<PAGE>
UNITED STATES 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): February 13, 1998
-----------------
SERACARE, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-21781 95-4343492
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation) Number)
1925 Century Park East, Suite 1970, Los Angeles, California 90067
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 772-7777
--------------
Not Applicable
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(Former name or former address, if changed since last report)
Total sequentially numbered pages in this document: 13.
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
A. CONSOLIDATED TECHNOLOGIES, INC.
On February 13, 1998, SeraCare, Inc. (referred to herein as "SeraCare" or the
"Company") a Delaware corporation acquired substantially all of the operating
assets of Consolidated Technologies, Inc., a Texas corporation and Conco
Associates, Inc. (dba Cone Biotech), a Texas corporation (collectively herein
referred to as "CTI" ) located in Austin, Texas.
CTI is a biomedical manufacturing company with a 25 year operating history
which specializes in the supply of products and services to the in-vitro
diagnostic industry. CTI's products include processed biological materials
and private-labeled products for manufacturing or laboratory use.
Under terms of the Asset Purchase Agreement dated February 13, 1998 (which is
filed as Exhibit 2.2 to this Form 8K and incorporated herein by this
reference), the purchase price paid by SeraCare (which is subject to
adjustment) consisted of $5,600,000 in cash and 439,000 shares of SeraCare
common stock. The purchase price was determined through arms length
negotiations between the Company and CTI. In order to finance the
acquisition and provide working capital for the subsequent operation of CTI's
business, the Company issued subordinated debentures (see ITEM 5. below).
The operating assets acquired by SeraCare include, but are not limited to:
certain real property; all furniture and fixtures; all machinery and
equipment; all leasehold improvements; all licenses and other intangible
properties including certifications, FDA licenses and trademarks; all
inventories; and all rights and interests arising under or in connection
with any contracts with customers or potential customers to which CTI is a
party. SeraCare plans to continue to operate CTI as a biomedical
manufacturing company.
B. THE WESTERN STATES GROUP, INC.
On February 13, 1998 (the "Closing Date"), SeraCare acquired all of the stock
of The Western States Group, Inc., a California corporation (herein referred
to as "Western States" ) located in Fallbrook, California.
Western States is a worldwide marketing organization for therapeutic blood
plasma products, diagnostic test kits, specialty plasma and bulk plasma, with
offices in Helsinki, London, Paris, Milan, Tel Aviv, Seoul and Hong Kong.
The primary focus of Western States is on multinational biotec,
pharmaceutical and technology products.
Under terms of the Stock Purchase Agreement dated February 13, 1998 (which is
filed as Exhibit 2.1 to this Form 8K and incorporated herein by this
reference), the purchase price paid by SeraCare (which is subject to
adjustment) consisted of $4,033,204 in cash and 125,000 shares of SeraCare
common stock. In addition, the selling shareholders are entitled to receive
"earn-out" cash payments for the first and second twelve full calendar months
after the Closing Date. The amount of such cash payments depends on certain
performance criteria of Western States as defined in the Stock Purchase
Agreement. The purchase price was
<PAGE>
determined through arms length negotiations between the Company and Western
States. In order to finance the acquisition and provide working capital for
the subsequent operation of Western States' business, the Company issued
subordinated debentures (see ITEM 5. below).
In the acquisition of the stock of Western States, SeraCare acquired all of
the operating assets of Western States. The operating assets acquired by
SeraCare include, but are not limited to: cash; trade accounts receivable;
inventories; certain furniture and fixtures; all machinery and equipment; all
leasehold improvements; all licenses and other intangible properties
including certifications, FDA licenses and trademarks; and all rights and
interests arising under or in connection with any contracts with customers to
which Western States is a party. SeraCare plans to continue to operate
Western States as a worldwide marketing and distribution company.
<PAGE>
ITEM 5. OTHER EVENTS.
On February 13, 1998 (the "Closing Date"), SeraCare executed a Securities
Purchase Agreement with Pecks Management Partners Ltd on behalf of certain
investors and issued $16,000,000 in Senior Subordinated Debentures due 2005
(the "Debentures") with interest payable quarterly on the unpaid balance at
12%. The Debentures are senior to all other debt of the Company but are
subordinate to any future senior bank debt. Repayment of the Debentures has
been guaranteed by each of SeraCare's subsidiaries. SeraCare is required to
make mandatory payments on the outstanding Debentures on the fifth
anniversary of the Closing Date (as to one-third of the then outstanding
principal balance) and on the sixth anniversary of the Closing Date (as to
one-half of the then outstanding principal balance). On the seventh
anniversary of the Closing Date, the principal amount of all Debentures then
outstanding, together with all accrued and unpaid interest thereon to and
including such date, are due and payable. SeraCare is also required to prepay
the outstanding Debentures following certain public offerings of SeraCare's
securities or following the occurrence of a "Change in Control" (as defined
in the Securities Purchase Agreement). In addition, the Debentures are
subject to optional prepayment by the Company at any time, in whole or in
part, at par plus accrued interest to the date of prepayment.
In connection with the Debentures, the Company also issued and delivered to
the investors Warrants to purchase an aggregate of 2,100,572 shares of its
Common Stock representing an aggregate of 16% of the fully diluted
outstanding shares of SeraCare, at any time, at an exercise price of $.01 per
share. The number of shares of Common Stock subject to the Warrants is
subject to adjustment from time to time as provided in the Warrant Agreement.
At the option of each Warrant holder, the Warrants may be put back to
SeraCare following a Change in Control at a price equal to the fair market
value of the underlying shares of Common Stock, less the exercise price per
share. In addition, following certain public offerings of SeraCare's
securities and repayment in full of the Debentures, SeraCare may redeem the
Warrants at anytime for a price of $1.00 per Warrant. SeraCare has granted to
the Warrant holders registration rights with respect to the shares of Common
Stock receivable upon exercise of the Warrants.
The Securities Purchase Agreement contains several affirmative and negative
covenants for the benefit of the holders of the Debentures. So long as the
Debentures are outstanding, such covenants (among other things) require
SeraCare to maintain certain minimum funded debt and fixed charge coverage
ratios and prohibit SeraCare and its subsidiaries from (I) incurring certain
types of indebtedness or liens on their respective assets, (ii) making
certain dividend and other restricted payments with respect to their
securities, (iii) making certain loans, advances or investments in other
persons, (iv) selling a substantial amount of assets or entering into certain
mergers or other business combinations, and (v) using securities which are
senior to or pari passu with the debentures. So long as Debentures are
outstanding, and for so long as the investors hold any combination of
warrants or shares received upon exercise of warrants equal to 25% of the
aggregate number of shares receivable upon exercise of all warrants, the
investors are also entitled to designate an individual to serve on SeraCare's
and each of its subsidiaries' board of directors.
In connection with this transaction, the Company also paid Sutro & Co. a
finders fee of $640,000 and issued to Sutro & Co. Warrants to purchase
131,286 shares of its Common Stock at an
<PAGE>
exercise price of $3.00 per share (subject to adjustment as specified in the
Warrant Agreement). Such warrants are exercisable only after twelve months
from the Closing Date and for a period of for four years thereafter. The
Warrants issued to Sutro & Co. otherwise contain substantially the same terms
as those described above for the Warrants issued to the investors.
The Securities Purchase Agreement, the form of Debenture, the form of
Warrant, the Subsidiary Guarantee Agreement, the Securityholders Agreement,
the Registration Rights Agreement and the Warrant and Registration Rights
Agreement entered into with Sutro & Co. (collectively, the "Financing
Documents") are filed as Exhibits to this Form 8K and are incorporated herein
by this reference. The summary description of the Financing Documents
contained herein is qualified in its entirety by reference to such documents.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
(1) Audited Combined Financial Statements of Consolidated
Technologies, Inc. and Affiliate for the years ended
December 31, 1996 and 1995.
a. Report of Independent Public Accountants.
b. Combined Balance Sheets as of December 31, 1996 and 1995.
c. Combined Statements of Operations for the years ended
December 31, 1996 and 1995.
d. Combined Statements of Stockholders' Deficit for the years
ended December 31, 1996 and 1995.
e. Combined Statements of Cash Flows for the years ended
December 31, 1996 and 1995.
f. Notes to Combined Financial Statements.
(2) Audited Financial Statements of Western States Group, Inc.
for the fiscal years ended May 31, 1997 and 1996.
a. Report of Independent Public Accountants.
b. Balance Sheets as of May 31, 1997 and 1996.
c. Statements of Operations for the years ended May 31, 1997
and 1996.
d. Statements of Stockholders' Equity for the years ended May
31, 1997 and 1996.
e. Statements of Cash Flows for the years ended May 31, 1997
and 1996.
f. Notes to Financial Statements.
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION
At this time, it is impractical to file the required pro forma
financial information. Such data will be filed as soon as
practical, but no later than 60 days after the date on which this
Report on Form 8-K is filed.
(c) EXHIBITS
2.1 Stock Purchase Agreement, dated as of February 13, 1998, among
SeraCare, Inc. and the Shareholders of The Western States
Group, Inc. named therein.
2.2 Asset Purchase Agreement, dated as of February 13, 1998, among
SeraCare, Inc., Consolidated Technologies, Inc. and Conco
Associates, Inc. (dba Cone Biotech).
4.1 Securities Purchase Agreement for $16,000,000 12% Senior
Subordinated Debentures due 2005 and Warrants to purchase
Shares of Common Stock, dated as of February 13, 1998 by and
among SeraCare, Inc. and the Investors named on the signature
pages thereto.
