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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 16, 1998
ADVANCE PARADIGM, INC.
(Exact Name of Registrant as Specified in Charter)
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Delaware 0-21447 75-2493381
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
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545 E. John Carpenter Freeway, Suite 1570, Irving, Texas 75062
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (972) 830-6199
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 16, 1998, the Company completed the acquisition of
Baumel-Eisner Neuromedical Institute, Inc., ("Baumel-Eisner"), a privately held
clinical trials firm based in southern Florida. The effective date of the
transaction is December 1, 1998. The Company paid $25 million in exchange for
all outstanding shares of Baumel-Eisner, which was funded from the Company's
working capital. Baumel-Eisner conducts neurological and psychiatric clinical
trials of investigational new drugs on behalf of the pharmaceutical industry.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Pursuant to Section 2.10.3-05(b)(2)(i) of Regulation S-X, the Company
is not required to file financial statements of Baumel-Eisner as part of this
Form 8-K.
(b) Pro Forma Financial Information.
Pursuant to Section 2.10.11-01(b)(1) of Regulation S-X, the Company is
not required to file pro forma financial information as part of this Form 8-K.
(c) Exhibits.
Exhibits required by Item 601 of Regulation S-K:
Exhibit No. Exhibit
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2.1 Stock Purchase Agreement, by and among Advance
Paradigm, Inc., Baumel-Eisner Neuromedical Institute,
Inc., Barry Baumel, M.D. and Larry S. Eisner, M.D.,
dated effective as of December 1, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ADVANCE PARADIGM, INC.
Date: December 29, 1998 By: /s/ David D. Halbert
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Name: David D. Halbert
Title: Chairman of the Board, Chief
Executive Officer and President
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EXHIBIT INDEX
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Exhibit No. Exhibit
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2.1 Stock Purchase Agreement, by and among Advance
Paradigm, Inc., Baumel-Eisner Neuromedical Institute,
Inc., Barry Baumel, M.D. and Larry S. Eisner, M.D.,
dated effective as of December 1, 1998
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement), dated effective as of
December 1, 1998 (the "Effective Date"), is made and entered into by and among
Advance Paradigm, Inc., a Delaware corporation (the "Purchaser"), Baumel-Eisner
Neuromedical Institute, Inc., a Florida corporation (the "Company"), Barry
Baumel, M.D., a resident of Florida, and Larry S. Eisner, M.D., a resident of
Florida. Baumel and Eisner are collectively referred to herein as the
"Stockholders."
WHEREAS, the Purchaser wishes to purchase from the Stockholders, and
the Stockholders wish to sell to the Purchaser, 1,000,000 shares of the Class A
Common Stock, $0.001 par value, of the Company (the "Class A Common Stock"),
which shares represent 100% of the issued and outstanding shares of capital
stock of the Company; and.
WHEREAS, the Purchaser, the Company, and the Stockholders desire to
establish various rights and obligations in connection with the purchase and
sale of the Class A Common Stock;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF THE CLASS A COMMON STOCK,
CONSIDERATION, AND EARN OUT AMOUNT
1.01 SALE AND PURCHASE OF THE CLASS A COMMON STOCK. Subject to the
terms and conditions hereof and in reliance on the representations and
warranties made pursuant hereto, the Stockholders will sell to the Purchaser,
and the Purchaser will purchase from the Stockholders, on the Effective Date (as
hereinafter defined), the Class A Common Stock for the consideration set forth
in Section 1.2 hereof.
1.02 CONSIDERATION. In consideration of its purchase of the Class A
Common Stock, the Purchaser shall pay to the Stockholders in accordance with the
terms of this Section 1.02 the following:
(a) $25,000,000 in Cash (the "Initial Purchase Price") to the
Stockholders on the Closing Date, which shall be apportioned by the
Company to the Stockholders in accordance with their pro-rata stock
ownership in the Company as of the Effective Date and as set forth on
the signature page hereto; and
(b) the Earn-Out Amount (defined below) to the Stockholders in
Cash in accordance with their stock ownership in the Company as of the
Effective Date, which shall be calculated and payable in accordance
with Section 1.03 of this Agreement. For purposes of this Agreement,
the term "Cash" shall mean cash, certified or cashier's check, money
order, or wire-transfer of immediately available funds.
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1.03 EARN-OUT AMOUNT. The Earn-Out Amount shall be one-third of the
amount by which (a) the Adjusted Earnings (defined below) for each of the
12-month periods ending on March 31 of each of the years 2000, 2001, 2002, 2003,
and 2004 (the "Earn-Out Period) is greater than (b) the Adjusted Earnings for
the 12-month period ended July 31, 1998, or $4,800,000, whichever is greater.
(a) Adjusted Earnings, for purposes of this Agreement, shall be
the net income of the Company, excluding any increases or decreases
attributable to any business acquired by the Company, calculated in
accordance with generally accepted accounting principles, consistently
applied ("GAAP"), plus, to the extent deducted in calculating such net
income, the following:
(i) all charges for or with respect to interest, state,
federal, foreign, and local income taxes, and goodwill amortization;
(ii) any expenses of the Purchaser related to the transactions
contemplated hereby and potential or completed future financings or
acquisitions, including legal, accounting, due diligence, and
investment banking fees and expenses;
(iii) all corporate management fees, allocations of corporate
overhead, or other administrative costs that arise from the Purchaser
or its Affiliates (defined below) owning the stock of the Company;
(iv) all intercompany charges between the Purchaser or its
Affiliates and the Company to which the Stockholders have not given
their prior consent;
(v) any employee termination or other costs arising out of a
consolidation of services or facilities or other reorganization of the
Company subsequent to the Effective Date;
(vi) any employment related costs associated with personnel
required by the Purchaser or its Affiliates to be employed by the
Company that the Company would not have otherwise employed in the
ordinary course of business, other than any person hired in connection
with the Transition described in Section 6.01 herein; and
(vii) any reserves or adjustments to reserves that are not
consistent with GAAP;
(viii) any premiums for the life insurance policies identified
in Section 2.01(c)(vii).
(b) The Earn-Out Amount for each year, if any, shall be paid by
the Purchaser within 15 days of completion of the Purchaser's
consolidated audit for the applicable 12-month period ended March 31.
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(c) The Purchaser agrees not to take any action with regard to the
operations of the Company during the Earn Out Period that is likely to
result in a material change to the Company's historical business
practices without the prior written consent of the Stockholders.
ARTICLE II
CLOSING
2.01 TIME AND PLACE; DELIVERY OF DOCUMENTS. The closing of the purchase
and sale of the Class A Common Stock (the "Closing") will take place on December
16, 1998. At the Closing, the parties hereto will respectively deliver, and the
Closing is expressly conditioned upon the delivery of, the following:
(a) the Purchaser shall deliver to the Stockholders the Initial
Purchase Price for the Class A Common Stock in accordance with Section
1.02(a) above; and
(b) the Stockholders shall deliver to the Purchaser:
(i) one or more certificates, duly endorsed, representing all
of the shares of Class A Common Stock owned by each such Stockholder;
and
(ii) a duly executed Employment Agreement (so called herein)
for each Stockholder in the form attached hereto as Exhibit A.
(c) The Company shall deliver to the Purchaser:
(i) an opinion of counsel, dated the Effective Date, that is
satisfactory to the Purchaser in the Purchaser's sole discretion and
which is substantially in the form set forth on Exhibit B, attached
hereto and incorporated herein by reference;
(ii) a certified copy of the Company's articles of
incorporation and all amendments thereto, appropriately authenticated
and certified as being true and correct by a principal officer of the
Company;
(iii) a copy of the Company's bylaws, as amended to date,
certified as being true and correct by a principal officer of the
Company;
(iv) a certificate of good standing of the Company, duly
certified within the 30 days immediately preceding the Effective Date
by the Secretary of State of the State of Florida, and from every
jurisdiction in which the Company is qualified to do business;
(v) duly executed resignations from all of the directors of
the Company effective as of the Effective Date;
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(vi) a duly executed Employment Agreement for each Stockholder
in the form attached hereto as Exhibit A;
(vii) life insurance policies on each Stockholder with each
policy having a face amount of $1,000,000, and naming the Purchaser as
the beneficiary; and
(viii) any and all consents, dated prior to the Effective
Date, required to be obtained by the Company from third parties in
order to not be in default under any contract identified in Section
3.17 hereof, and to transfer the Class A Common Stock to the Purchaser
in accordance with this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
To induce the Purchaser to enter into this Agreement and to consummate
the transactions contemplated hereby, the Company and the Stockholders,
severally, but not jointly, hereby make the following representations and
warranties to the Purchaser on and as of the Effective Date:
3.01 ORGANIZATION AND QUALIFICATION. The Company (a) is a corporation
duly incorporated, validly existing, and in good standing under the laws of the
State of Florida, and has all requisite corporate power and authority to own,
operate, and lease its properties and to carry on its business as it is
currently being conducted; and (b) is qualified to do business in every
jurisdiction in which the character and location of the assets owned by it or
the nature of its business require such qualification. Except as set forth in
Schedule 3.01, the Company has such licenses, including but not limited to
medical licenses of its investigators, permits, consents, orders, approvals, and
other authorizations necessary for the conduct of its business as now being
conducted and proposed to be conducted. No approval, consent, authorization, or
other order of, and no designation, filing, registration, qualification, or
recording with any governmental authority, domestic or foreign, is required for
the Company's performance of this Agreement or the consummation of the
transactions contemplated hereby.
