is available to the Seller permitting registration of such Common Shares
for resale by the Purchasers in the manner or manners reasonably designated by
them (including, without limitation, one or more underwritten offerings). The
Seller shall use its best efforts to prosecute the registration (the
"Registration") of the Common Shares pursuant to the Securities Act. The Seller
shall use its best efforts to cause the Common Shares to be registered as soon
as practicable after the filing of the registration statement relating to such
Common Shares, but in no event later than 180 days after the filing of such
registration statement. The Purchaser shall cooperate with the Seller to
provide all such necessary information as shall be required by the Seller to
file the registration statement relating to the Registration. In addition,
Seller shall use its best efforts to list, simultaneously with the Closing of
the transactions contemplated by this Agreement, the Common Shares on NASDAQ or
on such other securities exchange as the shares of Common Stock may then be
listed. Seller shall maintain the prospectus relating to the Common Shares
effective for so long as the Purchaser desires to dispose of the Common Shares,
not to exceed a period of five years from the date that the registration
statement was declared effective by the Commission. In the event that the
Registration is not effected within the foregoing time period, it is
acknowledged that the Purchasers will suffer liquidated damages, which the
Seller hereby agrees to pay to the Purchasers, in the form of options to
purchase 250,000 shares of Common Stock of the Seller at an exercise price of
$1.50 per share, which options shall be exercisable for a period of five years,
pro rata based upon the number of Shares owned by each Purchaser; provided,
however, that the Seller shall not be required to pay such liquidated damages in
the event that (i) an appropriate form to register the Common Shares for an
offering to be made on a continuous or delayed basis, such form to permit
updating through the incorporation by reference to periodic reports filed
pursuant to Section 13 or 15(d) of the Exchange Act, is not available to the
Seller at the time in question, or (ii) the Purchasers, in their sole
discretion, determine that the Registration has not been declared effective by
the
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Commission due to circumstances beyond the Seller's control. Notwithstanding
the payment of any such liquidated damages, the obligation of the Seller to
effect such Registration shall survive.
(B) DEMAND AND "PIGGYBACK" REGISTRATION RIGHTS.
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(i) DEMAND REGISTRATION RIGHTS. If at any time after the date hereof
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during which there is no effective registration statement relating to the Common
Shares, Seller shall be requested in writing by Purchasers holding at least a
majority of the Common Shares to effect the registration under the Securities
Act of Common Shares which the Purchasers reasonably expect to result in gross
aggregate proceeds upon such sale of at least $4,000,000, the Seller shall, as
expeditiously as possible, use its best efforts to effect the registration, on a
form of general use under the Securities Act, of all Common Shares which the
Seller has been requested to register. The Seller shall not be obligated to
cause to become effective more than two registration statements pursuant to
which Common Shares are registered under this Section 2.5(b)(i).
Notwithstanding the foregoing, if the Seller shall furnish to the Purchasers
requesting a registration under this Section 2.5(b)(i) a certificate signed by
the Chief Executive Officer of the Seller stating that in the good faith
judgment of the Board of Directors of the Seller it would be detrimental to the
Seller and its shareholders for such registration statement to be filed and it
is therefore essential to defer the filing of such registration statement, the
Seller shall have the right to defer taking action with respect to such filing
for a period of not more than 90 days after receipt of the request by the
Purchasers; provided, however, that the Seller may not utilize this right more
than once in any 12-month period. In addition, the Seller shall not be
obligated to effect, or to take any action to effect, any registration pursuant
to this Section 2.5(b)(i):
(A) During the period starting with the date 30 days prior to the
Seller's good faith estimate of the date of filing of, and ending on a date 120
days after the effective date of, a registration subject to Section 2.5(b)(ii)
hereto; provided that the Seller is actively employing in good faith its best
efforts to cause such registration statement to be filed and thereafter to
become effective;
(B) If the Purchasers propose to dispose of Common Shares in the
Registration that may be immediately registered or that are registered on Form
S-3 pursuant to a request made pursuant to Section 2.5(a) above;
(C) In the event that the sale contemplated by the Purchasers is a
public distribution of the Common Shares, if the Purchases do not request that
such offering be firmly underwritten by underwriters selected by Purchasers
(subject to the consent of the Seller, which consent will not be unreasonably
withheld); provided, however, that in the event such contemplated sale by the
Purchasers is to a limited number of purchasers, then the provisions of this
paragraph (C) shall not be applicable; or
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(D) In the event that the sale contemplated by the Purchasers is a
public distribution of the Common Shares, if the Seller and the Purchasers are
unable to obtain the commitment of the underwriter described in clause (C) above
to firmly underwrite the offer; provided, however, that in the event such
contemplated sale by the Purchasers is to a limited number of purchasers, then
the provisions of this paragraph (D) shall not be applicable.
(ii) "PIGGYBACK" REGISTRATION RIGHTS. At any time after the Closing
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Date, the Seller shall, at least thirty (30) days prior to the filing of any
registration statement under the Securities Act (other than a registration
statement on Form S-8 or Form S-4 or any successor forms) relating to the public
offering of its Common Stock by the Seller or any of its security holders, give
written notice of such proposed filing and of the proposed date thereof to the
Purchasers, and if, on or before the twentieth (20th) day following the date on
which such notice is given, the Seller shall receive a written request from a
Purchaser requesting that the Seller include among the securities covered by
such registration statement some or all of the Common Shares held by or to be
held after conversion by such Purchaser, the Seller shall, subject to Section
2.5(c) hereof, include such Common Shares in such registration statement, if
filed, so as to permit such Common Shares to be sold or disposed of in the
manner and on the terms of the offering thereof set forth in such request.
(C) TERMS AND CONDITIONS OF REGISTRATION. Except as otherwise provided
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herein, in connection with any registration statement filed pursuant to Sections
2.5(a) or (b) herein, the following provisions shall apply:
(i) If such registration statement shall be filed pursuant to Section
2.5(b)(ii) hereof and if the managing underwriter advises the Seller in writing
that the inclusion in such registration of some or all of the Common Shares
sought to be registered by the Purchasers creates a substantial risk that the
proceeds or price per share that will be derived from such registration will be
reduced or that the number of shares to be registered at the insistence of the
Purchasers, plus the number of shares of Common Stock sought to be registered by
the Seller and any other stockholders of the Seller is too large a number to be
reasonably sold, then, in such event, the number of shares sought to be
registered for the Seller and the other stockholders of the Seller having
registration rights, as applicable, shall be reduced, pro rata in proportion to
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the number of shares sought to be registered to the number of shares recommended
be sold by the managing underwriter. In no event will any securities to be sold
by the Seller be excluded from such registration by reason of any underwriters'
cut-backs unless the Seller has agreed thereto with the underwriter.
(ii) If requested by the Purchasers in connection with a registration
statement filed pursuant to Section 2.5(a) or (b)(i), the Seller will enter into
an underwriting agreement with the underwriters for such offering, such
agreement to be reasonably satisfactory in form and substance to the Seller, the
Purchasers and the underwriters, and to contain such representations, warranties
and covenants by the Seller and such other terms as are customarily
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contained in such agreements used by the managing underwriter, including,
without limitation, restrictions of sales of Common Stock or other securities by
the Seller as may be reasonably agreed to between the Seller and such
underwriters, and indemnities and rights to contributions to the effect and to
the extent provided in Sections 2.5(d) and 2.5(e) hereof. The Purchasers shall
be a party to any underwriting agreement relating to an underwritten sale of
their Common Shares and may, at their option, require that any or all of the
representations, warranties and covenants of the Seller to or for the benefit of
such underwriters, shall also be made to and for the benefit of the Purchasers.
All representations and warranties of the Purchasers shall be made to or for the
benefit of the Seller.
(iii) The Seller shall provide a transfer agent and registrar (which
may be the same entity) for the Common Shares, not later than the effective date
of such registration.
(iv) All expenses in connection with the preparation and filing of a
registration statement filed pursuant to Sections 2.5(a) or 2.5(b) shall be
borne solely by the Seller, except for any transfer taxes payable with respect
to the disposition of such Common Shares, and any underwriting discounts and
selling commissions applicable solely to such sales of Common Shares, which
shall be paid by the Purchasers of the Shares being registered.
(v) The Seller shall use its best efforts to cause all of the shares
covered by such registration statement to be listed on NASDAQ or on such other
securities exchange as such shares may then be listed, on which similar shares
are listed for trading, if the listing of such registered shares is permitted by
such exchange.
(vi) Following the effective date of such registration statement, the
Seller shall, upon the request of the Purchasers, forthwith supply such number
of prospectuses (including exhibits thereto and preliminary prospectuses and
amendments and supplements thereto) meeting the requirements of the Securities
Act and such other documents as are referred to in the prospectus as shall be
reasonably requested by the Purchasers to permit the Purchasers to make a public
distribution of their Common Shares.
(vii) (A) Each Purchaser agrees that it will not effect any sales
of Common Shares pursuant to a Registration described in Section 2.5(a) after
such Purchaser has received notice from the Seller to suspend sales as a result
of the occurrence or existence of any Suspension Event (as defined in Section
2.5(c)(vii)(B) below) until the Seller provides notice to such Purchaser that
all Suspension Events have ceased to exist. In addition, each Purchaser agrees
that it will not effect any sales of Common Shares pursuant to the Registration
described in Section 2.5(a) after such Purchaser has received notice from the
Seller to suspend sales because the registration statement pursuant to which
such sale is to be effected, and the related prospectus or any supplement
thereto contains an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, until the Seller
notifies such Purchaser that the misstatement or omission has been corrected.
The Seller hereby covenants
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and agrees that it will use its best efforts to correct any such misstatement or
omission, or to cure any Suspension Event, and that it will give immediate
notice to the Purchasers of such correction or cure.