4.2 Form of 12% Senior Subordinated Debenture due 2005 for
Exhibit 4.1.
4.3 Form of Warrant Agreement to Purchase Common Stock for
Exhibit 4.1.
4.4 Securityholders Agreement, dated as of February 13, 1998,
among SeraCare, Inc., the Investors listed on Exhibit I. A
hereto and the Shareholders of the Company listed on Exhibit
I. B thereto.
4.5 Registration Rights Agreement, dated as of February 13, 1998,
among SeraCare, Inc. and the Investors whose names appear
under the heading Investors on the signature page thereof.
4.6 Subsidiary Guarantee Agreement, dated as of February 13,
1998, made by Avre, Inc., Binary Associates, Inc., SeraCare
Acquisitions, Inc., BHM Labs, Inc., SeraCare Technology, Inc.,
The Western States Group, Inc., wholly-owned subsidiaries of
SeraCare, Inc. in favor of the Guaranteed Parties (as defined
therein).
4.7 Warrant Agreement, dated as of February 13, 1998, among
SeraCare, Inc. and Sutro & Co. Inc.
4.8 Registration Rights Agreement, dated as of February 13, 1998,
among SeraCare, Inc. and Sutro & Co. Inc.
<PAGE>
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.
SERACARE, INC.
DATE: FEBRUARY 26, 1998 BY: /s/ Barry D. Plost
------------------ ------------------------------------
BARRY D. PLOST
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
BY: /s/ Jerry L. Burdick
------------------------------------
JERRY L. BURDICK
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
<PAGE>
INDEX OF FINANCIAL STATEMENTS PRESENTED HEREIN
(1) Audited Combined Financial Statements of Consolidated
Technologies, Inc. and Affiliate for the years ended December
31, 1996 and 1995.
a. Report of Independent Public Accountants.
b. Combined Balance Sheets as of December 31, 1996 and 1995.
c. Combined Statements of Operations for the years ended
December 31, 1996 and 1995.
d. Combined Statements of Stockholders' Deficit for the years
ended December 31, 1996 and 1995.
e. Combined Statements of Cash Flows for the years ended
December 31, 1996 and 1995.
f. Notes to Combined Financial Statements.
(2) Audited Financial Statements of Western States Group, Inc.
for the fiscal years ended May 31, 1997 and 1996.
a. Report of Independent Public Accountants.
b. Balance Sheets as of May 31, 1997 and 1996.
c. Statements of Operations for the years ended May 31, 1997
and 1996.
d. Statements of Stockholders' Equity for the years ended May
31, 1997 and 1996.
e. Statements of Cash Flows for the years ended May 31, 1997
and 1996.
f. Notes to Financial Statements.
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
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COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
[LOGO]
BDO SEIDMAN, LLP
Accountants and Consultants
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
---------------------------------------------------------
COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
CONTENTS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS
Combined balance sheets 4
Combined statements of operations 5
Combined statements of stockholders' deficit 6
Combined statements of cash flows 7-8
Summary of significant accounting policies 9-12
Notes to combined financial statements 13-19
<PAGE>
[LOGO] BDO SEIDMAN, LLP 1900 Avenue of the Stars, 11th Floor
Accountants and Consultants Los Angeles, California 90067
Telephone: (310) 557-0300
Fax: (310) 557-1777
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying combined balance sheets of Consolidated
Technologies, Inc. and its affiliate, Conco Associates, Inc. dba Cone Biotech
(the "Companies") as of December 31, 1996 and 1995 and the related combined
statements of operations, stockholders' equity and cash flows for the years
then ended. These combined financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Consolidated
Technologies, Inc. and its affiliate as of December 31, 1996 and 1995 and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
BDO Seidman, LLP
December 12, 1997
<PAGE>
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<TABLE>
<CAPTION>
DECEMBER 31, 1996 1995
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<S> <C> <C>
ASSETS (NOTE 5)
CURRENT
Cash and cash equivalents $ 75,639 $ 74,693
Trade accounts receivable 115,376 81,912
Accounts receivable - related party (Note 9) 33,083 90,070
Inventories (Note 1) 780,084 371,209
Notes receivable - related party (Note 9) 82,224 --
Prepaid expenses and other assets 27,156 14,291
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Total current assets 1,113,562 632,175
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PROPERTY AND EQUIPMENT - NET (NOTE 2) 401,195 461,939
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OTHER ASSETS
Note receivable - stockholder (Note 4) 250,391 112,126
Restricted cash (Note 6) 150,647 150,895
Note receivable - officers (Note 9) 58,602 78,206
Investment in joint venture (Note 3) 35,963 59,251
Other assets (Note 9) 59,134 39,472
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Total other assets 554,737 439,950
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$2,069,494 $1,534,064
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</TABLE>
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
COMBINED BALANCE SHEETS
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<TABLE>
<CAPTION>
DECEMBER 31, 1996 1995
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 190,527 $ 109,983
Accounts payable - related party (Note 9) -- 278,362
Accrued liabilities 59,725 77,136
Current maturities under capital lease
obligation (Note 8) 25,617 24,654
Notes payable (Note 5) 399,070 512,734
Unsecured loan - related party (Note 9) 100,000 --
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Total current liabilities 774,939 1,002,869
BONDS PAYABLE (NOTE 6) 1,000,000 1,000,000
NOTE PAYABLE - RELATED PARTY (NOTES 7 AND 9) 439,693 --
CAPITAL LEASE OBLIGATION (NOTE 8) 11,224 36,841
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Total liabilities 2,225,856 2,039,710
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COMMITMENTS AND CONTINGENCY (NOTES 8, 10 AND 11)
STOCKHOLDERS' DEFICIT
Common stock:
Class A, no par value, 1,000,000 shares
authorized, 163,500 shares issued and
outstanding 163,500 163,500
Class B, no par value, 1,000,000 shares
authorized, 163,500 shares issued and
outstanding 163,500 163,500
$1 par value, 10,000 shares authorized,
1,389 shares issued and outstanding 1,389 1,389
Additional paid-in capital 500,078 500,078
Accumulated deficit (984,829) (1,334,113)
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Total stockholders' deficit (156,362) (505,646)
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$2,069,494 $ 1,534,064
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</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND NOTES TO COMBINED FINANCIAL STATEMENTS.
4
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
COMBINED STATEMENTS OF OPERATIONS
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<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996 1995
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<S> <C> <C>
REVENUE:
Product $3,325,832 $3,420,303
Services 149,098 25,042
Other 43,247 42,589
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Total revenue 3,518,177 3,487,934
Cost of revenue 2,630,475 2,819,905
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GROSS PROFIT 887,702 668,029
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Operating expenses:
Salaries, wages and employee benefits 643,790 620,825
General and administrative expenses 180,560 175,907
Consulting services (Note 9) 118,543 2,500
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TOTAL OPERATING EXPENSES 942,893 799,232
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OPERATING INCOME (LOSS) (55,191) (131,203)
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OTHER INCOME (EXPENSE):
Equity in earnings of joint venture (Note 3) 530,711 656,662
Interest and other income 77,974 56,363
Interest and other expenses (204,210) (223,899)
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TOTAL OTHER INCOME 404,475 489,126
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NET INCOME $ 349,284 $ 357,923
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</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND NOTES TO COMBINED FINANCIAL STATEMENTS.
5
<PAGE>
<TABLE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT
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Consolidated
Technologies, Inc. Cone Bio Tech
------------------ -------------
Common Stock Additional
------------------ Common Paid-in Accumulated
Class A Class B Stock Capital Deficit
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<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $163,500 $163,500 $1,389 $500,078 $(1,692,036)
Net income - - - - 357,923
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Balance, December 31, 1995 163,500 163,500 1,389 500,078 (1,334,113)
Net income - - - - 349,284
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Balance, December 31, 1996 $163,500 $163,500 $1,389 $500,078 $ (984,829)
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SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO COMBINED FINANCIAL STATEMENTS.
</TABLE>
6
<PAGE>
<TABLE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
YEARS ENDED DECEMBER 31, 1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 349,284 $ 357,923
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 106,009 128,612
Undistributed earnings of affiliate 23,288 48,339
Changes in operating assets and liabilities:
Trade accounts receivable (33,464) 76,803
Accounts receivable, related party 56,987 (90,070)
Inventories (408,875) 73,707
Prepaid expenses and other assets (12,864) (3,913)
Other assets (19,663) (2,805)
Accounts payable 520,237 (356,777)
Accounts payable, related party (278,362) 278,362
Accrued liabilities (17,411) (15,804)
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Net cash provided by operating activities 285,166 494,377
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INVESTING ACTIVITIES:
Capital expenditures (45,265) (46,989)
Increase in note receivable from stockholder (138,265) -
Increase in note receivable, related party (82,224) -
Repayment on (increase in) note receivable-officers 19,604 (43,124)
Net decrease (increase) in other assets 248 (6,801)
Purchase of investment in Cenetron - (15,000)
- -------------------------------------------------------------------------------
Net cash used in investing activities (245,902) (111,915)
- -------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCREASE IN CASH AND CASH EQUIVALENTS
YEARS ENDED DECEMBER 31, 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 1,524,000 1,290,000
Proceeds from unsecured loan-related party 100,000 -
Principal payments on long-term debt (1,637,664) (1,622,759)
Principal payments under capital lease obligation (24,654) -
- --------------------------------------------------------------------------------
Net cash used in financing activities (38,318) (332,759)
- --------------------------------------------------------------------------------
Net increase in cash and cash equivalents 946 49,703
Cash and cash equivalents at beginning of year 74,693 24,990
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 75,639 $ 74,693
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 204,210 $ 223,900
Interest received $ 36,488 $ 12,952
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITY:
Conversion of accounts payable to note payable $ 439,693 $ -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND NOTES TO COMBINED FINANCIAL STATEMENTS.