3.02 CAPITALIZATION.
(a) On the Effective Date, the authorized capital stock of the
Company consists of 10,000,000 shares of Class A Common Stock of which
1,000,000 shares are issued and outstanding, and 10,000,000 shares of
Class B Common Stock, $0.001 par value, none of which shares are issued
or outstanding. The 1,000,000 shares of Class A Common Stock
outstanding constitute 100% of the issued and outstanding shares of
capital stock of the Company.
(b) Except as set forth on Schedule 3.02, the Company has
outstanding (i) no shares of any class of capital stock other than the
Class A Common Stock, (ii) no options, warrants, or other rights to
purchase from the Company any capital stock of the Company; (iii) no
securities convertible into or exchangeable for capital stock of the
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Company; and (iv) no other commitments of any kind for the issuance of
additional shares of capital stock or options, warrants, or other
securities of the Company.
(c) No Person (defined below), including but not limited to any
officer or director of the Company, has any right (preemptive or
otherwise) to acquire any capital stock of the Company.
3.03 NO SUBSIDIARIES. Except as set forth on Schedule 3.03, there is no
corporation, partnership, or other business enterprise in which the Company has
any direct or indirect controlling, or 10% or greater, equity interest. Each
entity set forth on Schedule 3.03, unless otherwise noted, is a corporation or
other entity duly incorporated or organized, validly existing, and in good
standing, if applicable, under the laws of the state of its incorporation or
organization as noted on such schedule, and has all requisite corporate power
and authority to own, operate, and lease its properties and to carry on its
business as it is currently being conducted; and is qualified to do business in
every jurisdiction in which the character and location of the assets owned by it
or the nature of its business requires such qualification; and has all licenses,
including but not limited to medical licenses of its investigators, permits,
consents, orders, approvals, and other authorizations necessary for the conduct
of its business as now being conducted and proposed to be conducted.
3.04 AUTHORIZATION, EXECUTION, AND DELIVERY.
(a) The Company has all requisite power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. No proceedings on the part of the Company are
necessary to authorize the execution and delivery of this Agreement and
the consummation of such transactions. This Agreement and all other
agreements herein contemplated to be executed by the Company have been
duly executed and delivered by the Company and constitute legal, valid,
and binding obligations of the Company enforceable against the Company
in accordance with their respective terms, subject as to enforceability
to applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the enforcement of creditors' rights generally
and to the application of equitable principles and judicial discretion.
(b) The Stockholders have full legal power and capacity to
execute, deliver, and perform this Agreement and at the Closing will
have full legal power to sell the Class A Common Stock in accordance
with this Agreement. The Stockholders own beneficially and of record,
and have good and indefeasible title to, their respective shares of
Class A Common Stock free of all security interests, pledges, charges,
liens, or encumbrances of any kind, and the delivery of the Class A
Common Stock to the Purchaser pursuant to the terms of this Agreement
shall vest such beneficial ownership and good title in the Purchaser.
The Stockholders did not acquire any shares of Class A Common Stock in
violation of any preemptive right of any Person. This Agreement has
been duly and validly executed and delivered by the Stockholders and
constitutes the valid and binding obligation of the Stockholders
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, moratorium, reorganization, and similar laws affecting
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the rights and remedies of creditors generally and to the application
of equitable principles and judicial discretion.
3.05 NO CONFLICT WITH JUDGMENTS AND DECREES. The consummation of the
purchase of the Class A Common Stock in accordance with the terms, conditions,
and provisions of this Agreement will not conflict with, or result in a breach
of, any term, condition, or provision of any judgment, order, injunction,
decree, writ, or ruling of any court or tribunal, either domestic or foreign, to
which the Company or either Stockholder is subject.
3.06 GOVERNMENT APPROVALS. Except as set forth on Schedule 3.06, to the
Knowledge of the Company or the Stockholders, no consent, approval, order, or
authorization of, or registration, declaration, or filing with, any federal,
state, or local governmental authority is required to be made or obtained by the
Company, the Stockholders, or the Purchaser in connection with the execution and
delivery of this Agreement by the Company, the Stockholders, and the Purchaser,
or the consummation by the Company, the Stockholders, and the Purchaser of the
transactions contemplated hereby.
3.07 FINANCIAL STATEMENTS.
(a) The Company has previously delivered to the Purchaser true,
correct and complete copies of the following financial statements:
(i) Balance Sheets of the Company, dated as of July 31, 1997
and July 31, 1998 (the "Balance Sheet"), and Statements of Revenue and
Expenses for the 12 months ended July 31, 1997 and July 31, 1998
(collectively referred to as the "Statements"); and
(ii) a Balance Sheet of the Company, dated as of October 31,
1998, and a Statement of Income for the Company for the three months
ended October 31, 1998 (collectively referred to as the "Interim
Statements")
The Statements and the Interim Statements are collectively
referred to as the "Financial Statements"). The Financial Statements
(a) are a true and correct reflection of the financial statement of the
Company as of the dates therein; (b) were prepared on a cash basis; (c)
were prepared from the books and records of the Company; and (d) fairly
present the Company's financial condition and the results of its
operations at the relevant dates thereof and for the years or periods
covered thereby on a cash basis.
(b) In connection with Arthur Andersen, L.L.C.'s review of the
Company's financial condition, the Stockholders provided Arthur
Andersen, L.L.C. with true, correct and complete information and
documentation responsive to the requests of Arthur Andersen, L.L.C.
The Company has no material liabilities, accruals or reserves that
were not identified to and discussed with Arthur Andersen, L.L.C. by
the Stockholders.
(c) All of the receivables of the Company, net of any allowance
for doubtful accounts reflected in the balance sheet dated as of
October 31, 1998 and prepared on an accrual basis which is attached
hereto as Exhibit 3.07(c), are valid and legally binding, represent
bona fide transactions, arose in the ordinary course of business, and
are collectible in accordance with the terms of such receivables,
without setoff or counterclaim.
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3.08 INTERNAL ACCOUNTING CONTROLS. Except as set forth on Schedule
3.08, the Company (a) keeps books, records, and accounts that accurately,
fairly, and in reasonable detail reflect its assets and transactions, and (b)
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are accurately and promptly recorded,
(ii) transactions are executed in accordance with management's specific or
general authorizations, and (iii) access to its assets is permitted only in
accordance with management's general or specific authorization.
3.09 NO UNDISCLOSED LIABILITIES. Except as set forth in the Financial
Statements or on Schedule 3.09, the Company has no liabilities or obligations of
any nature, whether absolute, accrued, contingent, or otherwise, and whether due
or to become due (including without limitation any liability for taxes and
interest, penalties, and other charges payable with respect to any such
liability or obligation) which have had or could have a Material Adverse Effect
(defined below).
3.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 3.10
or as provided for or contemplated in this Agreement, since July 31, 1998, with
respect to the Company, there has not been:
(a) any transaction not in the ordinary course of business that
has had or could have a Material Adverse Effect;
(b) any change in the business, property, assets, liabilities
(whether absolute, accrued, contingent, or otherwise), operations,
liquidity, income, condition (financial or otherwise), prospects, or
net worth of the Company that has had or could have a Material Adverse
Effect;
(c) a declaration, or an agreement to declare or make any payment
of dividends or distributions of any assets of any kind to the
Stockholders, or a redemption, or agreement or authorization to redeem
any of the Class A Common Stock;
(d) any damage, destruction, or loss, extraordinary or otherwise
and whether or not covered by insurance, that has had or could have a
Material Adverse Effect;
(e) any amendment permitted or made with regard to any material
contract, material license, or material agreement to which the Company
is a party;
(f) any acquisition or disposition by the Company of any property
or asset, whether real or personal, having a fair market value in an
amount greater than $10,000, except in the ordinary course of business
and in conformity with past practice;
(g) any mortgage, pledge, or subjection to lien, charge, or
encumbrance of any kind or on any of the respective properties or
assets of the Company, except to secure borrowings in the ordinary
course of business and in conformity with past practice;
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(h) any increase in, or commitment to increase, the compensation
payable or to become payable to any officer, director, employee, or
agent of the Company, or any bonus payment or similar arrangement made
to or with any of such officers, directors, employees, or agents, other
than (except in the case of directors and officers) routine increases
made in the ordinary course of business and in conformity with past
practice;
(i) any incurrence of, guarantee of, assumption of, or taking any
property subject to, any liability, except for liabilities incurred or
assumed or property taken subsequent to July 31, 1998, in the ordinary
course of business and in conformity with past practice;
(j) any adoption of a plan or agreement or amendment to any plan
or agreement providing any new or additional benefits for officers,
directors, or employees;
(k) any material alteration in the manner of keeping the books,
accounts, or records of the Company, or in the accounting practices
therein reflected;
(l) any release or discharge of any obligation or liability of any
Person to the Company of any nature whatsoever, except in the ordinary
course of business and in conformity with past practice and except in
cases that have not had and could not have a Material Adverse Effect;
(m) any delay by the Company in paying any debt, charge, or amount
owed by the Company in excess of 30 days past the date such amount was
due;
(n) any increase or decrease of (i) any amounts charged for
services rendered or products sold by the Company; or (ii) inventory
ordered, except, in either case, in the ordinary course of business and
in conformity with past practice;
(o) any facts or circumstances that may reasonably result in the
loss of customers, suppliers, or vendors of the Company, including
without limitation, any notices, statements, or circumstances
indicating that any customer, supplier, or vendor has or will terminate
or alter its business relationship with the Company;
(p) any loan by the Company to any officer or director of the
Company, or any Affiliate thereof;
(q) any other event or condition of any character which has had or
could have a Material Adverse Effect; or
(r) any agreement or authorization to do any of the above.