(B) Notwithstanding anything to the contrary set forth in this
Agreement, the Seller's obligation to file a registration statement pursuant to
Section 2.5(a) hereof and make any filings with any state securities authority,
to use its best efforts to cause a registration statement or any state
securities filings to become effective, or to amend or supplement such a
registration statement or any state securities filings shall be temporarily
suspended in the event of and during a Suspension Event. A "Suspension Event"
shall exist at such times that (i) the Seller is not eligible to use Form S-3
for the registration contemplated by Section 2(a) hereof, or (ii) the Seller is
conducting an underwritten primary offering and is advised by the underwriters
therein that sale of Common Shares under the registration statement filed
pursuant to Section 2.5(a) hereof would have a material adverse effect on the
Seller's offering, or (iii) negotiations and/or consummation are pending
relating to a transaction or the occurrence of some other event (x) where any of
the foregoing would require disclosure under applicable securities laws of
material information in a registration statement (or any other document
incorporated into a registration statement by reference) or such state
securities filings and (y) as to which the Seller has a bona fide business
purpose, as determined in good faith by its Board of Directors, for preserving
confidentiality or which renders the Seller unable to comply with the
Commission's requirements. Suspension of the Seller's obligations pursuant to
this Section 2.5(c)(vii)(B) shall continue only for so long as a Suspension
Event is continuing. Sellers shall notify each Purchaser immediately after any
Suspension Event occurs or ceases to exist.
(viii) The Purchasers may select the underwriter or underwriters, if
any, who are to undertake any offering and distribution of the Common Shares to
be included in a registration statement filed under the provisions of Section
2.5(a) or (b)(i) hereof, subject to the Seller's prior approval of the
underwriter, which approval shall not be unreasonably withheld.
(ix) The Seller shall use its best efforts to register the Common
Shares covered by any such registration statements filed pursuant to Section
2.5(a) or (b) under such securities or Blue Sky laws in addition to those in
which the Seller would otherwise sell shares, as the Purchasers shall request,
except that neither the Seller nor the Purchasers shall for any such purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction where it is not so
qualified. The fees and expenses incurred in connection with such registration
shall be borne by the Seller.
(x) The Purchasers shall cooperate fully with the Seller and provide
the Seller with all information reasonably requested by the Seller for inclusion
in the registration statement or as necessary to comply with the Securities Act.
The Seller shall cooperate fully with any underwriters selected by the
Purchasers and counsel to such underwriters, and shall provide reasonable and
customary access to the Seller's books and records (upon receipt from such
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underwriters of customary confidentiality agreements) in order to facilitate
such underwriters' review and examination of the Seller in connection with such
underwriting.
(xi) The Seller shall notify the Purchasers, at any time after
effectiveness when a prospectus relating thereto is required to be delivered
under the Securities Act within the period mentioned in subdivision (vii) of
this Section 2.5(c), of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of circumstances then existing (and upon receipt of such
notice and until a supplemented or amended prospectus as set forth below is
available, the Purchasers shall not offer or sell any securities covered by such
registration statement and shall return all copies of such prospectus to the
Seller if requested to do so by it), and at the request of the Purchasers
prepare and furnish the Purchasers as promptly as practicable, but in any event
within 90 days, a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing.
(xii) The Seller shall furnish to the Purchasers at the time of the
disposition of the Common Shares, a signed copy of an opinion of the Seller's
regular in-house or outside general counsel, or other counsel of the Seller's
selection reasonably acceptable to, and which opinion shall be reasonably
satisfactory in form and substance to, the Purchasers to the effect that: (a) a
registration statement covering such Common Shares has been filed with the
Commission under the Securities Act and has been declared effective by order of
the Commission, (b) said registration statement and prospectus contained therein
comply as to form in all material respects with the requirements of the
Securities Act, and nothing has come to such counsel's attention (after due
inquiry) which would cause such counsel to believe that either said registration
statement or such prospectus (other than the financial statements contained
therein, as to which such counsel need not express any opinion) contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein (in the case of
such prospectus, in light of the circumstances under which they were made) not
misleading, (c) after due inquiry such counsel knows of no legal or governmental
proceedings required to be described in such registration statement or
prospectus which are not described as required, or of any contracts or documents
of a character required to be described in such registration statement or such
prospectus to be filed as an exhibit to such registration statement or to be
incorporated by reference therein which are not described and filed as required
and (d) to such counsel's knowledge, no stop order has been issued by the
Commission suspending the effectiveness of such registration statement; it being
understood that such opinion may contain such qualifications and assumptions as
are customary in the rendering of similar opinions, and that such counsel may
rely, as to all factual matters treated therein, on certificates of the Seller
(copies of which shall be delivered to the Purchasers).
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(xiii) The Seller will use its best efforts to comply with the
reporting requirements of Sections 13 and 15(d) of the Exchange Act, to the
extent it shall be required to do so pursuant to such sections, and at all times
while so required shall use its best efforts to comply with all other public
information reporting requirements of the Commission (including reporting
requirements which serve as a condition to utilization of Rule 144 promulgated
by the Commission under the Securities Act) from time to time in effect and
relating to the availability of an exemption from the Securities Act for the
sale of any of the Seller's Common Stock held by the Purchasers. The Seller
will also cooperate with the Purchasers in supplying such information and
documentation as may be necessary for the Purchasers to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
sale of any of the Seller's Common Stock held by the Purchasers.
(D) INDEMNIFICATION.
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(i) In the event of the registration of any Common Shares of the
Seller under the Securities Act pursuant to the provisions of Sections 2.5(a) or
2.5(b), the Seller agrees to indemnify and hold harmless the Purchasers, each
underwriter, broker or dealer, if any, and their respective directors, officers
and employees, of such Common Shares, and each other person, if any, who
controls the holders of the Shares or the Common Shares (or a permitted assignee
thereof), such underwriter, broker or dealer within the meaning of the
Securities Act, from and against any and all losses, claims, damages or
liabilities (or actions in respect thereof), joint or several, to which the
Purchasers (and as applicable) its directors, officers or employees, or such
underwriter, broker or dealer or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Common Shares were registered under
the Securities Act, any preliminary prospectus or final prospectus relating to
such Common Shares, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Seller of any rule or regulation under the
Securities Act applicable to the Seller or relating to any action or inaction
required by the Seller in connection with any such registration and will
reimburse the Purchasers, each such underwriter, broker or dealer and
controlling person, and their respective directors, officers or employees, for
any legal or other expenses reasonably incurred by the Purchasers or such
underwriter, broker or dealer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Seller will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, such preliminary prospectus, such
final prospectus or such amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Seller by the Purchasers
and as applicable, such Purchasers' directors, officers or employees, or such
9
underwriter, broker, dealer or controlling person for use in the preparation
thereof. Such indemnity shall remain in full effect irrespective of any
investigation by any person indemnified above.
(ii) In the event of the registration of any Common Shares of the
Purchasers under the Securities Act for sale pursuant to the provisions of this
Agreement, the Purchasers agree to indemnify and hold harmless the Seller, its
directors, officers and employees, from and against any losses, claims, damages
or liabilities, joint or several, to which the Seller, its directors, officers
or employees, may become subject under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
Common Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus relating to such Common Shares, or any amendment
or supplement thereto, or arise out of or are based upon omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which untrue statement
or alleged untrue statement or omission or alleged omission was made therein in
reliance upon and in conformity with written information furnished to the Seller
by the Purchasers for use in the preparation thereof. Such indemnity shall
remain in full effect irrespective of any investigation by any person
indemnified above.
(iii) Promptly after receipt by a person entitled to indemnification
under this Section 2.5(d) (for purposes of this Section 2.5(d), an "Indemnified
Party") of notice of the commencement of any action or claim relating to any
registration statement filed under Sections 2.5(a) or 2.5(b) or as to which
indemnity may be sought hereunder, such Indemnified Party will, if a claim for
indemnification hereunder in respect thereof is to be made against any other
party hereto (for purposes of this Section 2.5(d), an "Indemnifying Party"),
give written notice to such Indemnifying Party of the commencement of such
action or claim, but the failure to so notify the Indemnifying Party will not
relieve it from any liability which it may have to any Indemnifying Party
otherwise than pursuant to the provisions of this Section 2.5(d) and shall also
not relieve the Indemnifying Party of its obligations under this Section 2.5(d),
except to the extent that the Indemnifying Party is damaged solely as a result
of the failure to give timely notice. In case any such action is brought
against an Indemnified Party, and it notifies an Indemnifying Party of the
commencement thereof, the Indemnifying Party will be entitled (at its own
expense) to participate in and, to the extent that it may wish, jointly with any
other Indemnifying Party similarly notified, to assume the defense with counsel
satisfactory to such Indemnified Party, of such action and/or to settle such
action and, after notice from the Indemnifying Party to such Indemnified Party
of its election so to assume the defense thereof, the Indemnifying Party will
not be liable to such Indemnified Party for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof, other than the reasonable cost of investigation; provided, however,
that no Indemnifying Party and no Indemnified Party shall enter into any
settlement agreement which would impose
10
any liability on such other party or parties without the prior written consent
of such other party or parties.
(E) CONTRIBUTION. If the indemnification provided for in Section 2.5(d)
------------
hereof is unavailable to the Indemnified Party in respect of any losses, claims,
damages or liabilities referred to herein, then each such Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities (i) as between the Seller and the Purchasers on the one hand and
the underwriters on the other, in such proportion as is appropriate to reflect
the relative benefits received by the Seller and the Purchasers on the one hand
and the underwriters on the other from the offering of the Common Shares, or if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Seller and the Purchasers on the one hand and of the underwriters
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations and (ii) as between the Seller on the one hand and each
Purchaser on the other, in such proportion as is appropriate to reflect the
relative fault of the Seller and of each Purchaser in connection with such
statements or omissions, as well as any other relevant equitable considerations.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 2.5(e) exceed the amount that such Indemnifying
Party would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 2.5(d) hereof had been available
under the circumstances.