8
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
NATURE OF Consolidated Technologies, Inc. and its affiliate, Conco
BUSINESS Associates, Inc. dba Cone Biotech (the "Companies")
develop and manufacture intermediate biological
materials, in vitro diagnostics products and proficiency
testing specimens. The Companies market their products
and services to manufacturers and suppliers of in vitro
diagnostics and providers of proficiency testing
programs throughout the United States.
The intermediate biological materials processed by the
Companies are used in the formulation of in vitro
diagnostics having applications in laboratory
disciplines such as immunology, clinical chemistry,
toxicology and infectious disease. Proficiency testing
specimens manufactured from the intermediate biological
materials are primarily used in evaluating the
performance of laboratories in testing for substances
included in the specimens.
PRINCIPLES OF The accompanying combined financial statements include
COMBINATION the accounts of Consolidated Technologies, Inc. ("CTI")
and Cone Biotech ("CB"), both of which are under common
control. All material intercompany balances and
transactions are eliminated.
INVESTMENT IN CB uses the equity method to account for its investment
JOINT VENTURE in a 50% owned joint venture.
INVENTORIES Inventories, which primarily consist of blood plasma as
raw materials and proficiency testing kits as finished
goods, are valued at the lower of cost or market. Cost
is determined by the first-in, first-out ("FIFO") method.
PROPERTY, Property and equipment are stated at cost and are
EQUIPMENT, depreciated over the estimated useful lives of five to
DEPRECIATION AND seven years using the double declining balance method.
AMORTIZATION Leasehold improvements are recorded at cost and are
amortized using the straight-line method, over the
lesser of the estimated useful lives of the property or
the lease term.
9
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
INCOME TAXES The Companies have elected S Corporation filing status
for federal income tax purposes. Accordingly, no
provision for federal income taxes is required.
Stockholders are taxed individually on their pro rata
share of respective corporate earnings.
CASH AND CASH For purposes of reporting cash flows, the Companies
EQUIVALENTS consider certificates of deposit purchased with an
original maturity of three months or less to be cash
equivalents. Cash includes cash on hand and in banks.
ACCOUNTING The preparation of financial statements in conformity
ESTIMATES with generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUE OF CASH AND CASH EQUIVALENTS. The carrying amounts at
FINANCIAL December 31, 1996 and 1995 approximates the fair value
INSTRUMENTS because of the short maturity of those instruments.
NOTES RECEIVABLE. Based on discounted cash flows, the
fair values of the notes receivable approximates the
carrying value at December 31, 1996 and 1995.
LONG-TERM DEBT. Based on borrowing rates currently
available to the Companies for bank loans with similar
terms and average maturities, the fair value of long-term
debt, including the current portion thereof, approximates
its carrying value at December 31, 1996 and 1995.
10
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------------------------------------------------
LONG-LIVED In accordance with SFAS 121, "Accounting for the Impairment
ASSETS of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", management reviews long-lived assets and
intangible assets for impairment whenever events or
changes in circumstances indicate the carrying amount of
an asset may not be fully recoverable. As part of this
assesment, management prepares an analysis of the
undiscounted cash flows for each product that has
significant long-lived or intangible asset values
associated with it. This analysis for the asset values as
of December 31, 1996 and 1995 indicated there was no
impairment to these assets' carrying values.
11
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
NOTED TO COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1. INVENTORIES Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
-----------------------------------------------------------
<S> <C> <C>
Raw materials $105,428 $176,297
Work-in-process 9,624 9,354
Finished goods 665,032 185,558
-----------------------------------------------------------
$780,084 $371,209
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
2. PROPERTY AND Property and equipment consist of the following at
EQUIPMENT December 31:
<TABLE>
<CAPTION>
1996 1995
-----------------------------------------------------------
<S> <C> <C>
Land $ 250 $ 250
Machinery and equipment 973,419 932,742
Buildings and improvements 261,633 257,045
Equipment under capital lease 118,200 118,200
Furniture and fixtures 101,134 101,134
-----------------------------------------------------------
1,454,636 1,409,371
Accumulated depreciation
and amortization (1,053,441) (947,432)
-----------------------------------------------------------
$ 401,195 $ 461,939
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
Depreciation and amortization expense on property and
equipment were $106,009 and $128,612 in 1996 and 1995,
respectively, and were included in general and
administrative expenses.
12
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
3. INVESTMENT In November 1993, CB and Serafy Laboratories, Inc.
IN JOINT ("Serafy") signed a limited partnership agreement and
VENTURE formed Seracon Diagnostics Company ("Seracon"). CB owns
50% of Seracon. Seracon was formed to manufacture, label,
package and distribute specimens pursuant to an agreement
between Cone Biotech, Serafy and the College of American
Pathologists ("CAP"). In general, Seracon provides
specimens, test materials and related services for CAP's
Interlaboratory Comparison Survey Program.
Following is a summary of financial position and results
of operations of Seracon for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
-----------------------------------------------------------
<S> <C> <C>
Total assets $ 121,756 $ 256,561
-----------------------------------------------------------
-----------------------------------------------------------
Current liabilities $ 49,829 $ 138,057
Partners' capital 71,927 118,504
-----------------------------------------------------------
Total liabilities and
Partners' capital $ 121,756 $ 256,561
-----------------------------------------------------------
-----------------------------------------------------------
Sales $4,566,753 $5,412,043
-----------------------------------------------------------
Net income $1,061,422 $1,313,323
-----------------------------------------------------------
-----------------------------------------------------------
CB's proportionate share
of earnings $ 530,711 $ 656,662
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
13
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
4. NOTES In January of 1996, CB signed an unsecured draw note with
RECEIVABLE - its sole stockholder. The balance of this note was $250,391
STOCKHOLDER at December 31, 1996. The stated annual interest rate is
7%. This note will mature on January 17, 1998. Accrued
interest as of December 31, 1996 was $14,869.
In January of 1994, CB signed an unsecured draw note with
its sole stockholder. The balance of this note was $112,126
at December 31, 1995. The stated annual interest rate was
0%. This note matured on January 17, 1996. Imputed interest
on the note receivable - stockholder was not material.
5. NOTES Notes payable consist of the following at December 31:
PAYABLE
<TABLE>
<CAPTION>
1996 1995
-----------------------------------------------------------
<S> <C> <C>
CB note payable to Minstar, Inc.,
in default and due on demand,
guaranteed by a stockholder,
stated interest rate is 3.61%,
principal and accrued interest
were due on September 1994 $ 70,338 $103,057
CTI note payable to First
Commercial Capital, Inc.,in
technical default, collateralized
by accounts receivable, inventory,
equipment, guaranteed by a majority
stockholder and guaranteed 85% by
SBA, monthly installments are
$11,199, interest is prime plus
2.5%, matures December 2000 328,732 409,677
-----------------------------------------------------------
$399,070 $512,734
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
14
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
5. NOTES Prime rate at December 31, 1996 and 1995 was 8.25% and
PAYABLE 8.5%, respectively.
(CONTINUED)
The loan agreement with First Commercial Capital (the
"Lendor") contains various covenants pertaining to
maintenance of certain financial ratios, restriction of
additional business debt, compensation and dividend
restrictions. At December 31, 1996 and 1995, CTI was in
breach of the compensation restrictions and additional
business debt covenants. Under the terms of the agreement,
the Lendor may call the loan if the company is in
violation of any covenants. As of December 12, 1997, the
Lendor had not waived these requirements. Accordingly, the
entire amount of the note, $328,732 and $409,677,
respectively, was included in current liabilities at
December 31, 1996 and 1995, respectively.
6. BONDS PAYABLE Bonds payable consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
-----------------------------------------------------------
<S> <C> <C>
CB bonds payable, collateralized
by any and all assets, guaranteed
by Minstar, Inc., interest due
semi-annually at 13.75% per
annum, matures December 2001 $1,000,000 $1,000,000
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
According to the bond covenants, a minimum of $150,000 is
required to be held in escrow from which semi-annual
interest to bondholders is paid.
15
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
7. NOTE PAYABLE - On January 1, 1997, CTI restructured an unpaid accounts
RELATED PARTY payable balance into a signed, unsecured note. The note
payable accrues interest at 8 1/2%, principal and interest
payments are due in semi-monthly installments of $6,250
commencing December 1998. The outstanding balance of the
note payable, related party at December 31, 1996 was
$439,693.
8. LEASES As of December 31, 1996, future minimum lease payments
related to the rental of office and manufacturing
facilities and equipment are as follows:
<TABLE>
<CAPTION>
Operating Capital
-----------------------------------------------------------
<S> <C> <C>
1997 $253,195 $ 25,617
1998 255,889 11,224
1999 231,224 --
2000 22,306 --
2001 21,510 --
Later years 14,340 --
-----------------------------------------------------------
Total minimum lease payments $798,464 36,841
-----------------------------------------------------------
-----------------------------------------------------------
Less: current portion (25,617)
-----------------------------------------------------------
Long-term lease obligations $ 11,224
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
The Companies follow the provisions of Statement of
Financial Accounting Standards No. 13, "Accounting for
Leases", in determining the criteria for capital leases.