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3.11 REAL AND PERSONAL PROPERTY.
(a) Except as indicated in Schedule 3.11, the Company has good and
marketable title to each of the items of real and personal tangible and
intangible property recorded as owned in the Statements (except for
property sold or otherwise disposed of since July 31, 1998, in the
ordinary course of business and in conformity with past practice), free
and clear of all mortgages, liens, security interests, conditional
sales contracts, encumbrances, leases, equities, claims, charges,
easements, rights-of-way, covenants, conditions, and restrictions,
except (i) those incurred or created in conformity with past practice;
(ii) mortgages and other encumbrances reflected in the Financial
Statements; (iii) liens for current taxes not yet due and payable; and
(iv) such imperfections of title and encumbrances as do not detract
from, or interfere with, the present use of the properties subject
thereto or affected thereby, or otherwise impair the value thereof or
the operations thereat; and
(b) No officer, director, or employee of the Company, nor any
spouse, child, or other relative or Affiliate thereof, owns directly or
indirectly in whole or in part, any of such real property or tangible
or intangible personal property.
3.12 ENVIRONMENTAL COMPLIANCE. Except as set forth in Schedule 3.12:
(a) The Company and any property owned or operated by it are in
compliance with all applicable Environmental Laws (defined below) and
have obtained and are in compliance with all permits, licenses, and
other authorizations required under any Environmental Law. There is no
past or present event, condition, or circumstance that is likely to
interfere with the conduct of the business of the Company in the manner
now conducted relating to such entity's compliance with Environmental
Laws or constitute a material violation thereof or which would have a
Material Adverse Effect;
(b) The Company does not now or has not leased, operated, owned,
or exercised managerial functions at any facilities or real property
with respect to which such entity, facility, or real property is
subject to any actual Proceeding (defined below) under any
Environmental Law, and neither the Company nor the Stockholders are
aware of any facts or circumstances that could give rise to such a
Proceeding;
(c) There are no actions or Proceedings pending or, to the
Knowledge of the Company or the Stockholders, threatened against the
Company under any Environmental Law, and the Company has not received
any notice (whether from any regulatory body or private person) of any
violation, or potential or threatened violation, of any Environmental
Law;
(d) There are no actions or Proceedings pending or, to the
Knowledge of the Company or the Stockholders, threatened under any
Environmental Law involving the release or threat of release of any
Polluting Substances (defined below) at or on (i) any Property (defined
below) currently or in the past owned, operated, or leased by the
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Company or over which the Company exercised managerial functions, or
(ii) at any property where Polluting Substances generated by the
Company have been disposed;
(e) There is no Property for which the Company is or was required
to obtain any permit under an Environmental Law to construct, demolish,
renovate, occupy, operate, or use such Property or any portion of it;
(f) The Company has not generated any Polluting Substances;
(g) There has been no release of Polluting Substances in violation
of any Environmental Law which would require any report or notification
to any governmental or regulatory authority in or on any Property;
(h) Neither the Company nor any Property is subject to
investigation or, to the Knowledge of the Company or the Stockholders,
threatened or pending litigation by federal, state, or local officials
or a private litigant as a result of any previous on-site management,
treatment, storage, release, or disposal of Polluting Substances or
exposure to any Polluting Substances;
(i) There are no underground or above ground storage tanks on or
under any Property which are not in conformity with any Environmental
Law and any Property previously containing such tanks has been
remediated in compliance with all Environmental Laws; and
(j) There is no asbestos containing material on any Property.
3.13 TAX MATTERS. Except as disclosed on Schedule 3.13,
(a) within the times and in the manner prescribed by law, the
Company has filed all federal, state, and local tax returns for which
the Company has had the responsibility for filing, and has timely paid
all taxes, penalties, and interest (hereinafter collectively referred
to as "Taxes") shown to be due and payable on such returns;
(b) all tax returns filed by the Company constitute complete and
accurate representations of its Tax liabilities for such years and
accurately sets forth all items (to the extent required to be included
or reflected in such returns) relevant to its future Tax liabilities,
including the tax bases of its properties and assets;
(c) the Company has not waived or extended any applicable statute
of limitations relating to the assessment of federal, state, local, or
foreign Taxes;
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(d) no examination of the federal, state, or local tax returns of
the Company is currently in progress, nor, to the Knowledge of the
Company or the Stockholders, is any such examination threatened; and
(e) to the Knowledge of the Company or the Stockholders, neither
the Company nor any Stockholder has received any communication from any
taxing authority regarding any tax return of the Company with respect
to any matter that has not been closed, settled, waived, or fully
concluded, or would otherwise have a Material Adverse Effect.
3.14 NO LITIGATION. Except as set forth on Schedule 3.14, there are no
investigations, actions, suits, or claims pending or, to the Knowledge of the
Company or the Stockholders, threatened against the Stockholders or the Company
or involving any of their respective properties or assets, whether at law or in
equity, before or by any foreign, federal, state, municipal, or other
governmental court, department, commission, board, bureau, agency,
instrumentality, or other person (a "Proceeding"), which may result in any
material liability to the Company or affect the Class A Common Stock.
3.15 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
3.15, there are no transactions by the Company with its officers, directors,
employees, or any Affiliates thereof, and no such person has any interest in any
property owned or used by the Company.
3.16 PERSONNEL. Schedule 3.16 sets forth a true and complete list of
the names and current salaries of all of the employees of the Company (other
than the Stockholders) for the fiscal year ended July 31, 1998, and as of
October 31, 1998.
3.17 CONTRACTS. Except as set forth on Schedule 3.17, the Company is
not a party to any oral or written: (a) contract for the employment or
compensation of any officer or employee that is not terminable on 30 days (or
less) notice without the payment of any amount on account of such termination;
(b) agreement, contract, or indenture relating to the borrowing of money by the
Company; (c) guaranty of any obligations for the borrowing of money or
otherwise; (d) management agreement, consulting agreement, independent
contractor agreement, or other similar contract or arrangement ; (e) collective
bargaining or labor agreement; (f) agreement with any present or former officer,
director, or shareholder; (g) employee pension, profit-sharing, or other benefit
plan or arrangement; (h) lease for real or personal property; (i) any contract
or agreement that will terminate upon a change in control of the Company; (j)
any contract or agreement pursuant to the terms of which the Company conducts
clinical trials; (k) contracts obligating the Company to provide products or
services for a period of one year or more; (l) any contract relating to pending
capital expenditures by the Company; (m) any non-competition or confidentiality
agreements restricting the Company in any manner; (n) other material contracts
or understandings, irrespective of subject matter and whether or not in writing,
and not otherwise disclosed on the Schedules hereto; or (o) contract, agreement,
or other commitment that involved a payment, or requires the payment by, the
Company of more than $10,000 in any 12-month period. The Company has furnished
the Purchaser with a true and complete copy of each such contract, including all
amendments thereto made through the Effective Date. Except as set
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forth on Schedule 3.17, all clinical trials contracts entered into prior to the
Effective Date, contain a covenant by the other party to such contract to
indemnify the Company against any and all liability or damage it may suffer as a
result of claims arising out of the clinical research protocol in connection
with such contract (provided, however, that such contract need not indemnify the
Company against any liability or damage resulting from (i) a failure to adhere
to the terms of the protocol or the written instruction of the other party
thereto relative to the use of the investigational drug; (ii) failure to comply
with any applicable Food and Drug Administration ("FDA") or other governmental
requirements; or (iii) negligence or willful malfeasance by the Company). Except
as set forth on Schedule 3.17, each of such contracts is a valid and binding
agreement of the Company and all other parties thereto; there has not occurred
any material default under any of the material terms and conditions thereof, nor
has any event occurred that with the giving of notice or lapse of time, or both,
would constitute any such material default. Except as set forth on Schedule
3.17, to the Knowledge of the Company or the Stockholders, no employee of, or
party or Person providing services to, the Company has any intention to
terminate his, her, or its relationship with the Company or, in the case of
employees, leave the employ of the Company.