The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages and liabilities referred to in the next preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 2.5(e), no Purchaser or
underwriter shall be required to contribute any amount in excess of the amount
by which (i) in the case of a Purchaser, the net proceeds received by such
Purchaser from the sale of Common Shares or (ii) in the case of an underwriter,
the total price at which the Common Shares purchased by it and distributed to
the public were offered to the public exceeds, in any such case, the amount of
any damages that such Purchaser or underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(F) SURVIVAL. The indemnity and contribution agreements contained in this
--------
Section 2.5 shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement or any underwriting agreement, (ii) any
investigation made by or on behalf of any Indemnified Party or by or on behalf
of the Seller and (iii) the consummation of the sale or successive resales of
the Common Shares.
11
(G) FUTURE REGISTRATION RIGHTS. Until such time as the Registration has
--------------------------
been declared effective by the Commission, the Seller shall not grant to any
third party any registration rights equal to or more favorable than those
contained in this Section 2.5; provided, however, that the foregoing prohibition
shall not prevent the Seller from granting to a third party specific
registration rights that are equal to those contained in this Section 2.5, as
long as all of the registration rights granted to such third party, taken as a
whole, are less favorable to the third party that those granted to the
Purchasers herein. In the event that the Registration shall fail to remain
effective (or a stop order shall be entered with respect thereto) while any of
the Common Shares remain unsold, the provisions of this Section 2.5(g) shall
become applicable once again.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to the Purchasers as follows:
SECTION 3.1 CORPORATE EXISTENCE AND POWER. Seller is a corporation
-----------------------------
duly incorporated, validly existing and in good standing under the laws of the
State of Nevada, and has all corporate powers required to carry on its business
as now conducted. Seller is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on Seller. For purposes of this Agreement, the term "Material
Adverse Effect" means, with respect to any person or entity, a material adverse
effect on the condition (financial or otherwise), business, properties, assets,
liabilities (including contingent liabilities), results of operations or current
prospects of the Seller or its Subsidiaries (as defined below). True and
complete copies of Seller's Articles of Incorporation, as amended, and Bylaws,
as amended (collectively, the "Articles and Bylaws") have previously been
provided to the Purchasers. For purposes of this Agreement, the term
"Subsidiary" means, with respect to any entity, any corporation or other
organization of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are directly or indirectly owned by such entity or
of which such entity is a partner or is, directly or indirectly, the beneficial
owner of 50% or more of any class of equity securities or equivalent profit
participation interests.
SECTION 3.2 CORPORATE AUTHORIZATION. The execution, delivery and
-----------------------
performance by Seller of this Agreement, and the consummation of the
transactions contemplated hereby (including, but not limited to, the sale,
issuance and delivery of the Shares, the subsequent issuance of additional
Shares as payment of the dividends on the Shares, when, if and as declared by
the Board of Directors of the Seller, and the subsequent issuance of the Common
12
Shares upon conversion of the Shares) have been duly authorized and no
additional corporate action is required for the approval of this Agreement.
This Agreement constitutes the legal, valid and binding agreement of Seller
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium and similar laws of general
application relating to or affecting the enforcement of rights of creditors and
except that enforceability of its obligations hereunder are subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
SECTION 3.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery
--------------------------
and performance by Seller of this Agreement, and the consummation of the
transactions contemplated hereby (including, but not limited to, the sale,
issuance and delivery of the Shares, the subsequent issuance of additional
Shares as payment of the dividends on the Shares, when, if and as declared by
the Board of Directors of the Seller, and the subsequent issuance of the Common
Shares upon conversion of the Shares) by Seller require no action by or in
respect of, or filing with, any governmental body, agency, official or
authority, other than the filing of the Certificate of Amendment to the Seller's
Articles of Incorporation with the Secretary of State of the State of Nevada.
SECTION 3.4 NON-CONTRAVENTION. The execution, delivery and
-----------------
performance by Seller of this Agreement, and the consummation by Seller of the
transactions contemplated hereby do not and will not (a) contravene or conflict
with the Articles and Bylaws of Seller; (b) contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to Seller, (c) constitute
a default under or give rise to a right of termination, cancellation or
acceleration or loss of any benefit under any material agreement, contract or
other instrument binding upon Seller or under any material license, franchise,
permit or other similar authorization held by Seller; or (d) result in the
creation or imposition of any Lien (as defined below) on any material asset of
Seller. For purposes of this Agreement, the term "Lien" means, with respect to
any asset, any mortgage, lien, pledge, charge, security interest, claim or
encumbrance of any kind in respect of such asset.
SECTION 3.5 FINANCIAL STATEMENTS. The audited balance sheet of the
--------------------
Seller as at December 31, 1995 and 1994, and the audited statements of income
and cash flows for the years then ended, and the unaudited balance sheet as at
March 31, 1996 and the unaudited statements of income and cash flows for the
three month period then ended (collectively, the "Financial Statements") were
prepared in accordance with generally accepted accounting principles (as in
effect from time to time) applied on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto), and such Financial
Statements fairly present in accordance with generally accepted accounting
principles in all material respects the financial position of the Seller as at
the dates thereof and the results of its operations and its cash flows for the
periods then ended, subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end audit adjustments and the absence of
footnotes. Since March 31, 1996, except as disclosed in Schedule 3.5, the
------------
Seller has not incurred any liability
13
or obligation of any kind, outside of the ordinary course of business, that
would be required to be reflected on the Financial Statement or in the notes
thereto under generally accepted accounting principles.
SECTION 3.6 COMPLIANCE WITH LAW. Seller is in compliance in all
-------------------
respects and has conducted its business so as to comply in all respects with all
laws, rules and regulations, judgments, decrees or orders of any court,
administrative agency, commission, regulatory authority or other governmental
authority or instrumentality, domestic or foreign, applicable to its operations.
Except as disclosed in Schedule 3.6, there are no judgments or orders,
------------
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency or by arbitration), including any such actions relating to
affirmative action claims or claims of discrimination, against Seller or against
any of its properties or businesses.
SECTION 3.7 NO DEFAULTS. Except as disclosed in Schedule 3.7,
----------- ------------
Seller is not, nor has it received notice that it would be with the passage of
time, giving of notice, or both, (i) in violation of any provision of its
Articles and Bylaws (ii) in default or violation of any term, condition or
provision of (A) any judgment, decree, order, injunction or stipulation
applicable to Seller or (B) any agreement, note, mortgage, indenture, contract,
lease or instrument, permit, concession, franchise or license to which Seller is
a party or by which Seller or its properties or assets may be bound.
SECTION 3.8 LITIGATION. Except as disclosed in Schedule 3.8, there
---------- ------------
is no action, suit, proceeding, judgment, claim or investigation pending or, to
the best knowledge of Seller, threatened against Seller (or any of its
Subsidiaries), which could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Seller or which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay any of the
transactions contemplated hereby, or which could lead to a claim, damages
payment, settlement, loss, liability, cost or expense to Seller in excess of
$25,000 in the aggregate. To the best knowledge of Seller, there is no basis
for the assertion of any of the foregoing.
SECTION 3.9 ABSENCE OF CERTAIN CHANGES. Since March 31, 1996,
--------------------------
Seller has conducted its business in the ordinary course and there has not
occurred, except as set forth on Schedule 3.9:
------------
(a) Any event that could reasonably be expected to have a Material
Adverse Effect on the Seller;
(b) Any amendments or changes in the Articles or Bylaws of Seller,
except for the Certificate of Amendment to the Seller's Articles of
Incorporation, a true, correct and complete copy of which, as of the date
hereof, is attached hereto as Exhibit "B-1", and except for the By-Law amendment
dated July 3, 1996, a true, correct and complete copy of which is attached
------
hereto as Exhibit "B-2";
14
(c) Any damage, destruction or loss, whether or not covered by
insurance, that would, individually or in the aggregate, have a Material Adverse
Effect on the Seller;
(d) Any (i) incurrence, assumption or guarantee by Seller of any debt
for borrowed money; (ii) issuance or sale of any securities convertible into or
exchangeable for securities of Seller; (iii) issuance or sale of options or
other rights to acquire from Seller, directly or indirectly, securities of
Seller or any securities convertible into or exchangeable for any such
securities; (iv) issuance or sale of any stock, bond or other corporate
security; (v) discharge or satisfaction of any Lien, other than current
liabilities incurred since March 31, 1996, in the ordinary course of business;
(vi) declaration or making any payment or distribution to shareholders or
purchased or redeemed any share of its capital stock or other security; (vii)
sale, assignment or transfer any of its intangible assets except in the ordinary
course of business, or cancellation of any debt or claim; (viii) waiver of any
right of substantial value whether or not in the ordinary course of business;
(ix) material change in officer compensation except in the ordinary course of
business and consistent with past practices; or (x) other commitment (contingent
or otherwise) to do any of the foregoing.
(e) Any creation or assumption by Seller of any Lien on any asset or
any making of any loan, advance or capital contribution to or investment in any
person in an aggregate amount which exceeds $25,000 outstanding at any time;
(f) Any entry into, amendment of, relinquishment, termination or non-
renewal by Seller of any contract, license, lease, transaction, commitment or
other right or obligation, other than in the ordinary course of business;
(g) Any transfer or grant of a right with respect to the trademarks,
trade names, service marks, trade secrets, copyrights or other intellectual
property rights owned or licensed by the Seller; or
(h) To the best knowledge of Seller, any agreement or arrangement made
by Seller to take any action which, if taken prior to the date hereof, would
have made any representation or warranty set forth in this Section 3 untrue or
incorrect as of the date when made.