Leases that do not meet such criteria are classified as
operating leases and are charged to expense in the year
incurred. Capital lease amortization expense was $13,617
and $22,694 at December 31, 1996 and 1995, respectively.
16
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
9. RELATED During 1996 and 1995, CTI purchased approximately 46% and
PARTY 47%, respectively, of its raw materials from Cone
TRANSACTIONS BioProducts. This supplier is controlled by a relative of
an officer and stockholder of CTI. At December 31, 1996
and 1995, amounts due to the supplier included in notes
payable, related party and accounts payable, related
party were approximately $440,000 (see Note 7) and
$278,000, respectively. Cone BioProducts provides
consulting services and direct management assistance to
the Companies. Fees and expenses paid to
Cone BioProducts amounted to $120,000 for years ended
December 31, 1996 and 1995 and are included in the cost
of revenue.
A member of CTI's Board of Directors served as a
consultant to CTI on various aspects of CTI's business
issues. Fees paid for these services by CTI during the
year ended December 31, 1996 was approximately $119,000.
CTI owns a 30% interest in Cenetron. CTI also has a note
receivable from the entity, with the outstanding
principal and accrued interest at 9.75% due and payable
at June 30, 1997. The unpaid balances on this note at
December 31, 1996 and 1995, were approximately $82,000
and $15,000, respectively. The remaining balance of this
note was collected in March of 1997. The investment in
Cenetron is carried at cost and is included in other
assets in the accompanying combined balance sheets. The
accrued interest is included in prepaid expenses and other
assets at December 31, 1996 and in long-term, other
assets at December 31, 1995 in the accompanying combined
balance sheet.
CB conducts some of its operations through a joint
venture in the form of a partnership, which is
principally accounted for using the equity method,
discussed in more detail in Note 3. Included in CB's
revenues for 1996 and 1995 are equity in income of the
joint venture of approximately $530,777 and $656,662,
respectively. In addition, CTI sold approximately $1.8
million and $2.2 million of goods to the joint venture
during 1996 and 1995, respectively. Trade receivables
from the joint venture at December 31, 1996 and 1995,
were approximately $33,000 and $90,070, respectively.
17
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
9. RELATED CTI and Proficiency Testing Services ("PTS") have common
PARTY ownership. During 1996, PTS made a $100,000 advance to
TRANSACTIONS CTI. According to the verbal agreement, CTI is required
(CONTINUED) to repay the unsecured loan plus accrued interest of 9.5%
per annum on demand.
In December of 1993, CB agreed to loan up to $60,000 to
an officer of CB with unpaid principal and accrued
interest at 10% due and payable by December 12, 1998.
Under this agreement, CB loaned approximately $4,000 and
$57,500 to this officer in 1996 and 1995, respectively.
Unpaid principal balance and accrued interest due CB in
connection with the note receivable at December 31, 1996
and 1995 are approximately $52,000 and $48,000,
respectively.
10. CONCENTRATION Plasma collection, storage, labeling and distribution
OF CREDIT activities are subject to strict regulation and licensing
RISK AND by the U.S. Food and Drug Administration ("FDA"). The
SIGNIFICANT Companies's facilities are subject to periodic inspection
CUSTOMERS by the FDA. Failure to comply or correct deficiencies
with applicable laws or regulations could subject the
Companies to enforcement action, including product
seizures, recalls, center or facility closure, license
revocations and civil and criminal penalties. Any future
enforcement action by the FDA could have a material
adverse effect on the Companies' business.
Laws and regulations with similar substantive and
enforcement provisions are also in effect in many of the
states and municipalities where the Companies do
business. Any change in existing federal, state or
municipal laws or regulations, or in the interpretation
or enforcement thereof, or the promulgation of any
additional laws or regulations could have an adverse
effect on the Companies' business.
18
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
10. CONCENTRATION Financial instruments which potentially expose the
OF CREDIT Company to concentrations of credit risk, as defined by
RISK AND Statement of Financial Accounting Standards No. 105,
SIGNIFICANT consist primarily of accounts receivable.
CUSTOMERS
(CONTINUED) Approximately 90% and 95% of the net sales were made to
three customers in 1996 and 1995, respectively.
11. SUBSEQUENT On January 1, 1997, CTI purchased all of the assets of
EVENTS Cone BioProducts (a proprietorship) for $260,307.
Consideration included two promissory notes in the amount
of $63,224 and $197,083. The first note matured June 1,
1997 and was paid on June 1, 1997. The second note will
mature on November 16, 1998. In addition, the sole
proprietor of Cone BioProducts was granted an exclusive
right and option to purchase 33 1/3% of the total
outstanding shares of CTI's common stock for $482,000.
This option may be exercised at any time CTI receives an
offer to sell at least 51% of CTI's common stock. The
sole proprietor of Cone BioProducts is related to the
sole owner of CTI.
During September 1997, the stockholders of the Companies
entered into a letter of intent to sell substantially all
of the Companies' operating assets including inventories,
accounts receivable, leasehold interests, and equipment
to a third party for cash and stock in a publicly-traded
Company. According to the letter of intent, all accounts
payable, accrued liabilities and notes payable, including
revolving lines of credit will not be assumed by the
purchaser. The letter of intent also calls for multi-year
employment agreements for certain key employees.
19
<PAGE>
THE WESTERN STATES
GROUP, INC.
--------------------------------------------------
FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1997 AND 1996
[LOGO]
<PAGE>
THE WESTERN STATES
GROUP, INC.
--------------------------------------------------
FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1997 AND 1996
<PAGE>
THE WESTERN STATES GROUP, INC.
CONTENTS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS
Balance sheets 4
Statements of operations 5
Statements of stockholders' equity 6
Statements of cash flows 7-8
NOTES TO FINANCIAL STATEMENTS 9-15
2
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Western States Group, Inc.
We have audited the accompanying balance sheets of The Western States Group,
Inc. as of May 31, 1997 and 1996, and the related statements of operations and
stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Western States Group,
Inc. at May 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ BDO Seidman, LLP
October 17, 1997
3
<PAGE>
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAY 31, 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Note 5)
CURRENT ASSETS
Cash and equivalents $ 416,951 $ 704,486
Trade accounts receivables 1,486,141 308,193
Due from officer-stockholder (Note 2) 197,625 --
Other receivables 1,500 --
Inventory (Note 3) 436,022 704,699
- ------------------------------------------------------------------------------
Total current assets 2,538,239 1,717,378
- ------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Office furniture and equipment 69,022 68,009
Less accumulated depreciation and
amortization 62,631 60,089
- ------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, NET 6,391 7,920
- ------------------------------------------------------------------------------
OTHER ASSETS
Other 11,221 15,221
Investments in related party partnership
(Note 2) -- 339,630
- ------------------------------------------------------------------------------
Total other assets 11,221 354,851
- ------------------------------------------------------------------------------
TOTAL ASSETS $2,555,851 $2,080,149
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
THE WESTERN STATES GROUP, INC.
BALANCE SHEETS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAY 31, 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 956,838 $ 530,422
Accrued wages, salaries and commissions 418,869 213,285
Profit Sharing plan contribution (Note 4) 49,368 43,628
Income taxes payable 201,000 263,000
Other current liabilities -- 10,439
- ------------------------------------------------------------------------------
Total current liabilities 1,626,075 1,060,774
- ------------------------------------------------------------------------------
DEFERRED INCOME TAXES (Note 6) -- 157,000
Total Liabilities 1,626,075 1,217,774
- ------------------------------------------------------------------------------
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY
Common stock, no par value; 100,000
shares authorized, 1,000 issued and
outstanding 1,000 1,000
Retained earnings 928,776 861,375
- ------------------------------------------------------------------------------
Total stockholders' equity 929,776 862,375
- ------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,555,851 $2,080,149
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL
STATEMENTS.
4
<PAGE>
THE WESTERN STATES GROUP, INC.
STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED MAY 31, 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $7,952,960 $4,832,419
COST OF SALES 5,953,978 3,708,920
- -------------------------------------------------------------------------------
GROSS PROFIT 1,998,982 1,123,499
OPERATING EXPENSES
Sales and marketing 587,364 451,359
General and administrative 464,094 470,357
Officer compensation (Note 2) 890,000 280,000
- -------------------------------------------------------------------------------
Total operating expenses 1,941,458 1,201,716
- -------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 57,524 (78,217)
OTHER INCOME
Related party partnership (Note 2) 40,926 300
Interest 12,951 26,687
- -------------------------------------------------------------------------------
Total other income 53,877 26,687
- -------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) 111,401 (51,530)
INCOME TAX EXPENSE (BENEFIT) (Note 6) 44,000 (21,000)
- -------------------------------------------------------------------------------
NET INCOME (LOSS) $ 67,401 $ (30,530)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
5
<PAGE>
THE WESTERN STATES GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MAY 31, 1997 AND 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
SHARES AMOUNT EARNINGS TOTAL
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE,
June 1, 1995 1,000 $1,000 $891,905 $892,905
Net loss (30,530) (30,530)
- -------------------------------------------------------------------------------
BALANCE,
May 31, 1996 1,000 1,000 861,375 826,375
Net loss 67,401 67,401
- -------------------------------------------------------------------------------
BALANCE,
May 31, 1997 1,000 $1,000 $928,776 $929,776
- -------------------------------------------------------------------------------
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
6
<PAGE>
THE WESTERN STATES GROUP, INC.