3.18 EMPLOYMENT MATTERS. To the Knowledge of the Company or the
Stockholders, there is no activity or proceeding of any labor organization (or
representative thereof) or employee group to organize any employees of the
Company, or to effectuate or threaten to effectuate a strike, slowdown, work
stoppage, or lockout with regard to the Company.
3.19 COMPLIANCE WITH LAW.
(a) Except as set forth on Schedule 3.19(a), the conduct of the
business of the Company to date does not violate any federal, state, or
local laws, statutes, ordinances, rules, regulations, decrees, orders,
permits, or other similar items in force on the date hereof (including,
but not limited to, any of the foregoing relating to employment
discrimination, employment practices, withholding of taxes and other
sums from employees, the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and environmental protection or
conservation), the enforcement of which could have a Material Adverse
Effect, nor has the Company received any notice of any such violation.
(b) No prohibited transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Code, has occurred or is continuing with
respect to any employee pension benefit plan (as defined in Section
3(2) of ERISA) maintained by the Company or any welfare benefit plan
(as defined in Section 3(1) of ERISA) maintained by the Company. Except
as set forth on Schedule 3.19(b), no contributions are required to be
made by the Company with respect to any employee pension benefit plan.
(c) The Company has properly filed all reports (including all
amendments thereto) and properly maintained all books and records
required to be filed or maintained by it under applicable federal and
state food and drug laws, including without limitation, the rules and
regulations of the United States Food and Drug Administration and the
State of Florida, and has properly maintained such books and records in
accordance therewith.
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All information contained in such filings was true and complete on the
date such filings were made. Except as set forth on Schedule 3.19(c),
the Company is not subject to a formal or informal agreement or
enforcement action by any regulatory agency or authority having
jurisdiction over it.
3.20 EMPLOYEE BENEFITS.
(a) Except as set forth on Schedule 3.20 hereto, neither the
Company, nor any other corporation or trade or business under common
control with the Company (an "ERISA Affiliate"), as determined under
Section 414(b), (c), or (m) of the Internal Revenue Code of 1986, as
amended (the "Code"), sponsors, maintains, or otherwise is a party to,
or is currently in default under, or has any current accrued
obligations under any pension, profit sharing, or other retirement
plan, fringe benefit plan, health, group insurance, or other welfare
benefit plan, or other similar plan, agreement, policy, or
understanding, including, without limitation, any "employee benefit
plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether formal or
informal and whether legally binding or not under which the Company or
an ERISA Affiliate has any current or future obligation or liability or
under which any present or future employee of the Company or an ERISA
Affiliate, or such present or former employee's dependents or
beneficiaries, has any current or future rights to benefits (each such
plan, agreement, policy, or understanding being hereinafter referred to
individually as a "Plan"). Neither the Company nor any ERISA Affiliate
has any formal plan or commitment, whether legally binding or not, to
create any additional Plan or modify or change any existing Plan that
would affect any present or former employee of the Company, or such
present or former employee's dependents or beneficiaries. Except as
disclosed of Schedule 3.20 hereto, the Company is not now, and has not
been, a part of a controlled group of corporations within the meaning
of Section 414(b) of the Code or a group of trades or businesses under
common control within the meaning of Section 414(c) of the Code.
(b) Neither the Company nor any ERISA Affiliate has ever
sponsored, adopted, maintained, or been obligated to contribute to a
single employer, multiple employer, or multiemployer defined benefit
pension plan which is, or ever was, subject to the provisions of Title
IV of ERISA. Except as set forth in Schedule 3.20, neither the Company
nor any ERISA Affiliate has ever sponsored, adopted, maintained, or
been obligated to contribute to a Plan which is, or ever was, subject
to the minimum funding standards of Section 302 of ERISA and Section
412 of the Code. Neither the Company nor any ERISA Affiliate has any
obligation in connection with any Plan pursuant to the terms of a
collective bargaining agreement. The Company and all ERISA Affiliates
have made or will make all contributions required to be made by the
Company and all ERISA Affiliates under each Plan for all periods
through and including the Effective Date or adequate accruals therefore
have been made or will be provided.
(c) Each Plan has been maintained and administered in all material
respects in accordance with applicable laws, including, but not limited
to, the Age Discrimination in Employment Act, as amended, Title X of
the Consolidated Omnibus Budget
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Reconciliation Act of 1986, as amended ("COBRA"), ERISA, and the Code.
All reports required by any governmental agency with respect to each
Plan have been timely filed. The Company shall cooperate in full with
any action deemed reasonably necessary by the Purchaser to ensure
compliance with any federal or state law applicable to a Plan, whether
such action occurs prior to, on, or after the Effective Date. There are
no pending, or to the Knowledge of the Company, threatened or
anticipated, claims or actions with respect to any Plan (other than
routine claims for benefits by employees covered under any such Plan
and their beneficiaries). No "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code has occurred with
respect to any Plan, excluding transactions effected pursuant to a
statutory or administrative exemption. No tax under Section 4980B of
the Code has been incurred, or is reasonably expected to be incurred,
in respect of any Plan that is a group health plan as defined in
Section 162(i)(2) of the Code. No lien has been filed by any person or
entity on the assets of the Company or any ERISA Affiliate relating to
the operation or maintenance of a Plan, and no lien exists by operation
of law or otherwise on the assets of the Company as a result of the
operation or maintenance of a Plan or any other similar plan or plans,
and neither the Company nor any ERISA Affiliate has knowledge of the
existence of facts or circumstances that could result in the imposition
of such a lien.
(d) Each Plan that is intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified, both as to form
and operation and all necessary governmental approvals, including a
favorable determination as to the qualification under the Code of each
such Plan, and each amendment thereto, have been obtained.
(e) Neither the Company nor any ERISA Affiliate has any current or
projected liability in respect of post-employment or post-retirement
benefits for retired or former employees of the Company or an ERISA
Affiliate, or such present or former employees' dependents or
beneficiaries, except as required to avoid excise tax under Section
4980B of the Code. With respect to each Plan that is funded wholly or
partially through an insurance policy, there will be no liability of
the Company, as of the Effective Date, under any such insurance policy
or ancillary agreement with respect to such insurance policy.
(f) A true and complete copy of each Plan that covers any employee
or former employee of the Company (and, if applicable, related trust
agreements) and all amendments thereto and written interpretations
thereof have been furnished to Purchaser together with (i) the most
recent favorable determination letter, if any, with respect to each
Plan; (ii) the two most recent annual reports prepared in connection
with any such Plan (Form 5500, including all applicable schedules);
(iii) the most recent actuarial valuation report, if any, prepared in
connection with any such Plan; and (iv) the most recently disseminated
summary plan description and an explanation of any material plan
modifications made after the date thereof.
3.21 ABSENCE OF UNETHICAL BUSINESS PRACTICES. Neither the Company, any
director or officer thereof, nor a Stockholder has directly or indirectly given
or agreed to give any gift or similar benefit to any customer, contractor,
government, employee, or other person who was or is in a possible position to
help or hinder the Company, which gift or benefit (a) might subject the
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Company to any damages or penalties in any civil or criminal proceeding, (b)
might have had a Material Adverse Effect, or (c) might have a Material Adverse
Effect if not continued.
3.22 NO CONFLICT WITH OTHER INSTRUMENTS. The consummation of the
purchase of the Class A Common Stock in accordance with the terms, conditions,
and provisions of this Agreement will not be in material conflict with, or
result in a material breach of, any term, condition, or provision of, or
constitute a material default under, any indenture, mortgage, deed of trust, or
other material agreement or instrument to which the Company or either
Stockholder is a party and will not constitute an event that with the lapse of
time or action by a third party could result in any material default under any
of the foregoing, or result in the creation of any lien, charge, or encumbrance
upon any of the assets or properties of the Company or either Stockholder.
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3.23 INSURANCE. The Company has policies of insurance in effect in such
amounts as are adequate to protect its assets and properties and consistent with
its past practices. In addition, the Company and the Stockholders have in
effect, in such amounts as set forth on Schedule 3.23, continuing liability
insurance coverage in connection with the medical practice previously operated
by the Company and the Stockholders and subsequently sold to Dr. Andrew Kovacs.
Schedule 3.23 sets forth a true and complete list of all of the insurance
policies of the Company in effect as of November 30, 1998; the amount of the
premiums for each policy; and the date such premiums are due. Except as set
forth on Schedule 3.23, there are no pending claims under any insurance policy
of the Company nor, to the Knowledge of the Company or the Stockholders, any
facts or circumstances that may cause the cancellation of any insurance policy
held by the Company or the repudiation of any claims thereunder, nor prevent the
insurance policies it presently has in force from being renewed or require
onerous conditions to renewal that are not currently in effect with regard to
such insurance policies.