SECTION 3.10 NO UNDISCLOSED LIABILITIES. Except for liabilities and
--------------------------
obligations incurred in the ordinary course of business since March 31, 1996, as
of the date hereof, (i) the Seller does not have any liabilities or obligations
(absolute, accrued, contingent or otherwise) that would be required to be
reflected on the Financial Statements or in the notes thereto under generally
accepted accounting principles and (ii) to the Seller's knowledge, there has not
been any aspect of the prior or current conduct of the business of the Seller
which may form the basis for any claim by any third party which if asserted
could result in any such liabilities or obligations, which are not fully
reflected, reserved against or disclosed in the consolidated balance sheet of
the Seller as at March 31, 1996.
15
SECTION 3.11 RECEIVABLES. The Seller's receivables arose in the
-----------
ordinary course of business and have been collected or to the best of Seller's
knowledge are collectible in the ordinary course of business in the book amounts
thereof, less an amount not in excess of any allowance for doubtful accounts.
The receivables of Seller arising after March 31, 1996 and prior to the Closing
Date arose or to the best of Seller's knowledge will arise in the ordinary
course of business and have been collected or are or to the best of Seller's
knowledge will be collectible in the book amounts thereof, consistent with the
past practice of Seller, less any allowance for doubtful accounts consistent
with past practices.
SECTION 3.12 BACKLOG. The Seller's backlog as of the date hereof
-------
is not less than $10 million. "Backlog" for purposes hereof means anticipated
service revenue from clinical trials and other services that have not been
completed. "Backlog" includes anticipated service revenue from projects
represented by contracts or letters of intent or projects as to which the Seller
has commenced significant effort based upon the client's approval of a written
budget. There can be no assurance that the Seller will be able to realize all
of its backlog as service revenue.
SECTION 3.13 TAXES.
-----
(a) All tax returns, statements, reports and forms (including
estimated tax returns and reports and information returns and reports) required
to be filed with any taxing authority with respect to any taxable period ending
on or before the Closing Date by or on behalf of Seller have been or will be
filed when due (including any permitted extensions of such due date); provided,
however, that the Seller shall not be in breach of this Section 3.13(a) in
respect of tax liabilities which Seller is contesting in good faith with the
relevant tax authorities, subject to Seller having made sufficient reserves of
funds in order to satisfy such tax liabilities in full.
(b) Seller has timely paid, withheld or made provision on its books
for all material taxes due and payable by Seller.
(c) There are no Liens for taxes upon the assets or properties of
Seller and, to the best knowledge of Seller, there are no such Liens threatened
or anticipated to be placed upon the assets or properties of Seller.
SECTION 3.14 INTERESTS OF OFFICERS, DIRECTORS AND OTHER AFFILIATES.
-----------------------------------------------------
Schedule 3.14 sets forth a description of any interest held, directly or
-------------
indirectly, by any officer, director or other affiliate of Seller in any
property, real or personal, tangible or intangible, used in or pertaining to
Seller's business, including any interest in the Seller's Intellectual Property
(as defined in Section 3.15(b) hereof).
16
SECTION 3.15 INTELLECTUAL PROPERTY.
---------------------
(a) Except as disclosed in Schedule 3.15, to the best of Seller's
-------------
knowledge, Seller's business as conducted or as currently proposed to be
conducted does not and will not cause Seller to infringe or violate any patents,
trademarks, service marks, trade names, copyrights, licenses, trade secrets or
other intellectual property rights of any other person or entity.
(b) Set forth on Schedule 3.15 are all the patents, trademarks, trade
-------------
names, service marks, trade secrets, copyrights or other intellectual property
owned or licensed by Seller or in which Seller has any interest (the
"Intellectual Property"). Except as disclosed in Schedule 3.15, the
-------------
Intellectual Property is free of any unresolved ownership disputes or threats
with respect to any third party.
(c) The Seller owns or possesses the right to use all of the
Intellectual Property and no claim is pending, or to the best knowledge of
Seller, threatened, to the effect that the operations of the Seller infringe
upon or conflict with the asserted rights of any other person and to the best
knowledge of Seller, there is no basis for any such claim.
(d) Seller has taken all measures it deems reasonable to maintain the
Intellectual Property in full force and effect.
(e) The Seller currently possesses all licenses and sublicenses
required to operate the business of the Seller.
(f) To the best of Seller's knowledge, there are no infringers of the
Intellectual Property and the Seller has not learned of or communicated with any
third party considered by the Seller actually or possibly infringing on any of
the Intellectual Property in any material respect.
SECTION 3.16 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no
-----------------------------------
agreement, judgment, injunction, order or decree binding upon Seller which has
or could reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of Seller, any acquisition of property by Seller
or the conduct of business by Seller as currently conducted or as currently
proposed to be conducted by Seller.
SECTION 3.17 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES;
-------------------------------------------------------
CONDITION OF EQUIPMENT. Schedule 3.17 sets forth a true and complete list of
---------------------- -------------
all real property and equipment owned or leased by Seller with a value exceeding
$25,000. Seller has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of such tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any Liens.
17
SECTION 3.18 VENDORS AND CUSTOMERS. Seller has satisfactory
---------------------
relations and has engaged in no actions to jeopardize such satisfactory
relations with its customers and the corporations, partnerships, and individuals
whose products are offered for sale by Seller. To the best of Seller's
knowledge, no facts, circumstances or conditions exist which create a reasonable
basis for believing that the Seller's relationships with its vendors and/or
customers will be unable to continue on substantially the same terms and
conditions as currently exist.
SECTION 3.19 PREEMPTIVE RIGHTS. Except as set forth on Schedule
----------------- --------
3.19, none of the shareholders of the Seller possess any preemptive rights in
----
respect of the Shares to be sold and issued to the Purchaser pursuant to this
Agreement or the conversion of such Shares into Common Shares.
SECTION 3.20 INSURANCE. All of Seller's insurance policies are
---------
sufficient for compliance in all respects with all requirements of law and with
all agreements to which Seller is a party or otherwise bound and are, to the
Seller's best knowledge, valid, outstanding, collectible and enforceable
policies, and to the best knowledge of Seller, provide adequate insurance
coverage for Seller and its businesses, products, properties and assets and its
directors, officers, salespersons, agents or employees and will remain in full
force and effect.
SECTION 3.21 SUBSIDIARIES. Except as set forth on Schedule 3.21,
------------ -------------
the Seller has no subsidiaries.
SECTION 3.22 CAPITALIZATION. The authorized capital stock of the
--------------
Seller consists of (i) 75,005,256 shares of Common Stock, par value $.001 per
share, of which 4,086,400 shares are issued and outstanding and (ii) 5,256
shares of Preferred Stock, without par value, of which 3,500 shares will be
issued and outstanding upon the Closing contemplated hereby. No other shares of
capital stock have been authorized or issued. All shares of the Seller's
outstanding capital stock have been duly authorized, are validly issued and
outstanding, and are fully paid and nonassessable and the Shares, when issued
and paid for at the Closing, will be duly authorized, validly issued, fully paid
and nonassessable. The Seller has reserved (x) out of its authorized but
unissued shares of Common Stock, solely for issuance upon the conversion of the
Shares (including shares of Preferred Stock issued in respect of dividends on
the Shares), such number of shares of Common Stock as shall from time to time be
issuable upon conversion of all shares of Preferred Stock at the time
outstanding, and (y) out of its authorized but unissued shares of Preferred
Stock, solely for issuance in respect of the payment of dividends, a sufficient
number of shares of Preferred Stock to pay such dividends when, if and as
declared by the Board of Directors of the Seller. Upon the issuance of shares
of Common Stock upon conversion of the Preferred Stock, and upon the issuance of
shares of Preferred Stock in payment of dividends on the Preferred Stock, when,
if and as declared by the Board of Directors of the Seller, such shares of
Common Stock and Preferred Stock, as the case may be, shall be duly authorized,
validly issued, fully paid and nonassessable. The designations, powers,
preferences, rights, qualifications, limitations and restrictions in respect of
each class and series of authorized capital stock of the Company are as set
forth in the Certificate of Amendment to
18
the Articles of Incorporation of the Seller, as copy of which is attached as
Exhibit "B", and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and enforceable
in accordance with all applicable laws.
SECTION 3.23 RIGHTS, WARRANTS, OPTIONS. Except as set forth on
-------------------------
Schedule 3.23, there are no outstanding (a) securities or instruments
-------------
convertible into or exercisable for any of the capital stock or other equity
interests of the Seller; (b) options, warrants, subscriptions or other rights to
acquire capital stock or other equity interests of the Seller; or (c)
commitments, agreements or understandings of any kind, including employee
benefit arrangements, relating to the issuance or repurchase by the Seller of
any capital stock or other equity interests of the Seller, any such securities
or instruments convertible or exercisable for securities or any such options,
warrants or rights.
SECTION 3.24 REAL PROPERTY. Schedule 3.24A sets forth the street
------------- --------------
address of each parcel of real property owned by the Seller. The Seller owns,
and on the Closing Date will own, good and marketable title to the real property
set forth on Schedule 3.24A, free and clear of Liens of any kind (the "Owned
--------------
Property"). The Seller does not hold, nor is it a party to any option, right of
first refusal or other contractual right to purchase, acquire, sell or dispose
of any interest in real property set forth on Schedule 3.24A. Schedule 3.24B
-------------- --------------
sets forth the street address of each parcel of real property leased by the
Seller (the "Leased Property"). The Seller has previously delivered to
Purchaser a true and complete copy of all lease agreements, as amended to date
(the "Leases") relating to the Leased Property. The Seller enjoys peaceful and
undisturbed possession of the Leased Property. All improvements located on the
Leased Property are in a state of good maintenance and repair and in a condition
adequate and suitable for the effective conduct therein of the business
conducted and proposed to be conducted by the Seller.