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
<TABLE>
<CAPTION>
YEARS ENDED MAY 31, 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 67,401 $ (30,530)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating
activities:
Depreciation and amortization 2,542 13,635
Equity in net income of partnership investment (40,926) --
Distribution of partnership interest as bonus 510,556 --
Increase (decrease) from changes in:
Trade accounts receivables (1,177,948) 1,174,438
Due from officer-stockholder (197,625) --
Other receivables (1,500) --
Inventory 268,677 (397,742)
Other assets 4,000 (6,100)
Accounts payable 426,416 (280,320)
Income tax payable (219,000) (81,000)
Accrued expenses and other current liabilities 200,885 159,605
- ------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (156,522) 551,986
- ------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in partnership (130,000) (339,630)
Purchase of equipment (1,013) (11,629)
- ------------------------------------------------------------------------------
Net cash used in investing activities (131,013) (351,259)
- ------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
THE WESTERN STATES GROUP, INC.
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
<TABLE>
<CAPTION>
YEARS ENDED MAY 31, 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of line of credit -- (200,000)
- ------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (287,535) 727
CASH AND EQUIVALENTS AT, beginning of year 704,486 703,759
- ------------------------------------------------------------------------------
CASH AND EQUIVALENTS AT, end of year $ 416,951 $ 704,486
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID FOR:
Interest $ -- $ 225
Income taxes $ 262,203 $ 59,582
- ------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
During the year ended May 31, 1997, the Company distributed its investment
in a related party partnership of approximately $511,000 to its principal
officer-stockholder (see Note 2).
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL
STATEMENTS.
8
<PAGE>
THE WESTERN STATES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SUMMARY OF GENERAL
ACCOUNTING
POLICIES The Western States Group, Inc. (the Company) is engaged in
the worldwide sale, marketing and distribution of source
plasma, specialty plasma and the marketing of diagnostic
test components. Sales through its TheraSource
International Division are directed to the therapeutic
products industry and sales through the Western States
Plasma Company are directed to the diagnostics products
industry. Both divisions are active worldwide with sales
both within the United States and outside the United
States. The Company is a vendor approved supplier to
numerous pharmaceutical and healthcare companies and is
an FDA licensed distributor in the United States. Human
source plasma distributed by the Company is primarily
sold to fractionators who process the plasma into
various therapeutic products such as clotting factors,
albumin, immune globulin and various other derived
products. The Company also markets and distributes a
wide range of diagnostic and therapeutic products
including many antibodies and other biological
specimens. The Company obtains the plasma and other
products it sells from FDA licensed plasma collection
centers, from fractionators and from manufacturers of
diagnostic components. The products are frequently
shipped directly from the supplier to the customer.
The Company was incorporated in California in 1984.
REVENUE RECOGNITION
The Company recognizes revenue upon shipment of products
to customers.
9
<PAGE>
THE WESTERN STATES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SUMMARY OF INVENTORY
ACCOUNTING
POLICIES Inventory is valued at the lower of cost or market. Cost is
(CONTINUED) determined by the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation
is computed using accelerated methods over the estimated
useful lives of the respective assets. Leasehold
improvements are amortized using the straight-line
method over the estimated life of the asset or the
remaining term of the lease, whichever is shorter. The
estimated useful lives of the assets range from 5 to 7
years.
CASH AND CASH EQUIVALENTS
The Company considers as cash and cash equivalents all
cash on hand and in banks, certificates of deposit and
other highly-liquid investments with original maturities
of 3 months or less.
FDA LICENSES
Food and Drug Administration ("FDA") licenses are
required to operate as a distributor. The cost of
acquiring FDA licenses was fully amortized by May 31,
1996.
10
<PAGE>
THE WESTERN STATES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SUMMARY OF FAIR VALUE OF FINANCIAL INSTRUMENTS
ACCOUNTING
POLICIES Statement of Financial Accounting Standards No. 107,
(CONTINUED) "Disclosures About Fair Value of Financial Instruments,"
requires disclosure of the fair value of certain
financial instruments. Accounts receivable and accounts
payable as reflected in the financial statements
approximate fair value because of the short-term
maturity of these instruments. The fair value of the
investment in partnership cannot be estimated due to its
related-party nature.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity
with generally accepted accounting principals requires
management to make estimates and assumptions that affect
the amounts reported in the financial statements and
footnotes thereto. Actual results could differ from
those estimates.
INCOME TAXES
The company recognizes deferred tax liabilities and
assets for the expected future tax consequences of
events that have been recognized in a company's
financial statements or tax returns. Deferred tax
liabilities and assets are determined based on the
difference between the financial statement carrying
amounts and tax bases of assets and liabilities using
enacted tax rates in effect in the years which the
differences are expected to reverse.
11
<PAGE>
THE WESTERN STATES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
2. RELATED PARTY DUE FROM OFFICER - STOCKHOLDER
TRANSACTIONS
At May 31, 1997, the Company had a receivable from an
officer-stockholder for approximately $197,000. That
represented the related payroll tax withholding
reimbursable by the principal officer-stockholder, arising
from the distribution of the Company's interest in an
investment partnership to the officer-stockholder.
Subsequent to year-end, the receivable was collected by
the Company.
INVESTMENT IN PARTNERSHIP
At May 31, 1996, the Company had an investment of $339,630
in a partnership. The partnership was organized to invest
in real estate and equities. During the year ended May 31,
1997, the Company distributed the interest in the
partnership to the principal officer-stockholder as
additional compensation. At the time of the distribution,
the cost-basis of the Company's interest in the
partnership was approximately $511,000.
GENERAL AND ADMINISTRATIVE EXPENSES
During the year ended May 31, 1997, the Company paid
approximately $13,000 to the partnership described above
for lodging expenses for the Company's customers and
suppliers.
OTHER INCOME
Other income in 1997 and 1996 includes approximately
$41,000 and $300, respectively, of interest and capital
gains which represent the Company's share of earnings by
the partnership described above.
12
<PAGE>
THE WESTERN STATES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
3. INVENTORY The Company's inventory consists of:
<TABLE>
<CAPTION>
MAY 31, 1997 1996
-----------------------------------------------------------
<S> <C> <C>
Plasma $103,969 $412,511
Other products 332,053 292,188
-----------------------------------------------------------
Total $436,022 $704,699
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
4. PROFIT SHARING The Company has a profit sharing plan pursuant to Section
PLAN 401(k) of the Internal Revenue Code. The plan provides for
discretionary contributions by the Company as determined
by a committee made up of shareholders of the Company. For
the years ended May 31, 1997 and 1996, the Company
contributed $49,368 and $43,628, to the plan.
5. COMMITMENTS LINE OF CREDIT
The Company has a line of credit expiring November 1,
1997, which provides for borrowings up to $250,000 at the
lender's prime rate (8.50% per annum at May 31, 1997) plus
1.25%. The terms of the line of credit agreement require a
minimum interest rate of 8.50% per annum. The terms also
require maintenance of certain financial ratios. The line
is secured by substantially all assets of the Company and
is personally guaranteed by owner-officers of the Company.
The Company did not draw on the line during the years
ended May 31, 1997 and 1996.
13
<PAGE>
THE WESTERN STATES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
5. COMMITMENTS LEASES
(CONTINUED)
The Company leases its facilities under operating leases
expiring in August 1998. Future minimum payments due under
this non-cancelable operating lease are:
<TABLE>
<CAPTION>
YEAR ENDING MAY 31, Total
-----------------------------------------------------------
<S> <C>
1998 $24,000
1999 6,000
-----------------------------------------------------------
$30,000
-----------------------------------------------------------
</TABLE>
Rent expense for the years ended May 31, 1997 and 1996 was
$23,875 and $22,604.
6. INCOME TAXES Deferred income taxes reflect the impact of temporary
differences between the amount of assets and liabilities
recognized for financial reporting purposes and such
amounts recognized for tax purposes.
The Company changed its tax accounting method from cash to
accrual basis during the fiscal year ended May 31, 1995.
As a result of this change in accounting method, the
Company recorded a deferred tax liability of $157,000 and
$314,000 at May 31, 1997 and 1996, which is due $157,000
each year through May 31, 1998.
7. CONCENTRATION The Company sells its products on credit to pharmaceutical
OF CREDIT companies, biotechnology companies, hospitals and other
RISKS AND distributors.
SIGNIFICANT
CUSTOMERS
14
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THE WESTERN STATES GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
7. CONCENTRATION Plasma processing, storage, labeling and distribution
OF CREDIT activities are subject to strict regulation and licensing
RISKS AND by the U.S. Food and Drug Administration (FDA). The
SIGNIFICANT Company's facilities and those of its turn-key
CUSTOMERS manufacturers and its suppliers are subject to periodic
(CONTINUED) inspection by the FDA. Failure to comply or correct
deficiencies with applicable laws or regulations could
subject the Company, its manufacturers or its suppliers to
enforcement action, including product seizures, recalls,
facility closure, license revocation and civil and
criminal penalties, any one or more of which could have a
material, adverse effect on the Company's business.
Laws and regulations with similar substantive and
enforcement provisions are also in effect in many of the
states and municipalities where the Company, its
manufacturers and its suppliers do business. Any change in
existing federal, state or municipal laws or regulations,
or in the interpretation or enforcement thereof, or the
promulgation of any additional laws or regulations could
have an adverse effect on the Company's business.
For the year ended May 31, 1997, no individual customer
accounted for 10% or more of revenue. Approximately 12% of
the net sales for the year ended May 31, 1996, were made
to one customer. At May 31, 1997, approximately 69% of
accounts receivable was due from two customers. At May 31,
1996, approximately 31% of accounts receivable was due
from two customers.