3.24 ACCOUNTS RECEIVABLE. The accounts receivable of the Company have
arisen in the ordinary course of business and are valid and enforceable subject
to no defenses, setoffs, or counterclaims.
3.25 INTELLECTUAL PROPERTY.
(a) Schedule 3.25(a) sets forth a true and complete list of
intellectual property owned or licensed by the Company (other than
off-the-shelf software). Except as indicated on Schedule 3.25(a), the
Company has full and exclusive right, title, and interest in and to, or
license rights to, all patents, patent applications, registered or
unregistered trademarks, service marks, and trade names, registered or
unregistered copyrights and applications therefor, licenses, approvals,
or governmental authorizations to conduct its business as now
conducted, know-how, proprietary rights and processes, trade secrets,
customer lists, methodologies (to the extent protectable), proprietary
development and marketing information and know-how, inventions,
inventors' notes (to the extent such notes exist), drawings, designs
associated with the foregoing, and other confidential information
(collectively, "Intellectual Property") relating to its business or
otherwise used in or necessary for the proper conduct of its business,
free and clear of all liens, security interests, claims and
encumbrances of any nature; and the Company has no obligation to any
other Person or entity with respect to the Intellectual Property or any
product or process of the Company utilizing or embodying any
Intellectual Property.
(b) There is (i) no infringement, misuse or misappropriation of
any Intellectual Property owned, licensed or controlled by any third
party arising out of any product or process now being used,
manufactured, or distributed, or ever having been used, manufactured,
or distributed at any time previously, by or on behalf of the Company,
(ii) no pending or, to the Knowledge of the Company or the
Stockholders, threatened claim or challenge of or proceeding for
infringement, misuse or misappropriation of or interference with any
Intellectual Property owned, licensed, or controlled by any third party
arising out of any product or process now being used, manufactured, or
distributed, or ever having been used, manufactured, or distributed at
any time previously, by or on behalf of the Company, (iii) except as
set forth in Schedule 3.25(b) hereto, no pending or
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threatened or potential claim, challenge or proceeding by the Company
against any third party for infringement, misuse, or misappropriation
of or interference with any Intellectual Property owned, licensed, or
controlled by the Company, or (iv) no notice or facts or information
rendering any Intellectual Property owned, controlled, or licensed by
the Company invalid or unenforceable, nor is there any allegation that
any such Intellectual Property is invalid or unenforceable.
(c) The Company has not disclosed any material confidential
information developed or utilized by the Company to any third party
except on a confidential basis, pursuant to a confidentiality
agreement, and with no intention to entitle such third party to use
such information other than for the purposes set forth in such
confidentiality agreement. To the Knowledge of the Company or the
Stockholders, no third party has disclosed confidential information
developed or utilized by the Company to any Person except as
specifically authorized by the Company.
3.26 MINUTE BOOKS. The minute books of the Company accurately reflect
all material actions taken by the Stockholders and its Board of Directors.
3.27 HART-SCOTT. Within the meaning of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the applicable regulations thereunder,
16 C.F.R. Parts 801-803 (collectively, "Hart-Scott"), neither the Company nor
any of its Affiliates (i) is engaged in manufacturing; (ii) has total assets of
$10 million or more; or (iii) has annual net sales of $100 million or more.
3.28 SUFFICIENCY OF ASSETS. Except as set forth on Schedule 3.28, the
assets and properties currently owned and operated by the Company constitute, in
the aggregate, all of the assets and properties used in the conduct of the
Company's business in the manner in which and to the extent to which such
business is currently being conducted. The Company has not received any notice
from any current supplier of items essential to the conduct of its business that
such supplier intends to terminate or materially alter a business relationship
for any reason, and no such supplier intends to terminate or materially alter
any such business relationship with the Company. The Company has not received
any notice from any customer that such customer intends to discontinue purchases
of products or services from the Company, and, to the Knowledge of the Company
or the Stockholders, no such customer intends to discontinue or cancel purchases
or orders.
3.29 HEALTH OF THE STOCKHOLDERS. The Stockholders are free from any
terminal or disabling disease, affliction, or condition, or any disease,
affliction, or condition that with the passage of time will become a terminal or
disabling disease, affliction, or condition. The Stockholders have no materially
adverse medical history, nor, does either Stockholder have in his past, any
facts, circumstances, or symptoms that would reasonably indicate that either of
the Stockholders may have or will encounter a terminal or disabling disease,
affliction, or condition.
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3.30 BROKER'S AGENTS AND FINDER'S FEES. There is no agent's, broker's,
or finder's fee or commission payable, or that will be payable, in connection
with the transactions contemplated by this Agreement by virtue of, or resulting
from, any action or agreement by the Company, a Stockholder, or any Affiliate
thereof.
3.31 DISCLOSURE. The information with respect to the Company and the
Stockholders heretofore provided and to be provided by the Company and/or the
Stockholders pursuant to this Agreement, including the Schedules and Exhibits
hereto, and each of the representations, agreements, documents, certificates and
writings to be delivered to the Purchaser or its representatives at the Closing,
do not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated herein or therein or necessary in
order to make the statements and writings contained herein or therein not false
or misleading in the light of the circumstances under which they were made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
To induce the Company and the Stockholders to enter into this Agreement
and to consummate the transactions contemplated hereby, the Purchaser hereby
makes the following representations and warranties to the Company and the
Stockholders on and as of the Effective Date:
4.01 ORGANIZATION AND QUALIFICATION. The Purchaser (a) is a corporation
duly incorporated, validly existing, and in good standing under the laws of the
State of Delaware, and has all requisite corporate power and authority to own,
operate, and lease its properties and to carry on its business as is currently
being conducted; and (b) is qualified to do business in every jurisdiction in
which the character and location of the assets owned by it or the nature of its
business requires such qualification. No approval, consent, authorization, or
other order of, and no designation, filing, registration, qualification, or
recording with any governmental authority, domestic or foreign, is required for
the Purchaser's performance of this Agreement or the consummation of the
transactions contemplated hereby.
4.02 AUTHORIZATION, EXECUTION, AND DELIVERY. The Purchaser has all
requisite power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Company's Board of Directors, and no other
proceedings on the part of the Company are necessary to authorize the execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein. This Agreement and all other agreements herein contemplated
to be executed by the Purchaser have been duly executed and delivered by the
Purchaser and constitute the legal, valid, and binding obligations of the
Purchaser enforceable against the Purchaser in accordance with their respective
terms, subject as to enforceability to applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and to the application of equitable principles and
judicial discretion.
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4.03 NO CONFLICT WITH OTHER INSTRUMENTS. The consummation of the
purchase of the Class A Common Stock in accordance with the terms, conditions,
and provisions of this Agreement will not be in conflict with, or result in a
breach of, the Certificate of Incorporation or Bylaws of the Purchaser, or any
term, condition, or provision of, or constitute a default under, any indenture,
mortgage, deed of trust, or agreement or instrument to which the Purchaser is a
party and will not constitute an event that with the lapse of time or action by
a third party could result in any default under any of the foregoing, or result
in the creation of any lien, charge, or encumbrance upon any of the assets or
properties of the Purchaser.
4.04 NO CONFLICT WITH JUDGMENTS AND DECREES. The consummation of the
purchase of the Class A Common Stock in accordance with the terms, conditions,
and provisions of this Agreement will not conflict with, or result in a breach
of, any term, condition, or provision of any judgment, order, injunction,
decree, writ, or ruling of any court or tribunal, either domestic or foreign, to
which the Purchaser is subject.
4.05 BROKER'S AGENTS AND FINDER'S FEES. Except for a commission to be
paid by the Purchaser to Advance Capital Markets, Inc., there is no agent's,
broker's, or finder's fee or commission payable, or that will be payable, in
connection with the transactions contemplated by this Agreement by virtue of, or
resulting from, any action or agreement by the Purchaser.
4.06 DISCLOSURE. The information with respect to the Purchaser
heretofore provided and to be provided by the Purchaser pursuant to this
Agreement, and each of the representations, agreements, documents, certificates
and writings to be delivered by the Purchaser or its representatives at the
Closing, do not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated herein or therein or
necessary in order to make the statements and writings contained herein or
therein not false or misleading in the light of the circumstances under which
they were made.