The Leases are valid, binding and in full force and effect, all rent and
other sums and charges payable thereunder are current, no notice of default or
termination under any of the Leases is outstanding, no termination event or
condition or uncured default on the part of the Seller or, to the best of the
Seller's knowledge, on the part of the landlord, thereunder, exists under the
Leases, and no event has occurred and no condition exists which, with the giving
of notice or the lapse of time or both, would constitute such a default or
termination event or condition. There are no subleases, licenses or other
agreements granting to any person any right to the possession, use, occupancy or
enjoyment of the premises demised by the Leases or the Owned Property or any
portion thereof (the Owned Property and the Leased Property being collectively
referred to herein as the "Premises"). All of the Premises are used and useful
in the conduct of the Seller's business.
To the best of the Seller's knowledge, there are no liabilities associated
with any of the Leases including, without limitation, any liability under any
Environmental Law (as defined herein) or regulation, which is or which may
become payable by Purchaser.
19
SECTION 3.25 LABOR RELATIONS. There is no strike, work stoppage or
---------------
slowdown or labor disturbance pending or, to the best of the Seller's knowledge,
threatened that involves any employees of the Seller. The Seller is not a party
to, otherwise bound by or threatened with any labor or collective bargaining
agreement and to the best of Seller's knowledge there have been no attempts to
organize a labor union or to seek recognition as a collective bargaining unit by
or with respect to any employees of the Seller during the past thirty-six (36)
months.
SECTION 3.26 EMPLOYEES, EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT
------------ -----------------------------------------------------
PLANS.
-----
(A) EMPLOYMENT AGREEMENTS. Except as set forth in Schedule 3.26A,
--------------------- --------------
there are no employment, consulting, severance or indemnification arrangements,
agreements, or understandings between the Seller and any officer, director,
consultant or employee of the Seller (the "Employment Agreements"). The Seller
has previously delivered to Purchaser true and complete copies of all of the
Employment Agreements. Except as disclosed in Schedule 3.26A, no such
--------------
Employment Agreement provides for the acceleration or change in the award,
grant, vesting or determination of operations, warrants, rights, severance
payments, or other contingent obligations of any nature whatsoever of the Seller
in favor of any such parties in connection with the transactions contemplated by
this Agreement. Except for the agreements set forth in Schedule 3.26A, the
--------------
terms of employment or engagement of all directors, officers, employees, agents,
consultants and professional advisors of the Seller are such that their
employment or engagement may be terminated upon not more than two weeks notice
given at any time without liability for payment of compensation or damages and
the Seller has not entered into any agreement or arrangement for the management
of its business or any part thereof other than with its directors or employees.
(B) EMPLOYEE BENEFIT PLANS. Schedule 3.26B includes a correct and
---------------------- --------------
complete list of all pension, retirement, stock purchase, stock bonus, stock
ownership, stock option, profit sharing, savings, medical, disability,
hospitalization, or insurance plans, deferred compensation, bonus, or group
insurance contracts or plans or any other incentive, welfare or employee benefit
plan, policy, agreement commitment, arrangement or practice maintained by the
Seller for any of its directors, employees or former employees (the "Seller
Plans"). The Seller has previously delivered to Purchaser accurate and complete
copies of all of the Seller Plans (or, if oral, true and complete written
summaries thereof). Schedule 3.26B also identifies each Seller Plan which
--------------
constitutes an "employee pension benefit plan" or an "employee welfare benefit
plan", as such terms are defined in the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). Seller is not a contributing employer to any
"multiemployer plan," as such term is defined in ERISA, nor does Seller have any
multiemployer plan liability with respect to any such plans or any Seller Plan.
No event has occurred or condition exists with respect to any employee
benefit plan or arrangement (whether or not terminated) subject to ERISA which
is (or was) maintained, sponsored or contributed to by an entity under common
control with the Seller,
20
determined under Section 414(b), (c), (m) or (o) of the Code, which could, on or
after the Closing, subject the Seller or Purchaser directly or indirectly
(through an indemnification agreement or otherwise) to any liability, including,
without limitation, liability under Section 412, 4971 or 4980B of the Code or
Title IV or ERISA.
(C) EMPLOYEES. (i) To the Seller's best knowledge, no employee,
---------
consultant or agent of the Seller is or will be, based upon the business and
activities taken or proposed to be taken by the Seller, in violation of any term
of any employment contract, confidentiality or non-disclosure agreement or any
other contract, agreement, commitment or understanding relating to the
relationship of such employee, consultant or agent with the Seller or any other
party.
(ii) Each significant employee or consultant of the Seller with
access to confidential or proprietary information of the Seller has executed an
agreement obligating such employee, consultant, contractor or agent to hold
confidential the Seller's proprietary information.
(iii) The Seller is not aware that any officer or key employee
intends to terminate employment with the Seller.
SECTION 3.27 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the
------------ -------------------------------------
Seller, nor any affiliate of the Seller, any agent of the Seller, any other
person acting on behalf of or associated with the Seller, or any individual
related to any of the foregoing persons, acting alone or together, has: (a)
received, directly or indirectly, any rebates, payments, commissions,
promotional allowances or any other economic benefits, regardless of their
nature or type, from any customer, supplier, trading company, shipping company,
governmental employee or other person with whom the Seller has done business
directly or indirectly; or (b) directly or indirectly, given or agreed to give
any gift or similar benefit to any customer, supplier, trading company, shipping
company, governmental employee or other person who is or may be in a position to
help or hinder the business of the Seller (or assist the Seller in connection
with any actual or proposed transaction) which (i) may subject the Seller to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, may have had an adverse effect on the
Seller or (iii) if not continued in the future, may adversely affect the assets,
business, operations or prospects of the Seller or subject the Seller to suit or
penalty in any private or governmental litigation or proceeding.
SECTION 3.28 SERVICES.
------------ --------
(a) To the Seller's best knowledge, there exists no set of facts (i)
which could furnish a basis for the withdrawal, suspension or cancellation of
any registration, license, permit or other governmental approval or consent of
any governmental or regulatory agency with respect to any service developed or
provided by the Seller (a "Service"), (ii) which could furnish a basis for the
withdrawal, suspension or cancellation by order of any state, federal or foreign
21
court of law of any Service, or (iii) which could have a Material Adverse Effect
on the continued operation of any facility of the Seller or which could
otherwise cause the Seller to withdraw, suspend or cancel any such Service from
the market or to change the marketing classification of any such Service.
(b) Each Service provided by Seller has been provided in accordance
with the specifications under which such Service normally is and has been
provided and the provisions of all applicable laws or regulations including,
without limitation, those of the United States Food and Drug Administration.
(c) Copies of all material correspondence received or sent by or on
behalf of Seller from or to the Food and Drug Administration or any other
governmental regulatory agency, including, without limitation, any inspection
reports or notices, have been previously delivered to the Purchasers.
SECTION 3.29 ENVIRONMENTAL MATTERS. None of the Premises or any
------------ ---------------------
other property used by the Seller in the past has been used by the Seller or, to
the Seller's knowledge, any other person to manufacture, treat, store, or
dispose of any hazardous substance or any other regulated material, and, to the
best of Seller's knowledge, such property is free of all such substances and
materials. The Seller, and any other person for whose conduct it may be
responsible, are in compliance with all laws, regulations and other federal,
state or local governmental requirements, and all applicable judgments, orders,
writs, notices, decrees, permits, licenses, approvals, consents or injunctions
relating to the generation, management, handling, transportation, treatment,
disposal, storage, delivery, discharge, release or emission of any waste,
pollutant or toxic, hazardous or other regulated substance (including, without
limitation, asbestos, radioactive material and pesticides) or to any other
actions, omissions or conditions affecting the environment (the "Environmental
Laws"). Neither the Seller nor any other person for whose conduct it may be
responsible has received any complaint, notice, order, or citation of any
actual, threatened or alleged noncompliance with any of the Environmental Laws,
and there is no proceeding, suit or investigation pending or, to the Seller's
knowledge, threatened against the Seller or any such person with respect to any
violation or alleged violation of the Environmental Laws, and there is no basis
for the institution of any such proceeding, suit or investigation.
SECTION 3.30 LICENSES; COMPLIANCE WITH REGULATORY REQUIREMENTS. The
-------------------------------------------------
Seller holds licenses, franchises, ordinances, authorizations, permits,
certificates, variances, exemptions, orders and approvals, domestic or foreign
(collectively, the "Licenses") which are material to the operation of the
business of the Seller. The Seller is in compliance with, and has conducted its
business so as to comply with, the terms of their respective Licenses and with
all applicable laws, rules, regulations, ordinances and codes, domestic or
foreign, including laws, rules, regulations, ordinances and codes relating to
the protection of the environment. The Seller has not engaged in any activity
that would cause revocation or suspension of any such material licenses. No
action or proceeding looking to or contemplating the revocation or
22
suspension of any of such material Licenses is pending, or, to the knowledge of
the Seller, threatened.
SECTION 3.31 BROKERS. No broker, finder or investment banker is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement, based upon any arrangement
made by or on behalf of Seller.