8. SUBSEQUENT During September 1997, the stockholders of the Company
EVENTS entered into a letter of intent to sell all of the
Company's outstanding shares of stock to a third party for
cash, publicly-traded stock and payments to be determined
by the future financial performance of the Company. The
letter of intent also calls for multi-year employment
agreements with certain key employees.
15
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EXHIBIT INDEX
2.1 Stock Purchase Agreement, dated as of February 13, 1998, among
SeraCare, Inc. and the Shareholders of The Western States
Group, Inc. named therein.
2.2 Asset Purchase Agreement, dated as of February 13, 1998, among
SeraCare, Inc., Consolidated Technologies, Inc. and Conco
Associates, Inc. (dba Cone Biotech).
4.1 Securities Purchase Agreement for $16,000,000 12% Senior
Subordinated Debentures due 2005 and Warrants to purchase
Shares of Common Stock, dated as of February 13, 1998 by and
among SeraCare, Inc. and the Investors named on the signature
pages thereto.
4.2 Form of 12% Senior Subordinated Debenture due 2005 for
Exhibit 4.1.
4.3 Form of Warrant Agreement to Purchase Common Stock for
Exhibit 4.1.
4.4 Securityholders Agreement, dated as of February 13, 1998,
among SeraCare, Inc., the Investors listed on Exhibit I. A
hereto and the Shareholders of the Company listed on Exhibit I.
B thereto.
4.5 Registration Rights Agreement, dated as of February 13, 1998,
among SeraCare, Inc. and the Investors whose names appear under
the heading Investors on the signature page thereof.
4.6 Subsidiary Guarantee Agreement, dated as of February 13,
1998, made by Avre, Inc., Binary Associates, Inc., SeraCare
Acquisitions, Inc., BHM Labs, Inc., SeraCare Technology, Inc.,
The Western States Group, Inc., wholly-owned subsidiaries of
SeraCare, Inc. in favor of the Guaranteed Parties (as defined
therein).
4.7 Warrant Agreement, dated as of February 13, 1998, among
SeraCare, Inc. and Sutro & Co. Inc.
4.8 Registration Rights Agreement, dated as of February 13, 1998,
among SeraCare, Inc. and Sutro & Co. Inc.
<PAGE>
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
dated as of
February 13, 1998,
by and among
SERACARE, INC.,
a Delaware corporation,
as Buyer
and
THE WESTERN STATES GROUP, INC.,
a California corporation,
as Company
and
MICHAEL F. CROWLEY, an individual,
MARY A. CROWLEY, an individual,
and
MICHAEL F. CROWLEY and MARY A. CROWLEY
as trustees under the Crowley Charitable
Remainder Unitrust dated December 31, 1997, and
MICHAEL F. CROWLEY II, an individual,
as the Shareholders
<PAGE>
<TABLE>
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS .................................................. 1
ARTICLE II PURCHASE AND SALE OF STOCK/DISCHARGE OF
LIABILITIES/CLOSING .......................................... 6
2.1 Transfer of Stock by the Shareholders ........................ 6
2.2 Purchase of the Stock by Buyer ............................... 6
2.3 Purchase Price ............................................... 6
2.4 Covenants of Buyer Regarding Earn-out Payments ............... 7
2.5 Earn-out Payment Offset/Withholding .......................... 7
2.6 Discharge of Certain Indebtedness ............................ 8
2.7 Closing Matters .............................................. 8
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING THE SHAREHOLDERS ... 9
3.1 Ownership of Stock ........................................... 9
3.2 Delivery of Good Title .......................................10
3.3 Execution and Delivery .......................................10
3.4 No Conflicts .................................................10
3.5 Investment Intent ............................................10
3.6 Business Relationship ........................................10
3.7 Disclosure/Legend ............................................10
3.8 Rule 144 .....................................................11
3.9 Trust Formation ..............................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY ........11
4.1 Organization, Good Standing and Related Matters ..............11
4.2 Capitalization; Ownership of Stock ...........................12
4.3 Financial Statements; Changes; Contingencies .................12
4.4 Tax and Other Returns and Reports ............................13
4.5 Material Contracts ...........................................13
4.6 Real and Personal Property; Title to Property; Leases ........14
4.7 Intangible Property ..........................................14
4.8 Authorization; No Conflicts ..................................15
4.9 Legal Proceedings ............................................15
4.10 Labor Relations ..............................................15
4.11 Minute Books .................................................16
4.12 Accounting Records; Internal Controls ........................16
4.13 Insurance ....................................................16
4.14 Permits ......................................................17
4.15 Compliance with Law ..........................................17
4.16 Dividends and Other Distributions ............................17
4.17 Employee Benefits ............................................17
4.18 Certain Interests ............................................19
4.19 Bank Accounts and Powers .....................................19
4.20 No Brokers or Finders ........................................19
4.21 Accuracy of Information ......................................19
4.22 Inventories ..................................................20
<PAGE>
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4.23 Receivables and Commissions Payable ..........................20
4.24 Customers and Suppliers ......................................20
4.25 Environmental Compliance .....................................20
4.26 No Health Plans or Group Health Plans ........................21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER ......................21
5.1 Organization and Related Matters .............................21
5.2 Authorization ................................................21
5.3 No Conflicts .................................................21
5.4 No Brokers or Finders ........................................21
5.5 Legal Proceedings ............................................21
5.6 Capitalization of Buyer ......................................22
5.7 Accuracy of Information in Exchange Act Reports ..............22
5.8 Investment Intent ............................................22
5.9 Business Relationship ........................................22
5.10 Disclosure/Legend ............................................22
ARTICLE VI COVENANTS WITH RESPECT TO CONDUCT OF THE COMPANY PRIOR TO
CLOSING ......................................................23
6.1 Access .......................................................23
6.2 Material Adverse Changes; Reports; Financial Statements ......23
6.3 Conduct of Business ..........................................24
6.4 Notification of Certain Matters ..............................26
6.5 Permits and Approvals ........................................26
6.6 Preservation of Business Prior to Closing Date ...............26
6.7 Elimination of Intercompany and Affiliate Liabilities ........27
6.8 Termination of Grossmont Bank Loan ...........................27
ARTICLE VII ADDITIONAL CONTINUING COVENANTS ..............................27
7.1 Non-Competition ..............................................27
7.2 Nondisclosure of Confidential Information ....................28
7.3 Tax Cooperation ..............................................28
7.4 Release ......................................................28
7.5 Uncollectible Receivables ....................................29
7.6 Profit Sharing Plan ..........................................29
ARTICLE VIII CONDITIONS OF PURCHASE .......................................29
8.1 General Conditions ...........................................29
8.2 Conditions to Obligations of Buyer ...........................30
8.3 Conditions to Obligations of the Shareholders and the
Company ......................................................31
ARTICLE IX TERMINATION OF OBLIGATIONS; SURVIVAL .........................32
9.1 Termination of Agreement .....................................32
9.2 Effect of Termination ........................................32
9.3 Survival of Representations and Warranties ...................33
<PAGE>
Page
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ARTICLE X INDEMNIFICATION ..............................................33
10.1 Indemnification of Buyer .....................................33
10.2 Indemnification of the Shareholders ..........................34
10.3 Certain Tax Matters ..........................................34
10.4 Procedure ....................................................35
10.5 Limitations ..................................................37
10.6 Maximum Shareholders' and Buyer's Liability ..................37
10.7 Survival .....................................................37
10.8 Notice .......................................................38
ARTICLE XI ARBITRATION ..................................................38
11.1 Arbitration ..................................................38
11.2 Judicial Arbitration and Mediation Services, the Company .....38
11.3 Arbitration Panel ............................................38
11.4 Provisional Remedies .........................................38
11.5 Enforcement of Judgment ......................................38
11.6 Discovery ....................................................38
11.7 Consolidation ................................................39
11.8 Power and Authority of Arbitrator ............................39
11.9 Law to be Applied ............................................39
11.10 Costs ........................................................39
ARTICLE XII GENERAL ......................................................39
12.1 Amendments; Waivers ..........................................39
12.2 Schedules; Exhibits; Integration .............................39
12.3 Best Efforts; Further Assurances .............................39
12.4 Governing Law ................................................40
12.5 No Assignment ................................................40
12.6 Headings .....................................................40
12.7 Counterparts .................................................40
12.8 Publicity and Reports ........................................41
12.9 Confidentiality ..............................................41
12.10 Parties in Interest ..........................................41
12.11 Notices ......................................................41
12.12 Expenses .....................................................43
12.13 Remedies; Waiver .............................................43
12.14 Attorney's Fees ..............................................43
12.15 Knowledge Convention .........................................43
12.16 Representation By Counsel; Interpretation ....................43
12.17 Specific Performance .........................................43
12.18 Severability .................................................44
12.19 Construction .................................................44
12.20 Accounting and Economic Effective Date .......................44
12.21 Assignment of Receivable .....................................44
ARTICLE XIII PIGGY-BACK REGISTRATION RIGHTS ...............................44
<PAGE>
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13.1 Registration Notice ..........................................44
13.2 Underwriting Requirements ....................................45
13.3 Registration Covenants .......................................45
13.4 Holder Covenants .............................................46
13.5 Indemnification ..............................................47
13.6 Registration Expenses ........................................48
13.7 No Assignment of Registration Rights .........................48
</TABLE>
<TABLE>
SCHEDULES
<S> <C>
SCHEDULE 1.1 Products
SCHEDULE 4.1 Jurisdictions in which Company is Required to be Qualified to
Do Business as a Foreign Person; Directors and Executive
Officers
SCHEDULE 4.3(a) Audited Financial Statements
SCHEDULE 4.3(b) Unaudited Financial Statement
SCHEDULE 4.3(e) Liabilities
SCHEDULE 4.4 Tax Returns
SCHEDULE 4.5 Material Contracts
SCHEDULE 4.6 Real and Personal Property
SCHEDULE 4.8 Permits and Approvals
SCHEDULE 4.10 Labor Relations
SCHEDULE 4.13 Insurance
SCHEDULE 4.15 Compliance with Law
SCHEDULE 4.17(a)(i) Employee Benefit Plans, and Collective Bargaining and
Employee Agreements
SCHEDULE 4.17(a)(v) Termination of Plans
SCHEDULE 4.17(a)(vii) Employees, Consultants and Agents Entitled to Severance,
Parachute or Other Payments or Benefits
SCHEDULE 4.19 Bank Accounts, Powers, etc.