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ARTICLE V
INDEMNIFICATION
5.01 INDEMNIFICATION OF THE PURCHASER. Subject to the limitations set
forth in Section 5.02 below, the Company and the Stockholders each hereby
jointly and individually agree to indemnify, defend, and hold harmless the
Purchaser, its officers, directors, employees, agents, attorneys, and
shareholders (the "Indemnitees" or an "Indemnitee") from and against all
demands, claims, actions, or causes of action, assessments, losses, taxes,
damages, liabilities, costs, and expenses, including, without limitation,
interest, penalties, and reasonable attorneys' fees and expenses (collectively
"Damages"), asserted against, assessed upon, resulting to, imposed upon, or
incurred by an Indemnitee by reason of or resulting from (a) a material breach
of any representation, warranty, covenant, obligation, or agreement of the
Company or the Stockholders contained in or made pursuant to this Agreement,
including the Schedules and Exhibits hereto, or any facts or circumstances
constituting such a breach; or (b) the operation of the Company's business,
including, but not limited to, any products sold or services rendered, or any
Tax liability for any period, prior to the Effective Date (collectively the
"Indemnified Claims"). In addition, the Stockholders agree to indemnify the
Indemnitee for such Damages as they are incurred by the Indemnitee irrespective
of any ongoing or continuing legal proceedings and the relative timeframes and
issues associated with such proceedings, or the relative success or nonsuccess
the Indemnitee may experience in such proceedings; and the Purchaser shall have
the right to offset, withhold, and deduct such Damages from any payment of the
Earn Out Amount required to be made by the Purchaser pursuant to Section 1.03 of
this Agreement.
5.02 LIMITATIONS ON INDEMNIFICATION OF THE PURCHASER. No Indemnified
Claim may be brought under Section 5.01 against one or more of the Stockholders
until the amount of the Indemnified Claim or the aggregate amount of all
Indemnified Claims that have not yet been paid to an Indemnitee exceed $100,000.
In no event shall the Stockholders be liable to pay in the aggregate more than
the Initial Purchase Price pursuant to their duty to indemnify as set forth in
Section 5.01 hereof, and the Purchaser agrees that its sole and exclusive remedy
for an Indemnified Claim is to pursue its rights to be indemnified under Section
5.01 above; provided however, that if such claim is for a breach of the
representations and warranties made in Section 3.04(b) (insofar as such
representation relates to title to the Class A Common Stock) or Section 3.13
herein, or if the Indemnified Claim is based on fraud, the Purchaser shall have
all rights and remedies provided by this Agreement, at law, or in equity, and
the foregoing limitation on the aggregate dollar amount the Stockholders are
liable for shall be of no force and effect. The Purchaser's right to bring an
Indemnified Claim under Section 5.01 hereof shall expire 18 months after the
Effective Date.
5.03 INDEMNIFICATION CLAIMS PROCEDURE.
(a) For purposes of this Section 5.03, the party against whom an
Indemnified Claim is asserted under Section 5.01 herein is hereinafter
referred to as the "Indemnifying Party." All Indemnified Claims by any
Indemnitee under Section 5.01 hereof shall be asserted and resolved in
accordance with the following provisions. If any Indemnified Claim for
which an Indemnifying Party would be liable to an Indemnitee is
asserted
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against or sought to be collected from such Indemnitee by any third
party, such Indemnitee shall with reasonable promptness notify in
writing the Indemnifying Party of such Indemnified Claim stating with
reasonable specificity the circumstances for the Indemnitee's
Indemnified Claim; provided, however, that any failure to give such
notice will not waive any rights of the Indemnitee except to the extent
that the rights of the Indemnifying Party are actually prejudiced or to
the extent that any applicable period set forth in Section 5.02 herein
has expired without such notice being given. After receipt by the
Indemnifying Party of such notice, then upon prompt reasonable notice
from the Indemnifying Party to the Indemnitee, or upon the request of
the Indemnitee, the Indemnifying Party shall defend, manage, and
conduct any proceedings, negotiations, or communications involving any
claimant whose Indemnified Claim is the subject of the Indemnitee's
notice to the Indemnifying Party as set forth above, and shall take all
actions necessary, so as to enable the Indemnified Claim to be defended
against or resolved without expense or other action by the Indemnitee.
Upon request of the Indemnifying Party, the Indemnitee shall, to the
extent it may legally do so and to the extent that it is compensated in
advance by the Indemnifying Party for any costs and expenses thereby
incurred,
(i) take such action as the Indemnifying Party may reasonably
request in connection with such action;
(ii) allow the Indemnifying Party to dispute such action in
the name of the Indemnitee and to conduct a defense to such action on
behalf of the Indemnitee; and
(iii) render to the Indemnifying Party all such assistance as
the Indemnifying Party may reasonably request in connection with such
dispute and defense.
(b) Notwithstanding anything to the contrary herein, the
Indemnitee shall have the right to approve the Indemnifying Party's
choice of counsel, such consent not to be unreasonably withheld, and to
participate in or co-manage any defense of an Indemnified Claim
asserted with respect to such Indemnitee. The Indemnifying Party shall
not settle or compromise any Indemnified Claim or enter into any
settlement agreement regarding any Indemnified Claim, unless the
Indemnitee consents in writing to such settlement or compromise, such
consent not to be unreasonably withheld.
ARTICLE VI
POST-CLOSING COVENANTS AND AGREEMENTS
6.01 TRANSITION. The Stockholders hereby agree as follows:
(a) The Stockholders shall use their best efforts to transition
their respective responsibilities within the Company (the "Transition")
to other qualified and competent individuals prior to the fifth
anniversary of the Effective Date.
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(b) The Stockholders shall meet with the Purchaser on or about the
23 month anniversary of the Effective Date to discuss and begin the
development of a mutually agreeable written plan describing the
Transition. The Stockholders shall have the primary responsibility to
develop the appropriate steps and timelines to accomplish the
Transition on or before the fifth anniversary of the Effective Date
(the "Transition Plan").
(c) The Stockholders and the Purchaser shall thereafter meet, if
not mutually agreed otherwise, on or around the third anniversary, the
fourth anniversary, and 60 days prior to the fifth anniversary of the
Effective Date, to review the progress made by the Stockholders under
the Transition Plan and to amend or modify such plan as may be mutually
agreed. The Transition Plan will be deemed to be complete when the
Stockholders' duties, responsibilities, and relationships with Company
personnel, vendors, and customers have been assumed by other
individuals who have demonstrated, in the good faith and reasonable
opinion of the Stockholders and the Purchaser, the ability to perform
satisfactorily such functions and continue such relationships.
6.02 RESTRICTIVE COVENANTS. In order to ensure that the Purchaser will
realize the benefits of the transactions contemplated hereby, each of the
Stockholders, severally but not jointly, covenants and agrees that he will not,
during the 15-year period following the Effective Date:
(a) directly or indirectly, in any capacity whatsoever,
individually or on behalf of any other person or entity, engage or
invest in, own, manage, operate, finance, control, or participate in
the ownership, management, operation, financing, or control of, be
employed by, associated with, or in any manner connected with, lend the
Stockholder's name or any similar name to, lend the Stockholder's
credit to or render services or advice to, any business engaged or
about to become engaged in the Business of the Company, the Purchaser,
or any of their Affiliates. For purposes of this Agreement, the
Business of the Company, the Purchaser, and their Affiliates includes
(i) all those products and services that are presently or hereafter
marketed by the Company, the Purchaser, or any of their Affiliates, or
that are in the development stage on the Termination Date (as that term
is defined in the Employment Agreement); (ii) the business of
conducting clinical trials or medical research, and contract research
business; (iii) the third party prescription drugs claims processing
business; (iv) the organization and administration of retail pharmacy
networks; (v) the design, development, marketing of, or consulting as
to prescription drug benefit plans; (vi) the provision of mail service
pharmacy benefits; (vii) the collection, analysis, and/or sale of data
relating to prescription drug utilization; (viii) formulary management
and rebate administration services; (ix) disease state management, case
management, or demand management services; (x) health benefit plan
surveys, medical efficacy surveys, or NCQA surveys or related surveys;
and (xi) any other business in which the Company, the Purchaser, or
their Affiliates are engaged on the Termination Date. Notwithstanding
the foregoing sentence, each of the Stockholders may purchase or
otherwise acquire up to two percent of any class of securities of any
enterprise (but without otherwise participating in the activities of
such enterprise) if such securities are listed on any national or
regional securities exchange or have been registered under Section
12(g) of the Securities Exchange Act of 1934, as amended.
Notwithstanding anything to the contrary herein, nothing in this
Section 6.02(a) shall prohibit the
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<PAGE> 23
Stockholders from engaging in the general medical practice, and upon
termination of their employment with the Company, if neither the
Purchaser, the Company nor their Affiliates are engaged in the contract
research business, then subject to the prior written consent of the
Purchaser, which will not be unreasonably withheld, the Stockholders
may assist sponsors, or a sponsor's proxy which has responsibility for
monitoring a clinical trial, in the design or development of clinical
trials.
(b) directly or through an Affiliate (defined below), solicit any
Person that is a Current Customer (defined below) of the Purchaser or
its Affiliates for purposes of selling products or services to such
Person that are in competition with the products and services offered
or sold by the Purchaser or its Affiliates.