SECTION 3.32 ARM'S LENGTH TRANSACTIONS. Each of the agreements
-------------------------
entered into by the Seller have been entered into in good faith and represent
transactions that are no more favorable to the parties thereto than would be
available in an arm's length transaction between such parties. Except as set
forth on Schedule 3.32, there are no Related Person Transactions (as defined in
-------------
Section 5.2.2 hereof).
SECTION 3.33 DISCLOSURE. No representation or warranty made by
----------
Seller in this Agreement, nor in any document, written information, financial
statement, certificate, schedule or exhibit prepared and furnished or to be
prepared and furnished by Seller or the representatives of Seller pursuant
hereto or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts contained herein
or therein not misleading in light of the circumstances under which they were
furnished. Except as disclosed in Schedule 3.33, there is no event, fact or
-------------
condition (other than general business or economic conditions which affect
businesses generally) that adversely affects the business of Seller, or, to the
best of Seller's knowledge, that reasonably could be expected to do so, that has
not been set forth in this Agreement or in the Schedules attached hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER
Each Purchaser, severally and not jointly, hereby represents and
warrants to Seller as follows:
SECTION 4.1 EXISTENCE AND POWER. Each Purchaser is duly organized,
-------------------
validly existing and in good standing under the laws of the jurisdiction of its
organization. Each Purchaser has all powers required to carry on its business
as now conducted.
SECTION 4.2 AUTHORIZATION. The execution, delivery and performance
-------------
by each Purchaser of this Agreement, and the consummation by each Purchaser of
the transactions contemplated hereby has been duly authorized and no additional
action is required for the approval of this Agreement. This Agreement
constitutes a valid and binding agreement of each Purchaser, enforceable against
it in accordance with its terms, except as may be limited by
23
bankruptcy, reorganization, insolvency, moratorium and similar laws of general
application relating to or affecting the enforcement of rights of creditors and
except that enforceability of its obligations thereunder are subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
SECTION 4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery
--------------------------
and performance by each Purchaser of this Agreement, and the consummation of the
transactions contemplated hereby by each Purchaser require no action by or in
respect of, or filing with, any governmental body, agency, official or
authority, which individually or in the aggregate, would have a Material Adverse
Effect on each such Purchaser.
SECTION 4.4 NON-CONTRAVENTION. The execution, delivery and
-----------------
performance by each Purchaser of this Agreement, and the consummation by each
Purchaser of the transactions contemplated hereby do not and will not: (a)
contravene or conflict with the Certificate of Limited Partnership or other
organizational document of such Purchaser; or (b) contravene or conflict with or
constitute a material violation of any material provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
such Purchaser, which contravention, conflict or violation would have a Material
Adverse Effect on such Purchaser.
SECTION 4.5 LITIGATION. There is no action, suit, proceeding,
----------
claim or investigation pending or to the best of each Purchaser's knowledge
threatened, which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay any of the transactions contemplated hereby.
SECTION 4.6 INVESTMENT. Each Purchaser is acquiring the Shares
----------
purchased by it hereunder for its own account for investment and until such
Shares are registered pursuant to the Registration, not with a view to, or for
sale in connection with, any distribution thereof, nor with the intention of
distribution or selling the same; provided, however, that each Purchaser may
transfer Shares among one or more of its affiliates. Each Purchaser is aware
the Shares have not been registered under the Securities Act or under applicable
state securities or blue sky laws and that until the Shares are registered
pursuant to the registration statement, the certificate representing the Shares
will bear the legend set forth in Section 2.4 hereof. Each Purchaser is an
"accredited investor" as such term is defined in Rule 501 of Regulation D, as
promulgated under the Securities Act. The principal place of business of the
Purchasers is New York.
ARTICLE V
COVENANTS OF THE SELLER
SECTION 5.1 ACTIONS REQUIRING PURCHASER'S CONSENT. The Seller
-------------------------------------
covenants and agrees that, so long as shares of Preferred Stock are outstanding,
none of the following actions will take place prior or subsequent to the
Closing, without the prior written consent of
24
the Purchasers owning in the aggregate at least two-thirds of the outstanding
shares of Preferred Stock being first obtained (for purposes of this Section
5.1, Seller shall be deemed to include all Subsidiaries of Seller):
5.1.1 an authorization of any additional shares of capital stock of
any class or any other securities of the Seller;
5.1.2 the entering into of any bank or other non-trade indebtedness
for borrowed money, other than (i) a secured revolving credit
facility of up to $1,000,000 and (ii) borrowings made for the
purpose of redeeming the Preferred Stock pursuant to Section
2(B)(5) of Article VI of the Articles of Incorporation, as
amended;
5.1.3 the liquidation, dissolution or winding-up of the Seller or any
of its Subsidiaries or any merger or consolidation of the
Seller or any Subsidiary with or into another entity or the
sale of all or substantially all the assets of the Seller or
any Subsidiary;
5.1.4 the payment of any dividend by the Seller;
5.1.5 the repurchase by the Seller of any shares of the Seller's
capital stock;
5.1.6 any amendment to any of the Seller's charter documents which
relates to the Seller's capital structure;
5.1.7 any Related Person Transactions (as defined herein), unless the
same has been approved by a disinterested majority of the Board
of Directors of the Seller;
5.1.8 any material change in the compensation of the five (5) highest
compensated employees and/or officers of the Seller, unless the
same has been approved by a disinterested majority of the Board
of Directors of the Seller; and
5.1.9 otherwise take any action, directly or indirectly, which would
undermine the intent and purpose of this Agreement.
SECTION 5.2 ADDITIONAL COVENANTS.
--------------------
5.2.1 The Seller shall maintain insurance and cause each of its
Subsidiaries to maintain insurance as to their respective properties, products
and business, with financially sound and reputable insurers, against such
casualties and contingencies and of such types and
25
in such amounts as is customary for companies similarly situated, which
insurance shall be reasonably deemed by the Seller's Board of Directors to be
sufficient.
5.2.2 Except for transactions approved by a majority of the
disinterested directors of the Board of Directors, neither the Seller nor any of
its Subsidiaries shall enter into any transaction with any director, officer,
employee or holder of more than 5% of the outstanding capital stock of any class
or series of capital stock of the Seller or any of its Subsidiaries, member of
the family of any such person, or any corporation, partnership, trust or other
entity in which any such person, or member of the family of any such person, is
a director, officer, trustee, partner or holder of more than 5% of the
outstanding capital stock thereof, with the exception of transactions which are
consummated upon terms that are no less favorable than would be available if
such transaction had been effected at arms-length, in the reasonable judgment of
the Board of Directors ("Related Person Transactions").
5.2.3 The Seller shall comply and cause each Subsidiary to comply
with all applicable laws, rules, regulations and orders.
5.2.4 The Seller shall keep, and cause each Subsidiary to keep,
adequate records and books of account in which accurate and correct entries will
be made in accordance with generally accepted accounting principles consistently
applied.
5.2.5 The Seller shall not make any material change in the nature of
its business.
SECTION 5.3 REPORTING OBLIGATIONS.
---------------------
So long as shares of Preferred Stock are outstanding, Seller shall
furnish to the Purchasers:
5.3.1 As soon as practicable after receipt thereof, copies of any
material written communications delivered to, and received by, the Seller which
relates to the viability and existence of the Seller;
5.3.2 Promptly following receipt by the Seller, each audit response
letter, accountant's management letter and other written report submitted to the
Seller by its independent certified public accountants in connection with an
annual or interim audit of the books of the Seller or any of its Subsidiaries;
5.3.3 Promptly after the commencement thereof, notice of all actions,
suits, claims, proceedings, investigations and inquiries that could materially
adversely affect the Seller or any of its Subsidiaries in any manner;
26
5.3.4 Promptly upon sending, making available or filing the same, all
press releases, reports and financial statements that the Seller sends or makes
available to its stockholders or directors;
5.3.5 Promptly, from time to time, such other information regarding
the business, prospects, financial condition, operations, property or affairs of
the Seller and its Subsidiaries as the Purchasers reasonably may request; and
5.3.6 Representatives of the Purchasers shall be entitled to inspect
the properties, books and records of the Seller and its Subsidiaries and
interview the officers, directors and senior employees of the Seller and its
Subsidiaries, including Seller's accountants, attorneys and other advisors,
regarding the business of the Seller and its Subsidiaries during regular
business hours after reasonable notice to the Seller.
SECTION 5.4 CONFIDENTIALITY. Each party shall, and shall use its
---------------
reasonable efforts to cause its affiliates, directors, officers, agents,
advisors, employees and authorized representatives (collectively, "Agents") to,
(i) hold in confidence all confidential information obtained by it from the
disclosing party or such disclosing party's Agents pursuant to this Agreement
(unless such information (a) is or becomes generally available to the public or
the publishing industry other than as a result of wrongful acts of the non-
disclosing party, (b) is in the possession of the non-disclosing party or its
Agents prior to such disclosure (not by unlawful means), (c) is disclosed to the
non-disclosing party or its Agents on a non-confidential basis by a person other
than the disclosing party or its Agents that, to the non-disclosing party's
knowledge is not restricted from disclosing such information to the non-
disclosing party by any contractual, fiduciary or other legal obligation, or (d)
is developed by the non-disclosing party without the benefit of the confidential
information) and (ii) use all such data and information for the purpose of
consummating the transactions contemplated hereby, except, that the parties may
disclose such information (x) as required by law or securities market rule or
regulations or (y) in connection with legal proceedings relating to or arising
out of the transactions contemplated hereby. In the event a party is required
by clauses (x) and (y) of the preceding sentence to disclose any confidential
information of the disclosing party such non-disclosing party will (i) promptly
notify the disclosing party of the existence, terms and circumstances
surrounding such required disclosure, (ii) consult with the disclosing party on
the advisability of taking legally available steps to resist or narrow such
request, and (iii) if disclosure of such information is required, furnish only
such portion of the information as it is legally compelled to disclose and
exercise its reasonable best efforts to obtain, at the disclosing party's
expense, an order or other reliable assurance that confidential treatment will
be accorded to such portion of the disclosed information that the disclosing
party may designate. In the event this Agreement is terminated, each party
shall within three business days return or destroy (and certify to the other
party the destruction of), if so requested by the other party, all nonpublic
documents obtained from such other party in connection with the transactions
contemplated hereby and any copies thereof which may have been made by such
first party and shall use its reasonable efforts to cause its Agents
27
to whom such documents were furnished promptly to return or destroy (and certify
to the other party the destruction of) such documents and any copies thereof any
of them may have had.