SCHEDULE 4.23 Receivables and Commissions Payable
SCHEDULE 4.24 Customers and Suppliers
SCHEDULE 4.25 Environmental Compliance
SCHEDULE 5.6 Capitalization of Buyer
SCHEDULE 10.1 Specific Indemnification Matters
EXHIBITS
Exhibit A Ownership and Percentage Interests in the Company
Exhibit B MFC Employment Agreement
Exhibit C MFCII Employment Agreement
Exhibit D Form of Opinion of Counsel of the Shareholders and the Company
Exhibit E Form of Opinion of Counsel of the Buyer
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of February 13,
1998, by and among SeraCare, Inc., a Delaware corporation ("Buyer"), The
Western States Group, Inc., a California corporation (the "Company"), Michael
F. Crowley, an individual ("MFC"), Mary A. Crowley, an individual ("MAC"),
and MFC and MAC as trustees of the Crowley Charitable Remainder Unitrust
dated December 31, 1997 (the "Trust"), and Michael F. Crowley II, an
individual ("MFCII"), (MFC together with MAC, the Trust, and MFCII being the
"Shareholders" and MFC together with MAC and the Trust being the "Principal
Shareholders" and MFC together with MAC and MFCII being the "Individual
Shareholders") (the Buyer, the Company, MFC, MAC, the Trust, MFCII and the
Shareholders are collectively referred to herein as the "Parties").
B A C K G R O U N D
A. The Shareholders own all of the issued and outstanding capital
stock of the Company (referred to herein interchangeably as the "Stock" or
the "Shares"); and
B. The Shareholders desire to sell, and Buyer desires to buy, the
Stock for the consideration described herein.
A G R E E M E N T
In consideration of the mutual covenants and agreements as set
forth herein and intending to be legally bound, the Parties agree as follows:
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires,
the terms defined in this Article I have the meanings assigned
to them in this Article I and include the plural as well as the singular,
all accounting terms not otherwise defined herein have the
meanings assigned under generally accepted accounting principles ("GAAP"),
1
<PAGE>
all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of the body of this Agreement,
pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms, and
the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
As used in this Agreement and the Exhibits and Schedules delivered
pursuant to this Agreement, the following definitions shall apply.
"Acquisition" means the acquisition of the Stock by the Buyer as
contemplated by this Agreement.
"Action" means any action, complaint, petition, investigation, suit
or other proceeding, whether civil or criminal, in law or in equity, or
before any arbitrator or Governmental Entity.
"Affiliate" means a Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, a specified Person.
"Agreement" means this Agreement by and among Buyer, the
Shareholders and the Company as amended or supplemented together with all
Exhibits and Schedules attached or incorporated by reference.
"Approval" means any approval, authorization, assignment, consent,
qualification or registration, or any waiver of any of the foregoing,
required to be obtained from, or any notice, statement or other communication
required to be filed with or delivered to, any Governmental Entity or any
other Person.
"Associate" of a Person means:
a corporation or organization (other than the Company or a
party to this Agreement) of which such Person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities;
any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee
or in a similar capacity; and
any relative or spouse of such Person or any relative of such
spouse who has the same home as such Person or who is a director or officer
of the Company or any of its Affiliates.
2
<PAGE>
"Auditors" means BDO Seidman LLP, independent public accountants to
the Company.
"Business" means the business of the Company and shall be deemed to
include any of the following incidents of such business: income, cash flow,
operations, condition (financial or other), assets, properties, anticipated
revenues and income, prospects, liabilities, personnel and management.
"Buyer Shares" has the meaning set forth in Section 2.3.
"Buyer's Common Stock" means the Buyer's common stock, par value
$.001 per share.
"Closing" means the consummation of the purchase and sale of the
Stock under this Agreement.
"Closing Date" means the date of the Closing.
"Code" means the U.S. Internal Revenue Code of 1986, as amended.
"Company" means The Western States Group, Inc., a California
corporation.
"Confidential Information" means all information and material which
is proprietary to a party, whether or not marked as "confidential" or
"proprietary," which is disclosed to the other and relates to the party's
past, present or future business activities, including, without limitation,
all of the following: data, documentation, diagrams, flow charts, research,
development, processes, procedures, Know How, new product information,
marketing techniques and materials, marketing timetables, strategies and
development plans, including trade names, trademarks, client supplier or
personnel names and other information related to clients, suppliers or
personnel, pricing policies, projections and other financial information, and
other information of a similar nature, whether or not reduced to writing or
other tangible form, and any other Trade Secrets or non-public business
information. Confidential Information shall not include information which
(i) is currently in the public domain or subsequently comes into the public
domain through no fault of the receiving party and not in breach of this
Agreement; (ii) was already know to the receiving party on the date of
disclosure through a proper and lawful source, provided that such prior
knowledge can be substantiated and proved by documentation; or (iii) properly
and lawfully becomes available to this receiving party from sources
independent of the party.
"Contract" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"Encumbrance" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
3
<PAGE>
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise, except
for any restrictions on transfer generally arising under any applicable
federal or state securities law.
"Equity Securities" means any capital stock or other equity
interest or any securities convertible into or exchangeable for capital stock
or any other rights, warrants or options to acquire any of the foregoing
securities.
"ERISA" means the U.S. Employee Retirement Income Security Act of
1974, as amended, and the related regulations and published interpretations.
"Exchange Act" means the U.S Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.
"Hazardous Substance" means (but shall not be limited to)
substances that are defined or listed in, or otherwise classified pursuant
to, any applicable Laws as "hazardous substances," "hazardous materials,"
"hazardous wastes" or "toxic substances," or any other formulation intended
to define, list or classify substances by reason of deleterious properties
such as ignitibility, corrosivity, reactivity, radioactivity,
carcinogenicity, reproductive toxicity or "EP toxicity," and petroleum and
drilling fluids, produced waters and other wastes associated with the
exploration, development, or production of crude oil, natural gas or
geothermal energy.
"Holder" has the meaning set forth in Section 13.1.
"Indemnifiable Claim" means any Loss for or against which any party
is entitled to indemnification under this Agreement
"Indemnified Party" means the party entitled to indemnity under
this Agreement.
"Indemnifying Party" means the party obligated to provide
indemnification under this Agreement.
"Intangible Property" means any patents, patent applications (pending
or otherwise), industrial and intellectual property rights, copyrights,
unpublished works, inventions, Trade Secrets, Know-How, research and
development findings, computer firmware and software (existing in any
4
<PAGE>
form), marketing rights, contractual rights, licenses and all related
agreements and documentation, and all Marks.
"Intellectual Property Rights" means all intellectual property
rights, including, without limitation, patents, patent applications, patent
rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyrights, computer programs and other computer
software, inventories, Know How, Trade Secrets, proprietary processes and
formulae.
"IRS" means the U.S. Internal Revenue Service or any successor
entity.
"Know How" means any information, including, but not limited to,
invention records, research and development records and reports, experimental
and engineering reports, pilot designs, production designs, production
specifications, raw material specifications, quality control reports and
specifications, drawings, photographs, models, tools, parts, algorithms,
processes, methods, market and competitive analysis, or other information
possessed by the Company, whether or not considered proprietary or a Trade
Secret.
"Law" means any constitutional provision, statute or other law,
rule, regulation, or interpretation of any Governmental Entity and any Order.
"License" means all licenses, permits, consents, authorizations,
registrations and approvals related to the Business, with or from
Governmental Entities which have jurisdiction over it, including all export
licenses, Food and Drug Administration ("FDA") Master File and occupancy,
fire, business and other permits from local officials.
"Loss" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether foreseeable or unforeseeable,
including, but not limited to, interest or other carrying costs, penalties,
reasonable legal, accounting and other professional fees and expenses
incurred in the investigation, collection, prosecution and defense of claims,
actual or threatened, and amounts paid in settlement, that are imposed on or
otherwise incurred or suffered by the specified person; provided, however,
"Loss" shall not include any amount that is received by such specified person
under a valid and collectible insurance policy.
"Mark" means any brand name, copyright, patent, service mark,
trademark, tradename, and all registrations or applications for registration
of any of the foregoing.
"Material Contract" means any Contract material to the Business of
the subject person as of or after the date hereof or at any time during the
preceding three years and includes, but is not limited to, those contracts
deemed material by Section 4.5.
5
<PAGE>
"Maximum Buyer Liability" has the meaning set forth in Section 10.6.
"Maximum Shareholder Liability" has the meaning set forth in Section 10.6.