(c) employ, either directly or through an Affiliate, any current
employee of the Purchaser or its Affiliates or any individual who was
an employee of the Purchaser or its Affiliates during the 12 months
immediately preceding the Effective Date, and agrees not to solicit, or
contact in any manner that could reasonably be construed as a
solicitation, either directly or through an Affiliate, any employee of
the Purchaser or its Affiliates for the purpose of encouraging such
employee to leave or terminate his or her employment with the Purchaser
or its Affiliates.
(d) solicit, either directly or through an Affiliate, a current
vendor or supplier of the Purchaser or its Affiliates for purposes of
encouraging such vendor or supplier to cease or diminish providing
products or services to the Purchaser or its Affiliates, or to change
adversely the terms under which such vendor or supplier provides such
products or services to the Purchaser or its Affiliates.
(e) interfere with the Purchaser's relationship with any person
who at the relevant time is an employee, contractor, supplier, or
customer of the Purchaser or its Affiliates.
6.03 REFORMATION. If any covenant in Section 6.02 of this Agreement is
held to be unreasonable, arbitrary, or against public policy, such covenant will
be considered to be divisible with respect to scope, time, and geographic area,
and such lesser scope, time, or geographic area, or all of them, as an
arbitrator or a court of competent jurisdiction may determine to be reasonable,
not arbitrary, and not against public policy, will be effective, binding, and
enforceable against the Stockholders.
6.04 TERMINATION OF 401(K) PLAN. The Purchaser and the Company agree
and covenant, with respect to the currently existing 401(k) Plan of the Company
(the "Company Plan"), as follows:
(a) the Purchaser shall not make any material amendment to the
Company Plan without the prior written consent of the Stockholders,
except as required by law, court order, or the rules or regulations of
applicable governmental authorities including, but not limited to, the
United States Department of Labor and the Internal Revenue Service
("IRS");
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<PAGE> 24
(b) the Purchaser shall permit each Stockholder to remain as a
trustee under the Company Plan until the Company Plan is terminated and
all benefits under the Company Plan have been paid; provided, however,
that the Purchaser, in its sole discretion, shall have the right to (i)
appoint additional trustees under the Company Plan or (ii) remove a
Stockholder as a trustee in the event the Company Plan is not
administered and maintained in full compliance with all applicable
laws, rules, and regulations, or a Stockholder acts with negligence or
willful misconduct in his administration of the Company Plan. The
Company and the Stockholders hereby acknowledge and agree that any
defect or noncompliance in the Company Plan or its administration by a
Stockholder is an Indemnified Claim (as defined in Section 5.01
herein), and the Purchaser shall have all rights with regard to such
Indemnified Claim that are provided for in Article 5 of this Agreement;
(c) the Company shall terminate the Company Plan effective as of
the Effective Date and immediately prior to Closing;
(d) the Purchaser shall amend the Company Plan to allow for the
full vesting of all accounts subject to the Company Plan upon the
termination of the Company Plan;
(e) the Purchaser shall take all actions as are reasonably
necessary to submit the Company Plan to the IRS for a "determination
letter" that termination of the Company Plan will not adversely affect
the Company Plan's qualified status; provided, however, that if the
Purchaser does not receive such a determination letter due to problems
in the Company Plan or the administration thereof, then the Purchaser
shall be under no further duty to obtain such a determination letter;
(f) As soon as administratively possible after receipt of a
determination letter from the IRS, and to the extent permitted by law,
the Purchaser will distribute the assets of the Company Plan to the
Company Plan's participants, unless such distribution would adversely
affect the qualified status of the Company Plan under any applicable
law.
6.05 RECORDS RETENTION. The Purchaser and the Stockholders shall cause
the Company to store and maintain all medical records, case report forms,
regulatory materials, and all study-related documents in accordance with (i)
regulations of the FDA, Good Clinical Practices, International Conference on
Harmonization, or (ii) specific individual contracts with sponsoring
pharmaceutical companies and clinical research organizations, whichever is
applicable with regard to each record, form, regulatory material, or document.
The Purchaser and the Stockholders shall cause the Company to make such records,
forms, regulatory materials, and documents (collectively, the "Medical
Documents") available for review, or other lawful use, to the FDA, to the
authorized pharmaceutical company sponsor or its legitimate representatives, to
the duly constituted Institutional Review Board of record, all as required by
good clinical practice or by law; to a Stockholder, upon request so long as he
is employed by the Company; and to no other party without the consent of the
patient or the patient's legally authorized representative or by order of a
competent court of law. Notwithstanding the foregoing, the Purchaser and the
Stockholders shall cause the Company to make the Medical Documents
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<PAGE> 25
available for review by the Stockholders (regardless of their employment status
with the Company) to the extent such review is necessary to respond to matters
that are reflected, in whole or in part, in the Medical Documents and that arise
from (a) an investigation by any governmental authority, or (b) any demand,
claim, lawsuit, or similar action against the Stockholders, or any matter
arising in connection with any professional liability claim against either of
the Stockholders. In no event shall this Section 6.05 entitle the Stockholders
to use the Medical Documents in furtherance of, or to assist any Person in the
furtherance of, any endeavor, practice, business, or similar conduct that is in
competition with or intends to compete with, the Purchaser, the Company, or any
of their Affiliates, or would otherwise violate Section 6.02 herein.
6.06 OSHA RECORDS. The Purchaser shall maintain in confidence all OSHA
mandated personnel health records and shall comply with federal OSHA regulations
and state agency requirements regarding the health and welfare of health care
personnel and the disposal of biohazardous waste materials generated within the
normal course of business of the Company.
6.07 MAINTENANCE OF INSURANCE POLICIES. The Stockholders will continue
to have in effect (at their sole expense), for the 10-year period immediately
following the Effective Date, continuing liability insurance coverage in
connection with the medical practice previously operated by the Company and the
Stockholders and subsequently sold to Dr. Andrew Kovacs. The coverage of such
insurance policy shall be equivalent to the coverage in effect on the Effective
Date and shall name the Company and the Purchaser as loss payees.
ARTICLE VII
DEFINITIONS
The following terms as used in this Agreement shall have the meanings
set forth below:
"Affiliate" shall mean, as to any Person, any Person controlled by,
controlling, or under common control with such Person, and, in the case of a
Person who is an individual, a member of the family of such individual
consisting of a spouse, sibling, in-law, lineal descendant, or ancestor
(including by adoption), and the spouses of any such individuals. For purposes
of this definition, "control" (including the terms "controlling", "controlled
by" and "under common control with") of a Person means the possession, directly
or indirectly, alone or in concert with others, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of securities, by contract or otherwise, and no Person shall be deemed
in control of another solely by virtue of being a director, officer or holder of
voting securities of any entity. A Person shall be presumed to control any
partnership of which such Person is a general partner.
"Code" shall mean the Internal Revenue Code of 1986, as amended. All
references herein to sections of the Code shall include any corresponding
provision or provisions of succeeding law.
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<PAGE> 26
"Current Customer" shall mean any Person who is currently utilizing any
product or service sold or provided by the Purchaser, the Company, or any of
their Affiliates; any Person who utilized any such product or service within the
previous 12 months; and any Person with whom the Purchaser, the Company, or any
of their Affiliates is currently conducting negotiations concerning the
utilization of such products or services.
"Environmental Inspection" means asbestos surveys and sampling, other
environmental assessments and investigations, test borings, and any other
environmental surveys and analyses including, without limitation, soil and
ground water sampling, and phase I and phase II site assessments performed by
qualified environmental professionals having appropriate workers' compensation,
general liability, and professional liability insurance in amounts reasonably
acceptable to Purchaser and the Company.
"Environmental Laws" shall mean laws, including, without limitation,
federal, state, or local laws, ordinances, rules, regulations, interpretations,
and orders of courts or administrative agencies or authorities relating to
pollution, environmental protection, health and safety, or similar laws
(including, without limitation, ambient air, surface water, ground water, land
surface, and subsurface strata), including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Federal Clean Water Act ("CWA"), the Safe Drinking Water
Act ("SDWA"), the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), the Clean Air Act ("CAA"), the Emergency Planning and Community Right
to Know Act ("EPCRA"), the Occupational Safety and Health Act ("OSHA"), and
other laws relating to pollution or protection of the environment, or to the
manufacturing, processing, distribution, use, treatment, handling, storage,
disposal, or transportation of Polluting Substances.
"Governmental Authority" means any nation or government, any state,
regional, local, or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory. or
administrative functions of or pertaining to government.
"Knowledge" - An individual shall be deemed to have "knowledge" of a
particular fact or other matter if (i) such individual is actually aware of such
fact or other matter, or (ii) a prudent person serving in the same capacity as
such individual would be expected to discover or otherwise become aware of such
fact or other matter in the course of performing the official duties of such
individual. A corporation shall be deemed to have "knowledge" of a particular
fact or other matter if any individual serving as a director or officer (or in
any similar capacity) of the corporation has Knowledge (as set forth above) of
such fact or other matter.