SECTION 5.5 PUBLIC ANNOUNCEMENTS. For so long as the shares of
--------------------
Preferred Stock are outstanding, neither the Purchasers nor the Seller shall
(and each such party shall use its reasonable efforts to cause its subsidiaries,
affiliates, directors, officers, employees and authorized representatives not
to), issue any press release, make any public announcement or furnish any
written statement to its employees or stockholders generally concerning the
transactions contemplated by this Agreement without the consent of the other
party (which consent shall not be unreasonably withheld), except to the extent
required by applicable law or the applicable requirements of applicable stock
exchange rules (including NASDAQ) (and in either such case such party shall, to
the extent consistent with timely compliance with such requirement, consult with
the other party prior to making the required release, announcement or
statement).
SECTION 5.6 EXCLUSIVITY. (a) The Seller agrees that unless this
-----------
Agreement has been terminated by the mutual agreement of the parties, neither
the Seller, nor its respective affiliates, representatives, employees or agents
(collectively, "Agents") will, commencing on the date of this Agreement and
continuing through July 15, 1996 (the "Exclusive Period"), directly or
indirectly, (i) solicit, encourage or negotiate any proposal (whether solicited
or unsolicited) for, or execute any agreement relating to, a sale of all or any
part of the Shares or the Seller's assets or a sale of any equity or debt
security of the Seller or any merger, consolidation, recapitalization or similar
transaction involving the Seller with any other party (any of the foregoing is
referred to as an "Acquisition Proposal"), (ii) provide any information
regarding the Seller or the Shares to any third party for the purpose of
soliciting, encouraging or negotiating an Acquisition Proposal (it being
understood that nothing contained in clauses (i) or (ii) above shall restrict
the Seller or any of its Agents from providing information as required by legal
process), or (iii) operate the business of the Seller other than in the ordinary
course of business.
(b) In the event that the Seller does not consummate the transaction
contemplated hereby as a result of the Seller's breach of Section 5.6(a) hereof,
the Seller shall be liable to the Purchasers for all costs and expenses actually
incurred by the Purchasers in pursuit of the transaction, together with the
payment of liquidated damages to the Purchaser in the agreed upon amount of
$250,000.
SECTION 5.7 BOARD REPRESENTATION; ADVISORY FEES. (a) So long as
-----------------------------------
shares of Preferred Stock are outstanding, the Purchasers shall be entitled to
nominate that number of directors to the Seller's board of directors as is
proportional to their percentage ownership of the Seller, assuming conversion of
all Shares of Preferred Stock. The Seller shall use its best efforts to
facilitate the exercise by the Purchasers of their right, pursuant to Section
2(b) of the Seller's Articles of Incorporation, to elect and remove that number
of directors to the Seller's board of directors as is proportional to their
percentage ownership of the Seller, assuming
28
conversion of all Shares of Preferred Stock. The Seller shall have obtained a
commercially reasonable directors and officers liability insurance policy that
is reasonably satisfactory to the Purchasers.
(b) The Seller hereby grants to the Purchasers the first option to
provide and/or participate in any future financing that the Seller may require
for a period of two years from the Closing Date or, if sooner, the date of the
closing of the Seller's public offering. The Purchasers shall be entitled to
customary and appropriate advisory fees in the event that the Purchasers provide
acquisition, financing or other advisory services to the Seller.
SECTION 5.8 REGISTRATION STATEMENT UNDER EXCHANGE ACT. The Seller
-----------------------------------------
shall use its best efforts to file a registration statement under the Exchange
Act within thirty (30) days of the Closing. The Seller further covenants that it
will use its best efforts to cause such registration statement to become
effective within 90 days of the date of Closing.
ARTICLE VI
CONDITIONS TO THE CLOSING
SECTION 6.1 CONDITIONS TO OBLIGATIONS OF PURCHASERS. The
---------------------------------------
obligations of Purchasers hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing Date, of each of the following conditions
(any one or more of which may be waived by the Purchasers in their sole
discretion, but only in a writing signed by the Purchasers):
(A) OPINION. The Purchasers shall have received the
-------
opinion of Graves, Dougherty, ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Seller, which shall
be reasonably satisfactory to the Purchasers.
(B) SECRETARY'S CERTIFICATE. The Purchasers shall have
-----------------------
received a certificate of the Secretary of the Seller (in form and substance
satisfactory to the Purchasers) certifying (i) that attached thereto are true
and complete copies of the Articles and Bylaws of Seller, (ii) that attached
thereto are true and complete copies of the resolutions of the Board of
Directors of Seller authorizing the execution, delivery and performance of this
Agreement and any other documents, instruments and certificates required to be
executed by it in connection herewith and approving the consummation of the
transactions in the manner contemplated hereby including, but not limited to,
the authorization and issuance of the Shares and the filing of the Certificate
of Amendment to the Articles of Incorporation, (iii) the names and true
signatures of the officers of the Seller signing this Agreement and all other
documents to be delivered in connection with this Agreement, and (iv) such other
matters as the Purchasers may reasonably request.
29
(C) DUE DILIGENCE. Completion of due diligence by the Purchasers to
-------------
their entire satisfaction on or before the date of Closing.
(D) FILING OF CERTIFICATE OF AMENDMENT. The Certificate of Amendment
----------------------------------
to the Articles of Incorporation of Seller, in the form attached hereto as
Exhibit "B", shall have been filed with the Secretary of State of the State of
Nevada.
(E) PERFORMANCE; REPRESENTATION AND WARRANTIES. The Seller shall have
------------------------------------------
performed and complied in all respects with all agreements and conditions
contained in this Agreement which are required to be performed or complied with
by Seller prior to or at the Closing, the representation and warranties of the
Seller contained herein shall be true and correct on and as of the Closing Date
as though made on such date, and the Seller shall have delivered to the
Purchasers a certificate of a duly authorized officer of the Seller to such
effect.
(F) APPROVALS, ETC. Approval and consent of all appropriate
---------------
governmental regulatory agencies and the receipt of approval and/or consent from
all other appropriate parties, and all consents which may be required under any
of the Seller's agreements (or otherwise), including, but not limited to, all
landlord consents and waivers, with respect to the transactions contemplated
hereby shall have been obtained.
(G) NO MATERIAL ADVERSE EFFECT. There shall have occurred no event
--------------------------
which, in the Purchasers' sole discretion, could result in a Material Adverse
Effect on the Seller between the date hereof and the date of the Closing and the
Seller shall have operated its business in the ordinary course, consistent with
its past practices during such period.
(H) YEAR-END AUDIT. The Seller's audit for the fiscal year ended
--------------
December 31, 1995 shall have been completed and the Seller shall have received
an unqualified opinion from its independent public accountants respecting such
audited financial statements.
(I) EMPLOYMENT AGREEMENTS. Each of ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇
---------------------
shall have entered into employment agreements with the Seller on terms that are
satisfactory to the Purchaser.
(J) All holders of options exercisable into shares of the Seller's
Common Stock shall have waived, on terms reasonably acceptable to the
Purchasers, any provisions of their respective options, or the plans pursuant to
which such options have been granted, which by their terms accelerate any
vesting period to which such options are subject based upon or due to the
consummation of the transactions contemplated by this Agreement.
(K) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and Irawan Onggara shall have waived, on terms
reasonably acceptable to the Purchasers, their respective preemptive rights
relating to securities issued by the Seller.
30
(L) The Seller's Application for Authority to transact
business in Texas shall have been amended to reflect the business currently
conducted by the Seller.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF THE SELLER. The
---------------------------------------
obligations of the Seller hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing Date, of the following condition (which
may be waived by the Seller, in its sole discretion, but only in a writing
signed by Seller):
(A) PERFORMANCE; REPRESENTATION AND WARRANTIES. The
------------------------------------------
Purchasers shall have performed and complied in all respects with all agreements
and conditions contained in this Agreement which are required to be performed or
complied with by the Purchasers prior to or at the Closing, the representation
and warranties of each Purchaser, severally and not jointly, contained herein
shall be true and correct on and as of the Closing Date as though made on such
date, and the Purchasers shall have delivered to the Seller a certificate of a
duly authorized officer of the Purchasers to such effect.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES: INDEMNITY.
-----------------------------------------------------
(A) SURVIVAL OF REPRESENTATIONS. Except as otherwise
---------------------------
provided herein, the representations, warranties, covenants and agreements of
Seller contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing Date for the longer of
(i) two years from the Closing Date, or (ii) so long as the Shares of Preferred
Stock are outstanding and shall in no way be affected by any investigation of
the subject matter thereof made by or on behalf of the Purchasers.
(B) INDEMNIFICATION. (A) The Seller agrees to indemnify and
---------------
hold harmless each Purchaser, its affiliates, and its respective successors and
assigns, from and against any losses, damages, or expenses which are caused by
or arise out of (i) any breach or default in the performance by the Seller of
any covenant or agreement made by the Seller in this Agreement; (ii) any breach
of warranty or representation made by the Seller in this Agreement; and (iii)
any and all actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal fees and expenses) incident to any of the
foregoing. (B) Each Purchaser, severally and not jointly, agrees to indemnify
and hold harmless Seller, its affiliates, and its respective successors and
assigns, from and against any losses, damages, or expenses which are caused by
or arise out of (i) any breach or default in the performance by such Purchaser
of any covenant or agreement made by such Purchaser in this Agreement; (ii) any
breach of warranty or representation made by such Purchaser in this Agreement;
and (iii) any
31
and all actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal fees and expenses) incident to any of the
foregoing.
(C) INDEMNITY PROCEDURE. A party or parties hereto agreeing to be
-------------------
responsible for or to indemnify against any matter pursuant to this Agreement is
referred to herein as the "Indemnifying Party" and the other party or parties
------------------
claiming indemnity is referred to as the "Indemnified Party".
-----------------
An Indemnified Party under this Agreement shall, with respect to
claims asserted against such party by any third party, give written notice to
the Indemnifying party of any liability which might give rise to a claim for
indemnity under this Agreement within sixty (60) business days of the receipt of
any written claim from any such third party, but not later than twenty (20) days
prior to the date any answer or responsive pleading is due, and with respect to
other matters for which the Indemnified Party may seek indemnification, give
prompt written notice to the Indemnifying party of any liability which might
give rise to a claim for indemnity; provided, however, that any failure to give
such notice will not waive any rights of the Indemnified Party except to the
extent the rights of the Indemnifying Party are materially prejudiced.
The Indemnifying Party shall have the right, at its election, to
take over the defense or settlement of such claim by giving written notice to
the Indemnified Party at least fifteen (15) days prior to the time when an
answer or other responsive pleading or notice with respect thereto is required.
If the Indemnifying Party makes such election, it may conduct the defense of
such claim through counsel of its choosing (subject to the Indemnified Party's
approval of such counsel, which approval shall not be unreasonably withheld),
shall be solely responsible for the expenses of such defense and shall be bound
by the results of its defense or settlement of the claim. The Indemnifying Party
shall not settle any such claim without prior notice to and consultation with
the Indemnified Party, and no such settlement involving any equitable relief or
which might have an adverse effect on the Indemnified Party may be agreed to
without the written consent of the Indemnified Party (which consent shall not be
unreasonably withheld). So long as the Indemnifying Party is diligently
contesting any such claim in good faith, the Indemnified Party may pay or settle
such claim only at its own expense and the Indemnifying Party will not be
responsible for the fees of separate legal counsel to the Indemnified Party,
unless the named parties to any proceeding include both parties and
representation of both parties by the same counsel would be inappropriate. If
the Indemnifying Party does not make such election, or having made such election
does not, in the reasonable opinion of the Indemnified Party proceed diligently
to defend such claim, then the Indemnified Party may (after written notice to
the Indemnifying Party), at the expense of the Indemnifying Party, elect to take
over the defense of and proceed to handle such claim in its discretion and the
Indemnifying Party shall be bound by any defense or settlement that the
Indemnified Party may make in good faith with respect to such claim. In
connection therewith, the Indemnifying Party will fully cooperate with the
Indemnified Party should the Indemnified Party elect to take over the defense of
any such claim.
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The parties agree to cooperate in defending such third
party claims and the Indemnified Party shall provide such cooperation and such
access to its books, records and properties as the Indemnifying Party shall
reasonably request with respect to any matter for which indemnification is
sought hereunder; and the parties hereto agree to cooperate with each other in
order to ensure the proper and adequate defense thereof.
With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification shall be paid by the
Indemnifying Party upon the earlier to occur of: (i) the entry of a judgment
against the Indemnified Party and the expiration of any applicable appeal
period, or if earlier, five (5) days prior to the date that the judgment
creditor has the right to execute the judgment; (ii) the entry of an
unappealable judgment or final appellate decision against the Indemnified Party;
or (iii) a settlement of the claim. Notwithstanding the foregoing, provided that
there is no dispute as to the applicability of indemnification, the reasonable
expenses of counsel to the Indemnified Party shall be reimbursed on a current
basis by the Indemnifying Party if such expenses are a liability of the
Indemnifying Party. With regard to other claims for which indemnification is
payable hereunder, such indemnification shall be paid promptly by the
Indemnifying Party upon demand by the Indemnified Party.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 FURTHER ASSURANCES. Each party agrees to cooperate
------------------
fully with the other parties and to execute such further instruments, documents
and agreements and to give such further written assurances as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
SECTION 8.2 FEES AND EXPENSES. The Seller shall be responsible for
-----------------
the payment of the Purchaser's legal fees relating to the transactions
contemplated by this Agreement, up to the maximum amount of $30,000. All such
legal fees will be payable by Seller at Closing. Notwithstanding anything to
the contrary contained herein, the expenses of the Registration shall be borne
entirely by the Seller and shall not be subject to the foregoing limitation.
SECTION 8.3 NOTICES. Whenever any party hereto desires or is
-------
required to give any notice, demand, or request with respect to this Agreement,
each such communication shall be in writing and shall be effective only if it is
delivered by personal service or mailed, United States registered or certified
mail, postage prepaid, return receipt requested (and shall be deemed to have
been received three(3) days after deposit into the United States mail), or sent
by prepaid overnight courier, facsimile or confirmed telecopier, addressed as
follows:
33
If to the Purchasers:
c/o Oracle Partners, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy in each case to:
▇▇▇▇ ▇▇▇▇▇▇▇, P.C.
1350 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Seller:
Clinicor, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy in each case to:
Graves, Dougherty, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Unless otherwise stated above, such communications shall be effective when they
are received by the addressee thereof in conformity with this Section. Any
party may change its address for such communications by giving notice thereof to
the other parties in conformity with this Section.
SECTION 8.4 GOVERNING LAW AND JURISDICTION.
------------------------------
8.4.1 This agreement shall be construed in all respects under the
laws of the State of New York, without reference to its conflicts of law
provisions.
34
8.4.2 The Seller and the Purchasers hereby agree to submit to the
exclusive jurisdiction of the courts located in the State of New York and hereby
waive any objection based on venue or forum non conveniens with respect to any
----- --- ----------
action instituted therein, and agree that any dispute concerning the conduct of
any party in connection with this agreement or otherwise shall be heard only in
the federal courts described above.
8.4.3 Seller and the Purchasers each hereby waive personal service of
any and all process upon it and consent that all such service of process may be
made by hand delivery or mail to Seller and the Purchasers at the addresses set
forth in, and in accordance with, Section 8.3 of this Agreement. Each of Seller
and the Purchasers hereby consent to service of process as aforesaid.
SECTION 8.5 BINDING UPON SUCCESSORS AND ASSIGNS. This Agreement is
-----------------------------------
personal to each of the parties and may not be assigned without the written
consent of the other parties; provided, however, that the Purchasers shall be
permitted to assign their rights under this Agreement to any affiliate of the
Purchasers.
SECTION 8.6 SEVERABILITY. If any provision of this Agreement, or
------------
the application thereof, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall continue in full force and effect and in
no way be affected, impaired or invalidated.
SECTION 8.7 ENTIRE AGREEMENT. This Agreement and the other
----------------
agreements and instruments referenced herein constitute the entire understanding
and agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings.
SECTION 8.8 OTHER REMEDIES. Except as otherwise provided herein,
--------------
any and all remedies herein expressly conferred upon a party shall be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by
law, or in equity on such party, and the exercise of any one remedy shall not
preclude the exercise of any other.
SECTION 8.9 AMENDMENT AND WAIVERS. Any term or provision of this
---------------------
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by all parties hereto. The waiver by
a party of any breach hereof or default in the performance hereof shall not be
deemed to constitute a waiver of any other default or any succeeding breach or
default. This Agreement may not be amended or supplemented by any party hereto
except pursuant to a written amendment executed by all parties.
SECTION 8.10 NO WAIVER. The failure of any party to enforce any of
---------
the provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
35
SECTION 8.11 CONSTRUCTION OF AGREEMENT; KNOWLEDGE. For purposes
------------------------------------
of this Agreement, the term "knowledge," when used in reference to a corporation
means the actual knowledge of the executive officers of such corporation after
such officers shall have made inquiry that is customary and appropriate under
the circumstances to which reference is made, and when used in reference to an
individual means the actual knowledge of such individual after the individual
shall have made inquiry that is customary and appropriate under the
circumstances to which reference is made.
SECTION 8.12 COUNTERPARTS. This Agreement may be executed in any
------------
number of counterparts, each of which shall be an original as against any party
whose signature appears thereon and all of which together shall constitute one
and the same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as signatories.
SECTION 8.13 NO THIRD PARTY BENEFICIARY. Nothing expressed or
--------------------------
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person other than the parties hereto and their respective heirs,
personal representatives, legal representatives, successors and permitted
assigns, any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ORACLE PARTNERS, L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Managing General Partner
QUASAR INTERNATIONAL PARTNERS, C.V.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as President of
Oracle Management, Inc., Investment Advisor
ORACLE INSTITUTIONAL PARTNERS, L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
General Partner
36
GSAM ORACLE FUND, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as President of
Oracle Management, Inc., Investment Advisor
CLINICOR, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇
-----------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇
Title: President
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President
37
EXHIBIT A
---------
Purchaser: Purchase Price: No. of Shares:
--------- -------------- -------------
Oracle Partners, L.P. $1,660,000 1,660
Quasar International Partners, C.V. 350,000 350
Oracle Institutional Partners, L.P. 265,000 265
GSAM Oracle Fund, Inc. 1,225,000 1,225
Total: $3,500,000 3,500
========== =====
Other Exhibits and Schedules Omitted