"Material Adverse Effect" means any development, change, or effect that
is materially adverse to the business, properties, tangible or intangible
assets, net worth, condition (financial or other), results of operations, or
prospects of the Company.
"Person" shall have the meaning given in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended, as modified and used in Sections
13(d)(3) and 14(d)(2) of such act.
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<PAGE> 27
"Polluting Substances" shall be construed broadly to include (a)
asbestos, (b) petroleum products or wastes, (c) biomedical or biological wastes,
and (d) all pollutants, contaminants, chemicals, or industrial, toxic, or
hazardous substances or wastes and shall include, without limitation, any
flammable explosives, radioactive materials, oil, hazardous materials, hazardous
or solid wastes, hazardous or toxic substances or regulated materials defined in
CERCLA, CWA, SDWA, RCRA, EPCRA, and CAA and/or any other Environmental Laws, as
amended, and in the regulations adopted and publications promulgated thereto;
provided, to the extent that the laws of the State of Florida establish a
meaning for "hazardous substance," "hazardous waste," "hazardous materials,"
"solid waste," or "toxic substance," which is broader than that specified in any
of CERCLA, CWA, SDWA, RCRA, EPCRA, and CAA or other Environmental Laws such
broader meaning shall apply.
"Property" includes any property (whether real or personal) which the
Company currently or in the past has leased, operated, owned, or managed in any
manner, including, without limitation, any property acquired by foreclosure or
deed in lieu thereof and property held as security for a loan or other
indebtedness by the Company on the date hereof.
ARTICLE VIII
MISCELLANEOUS
8.01 AMENDMENTS. This Agreement may not be modified, amended, or
supplemented except by an agreement in writing signed by all of the parties
hereto.
8.02 ASSIGNABILITY. This Agreement and the rights and obligations
hereunder shall not be assignable without the express written consent of all
parties hereto.
8.03 CONSTRUCTION OF AGREEMENT. Each party and its counsel have
participated fully in the review and revision of this Agreement. Any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not apply in the interpretation of this Agreement.
8.04 COURT COSTS AND ATTORNEYS' FEES. If any action at law or in
equity, including an action for declaratory relief, is brought to enforce or
interpret the provisions of this Agreement, the prevailing party shall be
entitled to recover costs of court and reasonable attorneys' fees from the other
party or parties to such action, which fees may be set by the court in the trial
of such action or may be enforced in a separate action brought for that purpose,
and which fees shall be in addition to any other relief that may be awarded.
8.05 ENTIRE AGREEMENT. This Agreement and the executed documents, the
forms of which are attached hereto as Exhibits, together with the Schedules and
Exhibits attached hereto and thereto, shall constitute the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and shall supersede all prior or contemporaneous negotiations, understandings
and agreements. There are no representations, agreements, arrangements, or
understandings, oral or written, between or among the parties hereto relating to
the subject matter of this Agreement that are not fully expressed herein.
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<PAGE> 28
8.06 FURTHER ASSURANCES. Each party hereto, without further
consideration, shall, at the reasonable request of any other party hereto after
the consummation of the transactions contemplated by the Agreement, execute and
deliver any instruments of conveyance, assignment, transfer, assumption, or
other instrument or document and take such other actions, as such other party
may reasonably request to more effectively consummate the transactions
contemplated by this Agreement.
8.07 GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS RULES OR CHOICE OF LAWS RULES THEREOF. VENUE FOR
ANY ACTION BROUGHT HEREUNDER SHALL BE PROPER ONLY IN DALLAS COUNTY, TEXAS.
8.08 HEADINGS. The headings of sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
8.09 INUREMENT. Subject to the restrictions against transfer or
assignment as herein set forth, the provisions of this Agreement shall inure to
the benefit of, and shall be binding on, the heirs, assigns, successors,
personal representatives, estates, and legatees of each of the parties hereto.
8.10 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under any present or future law, and if
the rights or obligations of either of the parties hereto would not be
materially and adversely affected thereby, (a) such provisions shall be fully
severable; (b) this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provisions had never comprised a part hereof;
(c) the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance; (d) in lieu of such illegal, invalid, or
unenforceable provision, there shall be added automatically as a part of this
Agreement a legal, valid, and enforceable provision as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible.
8.11 MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
8.12 NOTICES, ETC. All notices, demands or other communications given
hereunder shall be in writing and shall be sufficiently given if delivered
either personally or by a United States nationally recognized courier service
marked for next business day delivery or sent by facsimile confirmed by
telephone conversation (for this purpose, voice mail messages are insufficient)
or in a sealed envelope by first class mail, postage prepaid and either
registered or certified, addressed as follows:
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<TABLE>
<CAPTION>
<S> <C>
if to the Company: Baumel-Eisner Neuromedical Institute, Inc.
7301 N. University Drive, Suite 300
Tamarac, Florida 33321
Attention: Chairman of the Board
Telephone: (954) 720-1899
Facsimile: (954) 726-6468
with a copy to: Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Michael G. Taylor
Telephone: (305) 579-0500
Facsimile: (305) 579-0717
if to the Stockholders: Barry Baumel, M.D.
555 N.E. 34th Street
Apartment 1403
Miami, Florida, 33137
Larry S. Eisner, M.D.
5852 N.W. 23rd Terrace
Boca Raton, Florida 33496
with a copy to Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Michael G. Taylor
Telephone: (305) 579-0500
Facsimile: (305) 579-0717
if to the Purchaser: Advance Paradigm, Inc.
545 E. John Carpenter Freeway, Suite 1570
Irving, Texas 75062
Attention: Chief Executive Officer
Telephone: (972) 830-6199
Facsimile: (972) 830-6196
with a copy to: Block & Balestri, P.C.
15851 Dallas Parkway, Suite 1020
Addison, Texas 75001
Attention: Steven R. Block, P.C.
Telephone: (972) 788-2700
Facsimile: (972) 788-2772
</TABLE>
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<PAGE> 30
or to such other address with respect to any party hereto as such party may from
time to time notify (as provided above) the other parties hereto. Any such
notice, demand or communication shall be deemed to have been received (i) on the
date of delivery, if delivered personally, (ii) one business day after delivery
to a nationally recognized overnight courier service, if marked for next day
delivery, (iii) five business days after the date of mailing, if mailed or (iv)
on the date of confirmation, if sent by facsimile.
8.13 EXPENSES. Except as otherwise provided herein, the Purchaser, on
the one hand, and the Stockholders, on the other, shall each bear their
respective legal, accounting, tax, consulting and financial advisory, and other
fees and expenses incurred in connection with the transactions contemplated by
this Agreement. It is expressly agreed that the Purchaser shall pay all fees and
expenses related to the preparation of the Statements, and the Company shall pay
all premiums on the life insurance policies referred to in Section 2.01(c)(viii)
hereof.
8.14 SURVIVAL REPRESENTATIONS AND WARRANTIES. All representations,
warranties, covenants, and obligations of the parties hereto and remedies
available to the parties hereto shall survive the Closing.
8.15 THIRD PARTIES. Except with respect to indemnification under
Section 5.01 herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person other than the parties hereto and
their successors, heirs, or assigns, any rights or remedies under or by reason
of this Agreement.
8.16 WAIVER. The failure of any party to insist, in any one or more
instances, upon performance of any of the terms, covenants, or conditions of
this Agreement shall not be construed as a waiver or a relinquishment of any
right or claim granted or arising hereunder or of the future performance of any
such term, covenant, or condition, and such failure shall in no way affect the
validity of this Agreement or the rights and obligations of the parties hereto.
No waiver of any provision or condition of this Agreement shall be valid unless
executed in writing and signed by the party to be bound thereby, and then only
to the extent specified in such waiver. No waiver of any provision or condition
of this Agreement shall be construed as a waiver of any other provision or
condition of this Agreement, and no present waiver of any provision or condition
of this Agreement shall be construed as a future waiver of such provision or
condition.
8.17 DISCLOSURE ON SCHEDULES. Disclosure of a specific item in any one
Schedule hereto shall be deemed a disclosure as to all other applicable
Schedules if either (a) there is an explicit cross-reference to another Schedule
or Schedules, or (b) the party to whom the disclosure is being made could
reasonably be expected to ascertain the scope of the modification to another
representation notwithstanding the absence of a cross-reference.
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<PAGE> 31
IN WITNESS WHEREOF, the undersigned have set their hands effective the
date first written above.
THE PURCHASER:
ADVANCE PARADIGM, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
THE COMPANY:
BAUMEL-EISNER NEUROMEDICAL
INSTITUTE, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
THE STOCKHOLDERS: NUMBER OF SHARES OF
OF CLASS A COMMON STOCK
-----------------------
- ------------------------------------- 500,000
Barry Baumel, M.D.
- ------------------------------------- 500,000
Larry S. Eisner, M.D.
31