"Non-Competition Period" has the meaning set forth in Section 7.1.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ of any Governmental Entity, including, but not limited to,
the OSHA and the FDA.
"Permit" means any license, permit, franchise, certificate of authority,
authorization, or order, or any waiver of the foregoing, required to be
issued by any Governmental Entity.
"Person" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
Governmental Entity.
"Products" means products, technology and services, sold, licensed, or
otherwise exploited by the Company in connection with its Business as
described in Schedule 1.1.
"Products Loss" has the meaning set forth in Section 10.1(e).
"Purchase Price" has the meaning set forth in Section 2.3.
"Registerable Securities" has the meaning set forth in Section 13.1.
"SEC" means the U.S. Securities and Exchange Commission or any successor
entity.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Subsidiary" means any Person in which the Company has a direct or
indirect equity or ownership interest in excess of 50%.
"Tax" means any foreign, federal, state, county or local income, sales
and use, excise, franchise, real and personal property, transfer, gross
receipt, capital stock, production, business and occupation, disability,
employment, payroll, severance or withholding tax or charge imposed by any
Governmental Entity, any interest and penalties (civil or criminal) related
thereto or to the nonpayment thereof, and any Loss in connection with the
determination, settlement or litigation of any Tax liability.
"Tax Matters" has the meaning set forth in Section 10.3.
6
<PAGE>
"Tax Return" means a report, return or other information required to be
supplied to a Governmental Entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for any group of
entities that includes the Company.
"Trade Names" has the meaning set forth in Section 4.7.
"Trade Secrets" means formulas, patterns, devices or compilations of
information which is used in connection with or relating to the Business and
which gives an opportunity to obtain an advantage over competitors who do not
know or use it, including, but not limited to, formulas for chemical
compounds, processes of manufacturing, treating or preserving materials,
patterns for machines or any forms, plans, drawings, specifications, customer
lists, marketing and competition analysis and project management, inventory
and cost control systems and techniques.
"Uncollectible Receivables" has the meaning set forth in Section 7.5.
PURCHASE AND SALE OF STOCK/DISCHARGE OF LIABILITIES/CLOSING
TRANSFER OF STOCK BY THE SHAREHOLDERS.
Subject to the terms and conditions of this Agreement, the Shareholders
agree to sell the Stock and deliver the certificates evidencing the Stock to
Buyer at the Closing. The certificates will be properly endorsed for
transfer to, or accompanied by a duly executed stock power in favor of, Buyer
or its nominee and otherwise in a form acceptable for transfer on the books
of the Company. The Shareholders will pay any Taxes payable with respect to
the transfer of the Stock.
PURCHASE OF THE STOCK BY BUYER.
Subject to the terms and conditions of this Agreement, Buyer agrees to
purchase and accept from the Shareholders, on and as of the Closing Date for
the Purchase Price described in Section 2.3 hereof, all of the Stock.
PURCHASE PRICE.
The aggregate consideration to be paid by Buyer to the Shareholders
pursuant to this Agreement (the "Purchase Price") shall consist of:
7
<PAGE>
A cash payment of $2.7 million (the "Closing Cash Payment") which shall
be made to the Shareholders at the Closing by wire transfer, however, at
Buyer's option at Closing or before Closing Buyer may opt to replace $500,000
of the Closing Cash Payment with certificates representing 125,000 shares
(the "Buyer's Shares") of Buyer's Common Stock. Such share certificates
shall be delivered to the Shareholders at the Closing pursuant to a valid
private placement under the Securities Act;
A cash payment equal to the good faith determination of the net asset
value of the Company's cash, accounts receivable and inventory as of the
Closing Date minus the Company's total liabilities (the "Net Asset Amount")
as of the Closing Date. Buyer shall have the right to audit the cash,
accounts receivable, inventory and total liabilities balances as of the
Closing Date. The amount of such cash payment shall be determined in
accordance with GAAP consistently applied (provided, however, that no reserve
shall be made for doubtful accounts receivable, and that the receivable
identified in Schedule 10.1 shall be assigned to the Shareholders prior to
Closing) and shall be paid within 10 days of the Closing Date;
Within ninety (90) days after the Closing Date the Parties agree to
determine what was the exact Net Asset Amount (the "Exact Net Asset Amount")
of the Company as of the Closing Date. If the Exact Net Asset Amount exceeds
the Net Asset Amount paid as of the Closing Date, then the Buyer shall pay
the difference to the Shareholders pro rata within 10 days. If the Exact Net
Asset Amount is less than the Net Asset Amount, then the Shareholders shall
(on a pro rata basis) refund the difference to Buyer within 10 days. In the
event that the Parties are unable to agree upon the Exact Net Asset Amount,
said dispute shall be resolved pursuant to Article XI of this Agreement; and
Earn-out cash payments, if any, which shall be determined as follows
(the "Earn-out Payments"):
With respect to the first twelve full calendar months after the
Acquisition Date:
(A) If the Company generates at least $1,000,000, but less
than $1,500,000 of earnings before income taxes ("EBT"), determined
in accordance with GAAP consistently applied, during the
twelve-month period beginning on the first day of the calendar
month following the Closing Date and ending on the day prior to the
first anniversary of such date (the "First Measurement Period"),
then the Shareholders shall be entitled to an earn-out payment in
cash equal to twenty percent (20%) of EBT; or
(B) If the Company generates at least $1,500,000, but less
than $2,000,000 of EBT during the First Measurement Period, then
the Shareholders shall be entitled to an earn-
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out payment in cash equal to twenty-five percent (25%) of EBT; or
(C) If the Company generates $2,000,000 or more of EBT during
the First Measurement Period, then the Shareholders shall be
entitled to an earn-out payment in cash equal to thirty percent
(30%) of EBT.
With respect to the twelve-month period ending on the first
anniversary of the end of the First Measurement Period (the "Second
Measurement Period"):
(A) If the Company generates at least $1,000,000, but less
that $1,500,000 of EBT during the Second Measurement Period, then
the Shareholders shall be entitled to an earn-out payment in cash
equal to thirty percent (30%) of EBT; or
(B) If the Company generates at least $1,500,000, but less
than $2,000,000 of EBT during the Second Measurement Period, then
the Shareholders shall be entitled to an earn-out payment in cash
equal to thirty-five percent (35%) of EBT; or
(C) If the Company generates $2,000,000 or more of EBT during
the Second Measurement Period, then the Shareholders shall be
entitled to an earn-out payment in cash equal to forty percent
(40%) of EBT.
Each portion of the Purchase Price shall be paid to the Shareholders on a pro
rata basis according to their percentage interests in the Company as set
forth on Exhibit A attached hereto, using conventional rounding to the
nearest dollar or Share as the case may be. The amounts owed to the
Shareholders pursuant to Sections 2.3(b) and 2.3(d), if any, shall be paid by
wire transfer to the Shareholders in accordance with written instructions to
be provided by the Shareholders, and amounts owed under Section 2.3(d), if
any, shall be paid within 30 days of the final determination of such amounts.
COVENANTS OF BUYER REGARDING EARN-OUT PAYMENTS.
After the Closing and continuing until all Earn-out Payments have been
calculated hereunder, Buyer shall maintain the Company as a wholly owned
subsidiary. The Company's EBT for purposes of calculating the Earn-out
Payments shall not be reduced by additional overhead charges relating to
Buyer's operations.
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EARN-OUT PAYMENT OFFSET/WITHHOLDING.
If, at the time any Earn-out Payment is due to the Shareholders
from Buyer hereunder, (i) a Shareholder owes any amount to Buyer under the
indemnification provisions contained in Section 7.5 and Section 10.1 of this
Agreement, or (ii) a bona fide dispute exists between Buyer and a Shareholder
regarding any claim or demand made by Buyer against such Shareholder for
indemnification under Section 7.5 or Section 10.1, then in addition to any
other remedies available to Buyer, Buyer shall have the right to, in the case
of (i) above, offset the amount owed to Buyer by such Shareholder under
Section 7.5 or Section 10.1 hereof against the Earn-out Payment due to such
Shareholder and, in the case of (ii) above, withhold making payment to such
Shareholder of the Earn-out Payment until such time as the claim is resolved.
DISCHARGE OF CERTAIN INDEBTEDNESS.
Prior to the Closing, the Shareholders shall cause the satisfaction
and discharge of any and all indebtedness and other amounts owed to Grossmont
Bank under that certain Loan Agreement dated as of October 29, 1997, and
shall all obtain from Grossmont Bank a release of all liens against the
Company's assets securing such indebtedness.
CLOSING MATTERS.
CLOSING. The Parties will use their best efforts to make
the Closing take place effective as of 11:59 p.m., California time, on
February 13, 1998 (the "Closing Date"), following the fulfillment or waiver
of all conditions precedent to the Closing and shall be held at the offices
of O'Melveny & Myers LLP in Newport Beach, California. Such Closing Date may
be changed by agreement among the Parties.
DELIVERIES BY THE SHAREHOLDERS. At the Closing, the
Shareholders shall deliver or cause to be delivered to Buyer the following,
in form and substance satisfactory to Buyer and Buyer's counsel, against
delivery of the items specified in Section 2.7(c):
Certificates representing the Stock, duly endorsed
in blank or having affixed thereto stock powers executed in blank, and
in proper form for transfer, with all requisite stock transfer stamps,
if any, affixed to such certificates;
The employment agreement referred to in Section
8.1(b) executed by MFC and the Company;
The employment agreement referred to in Section
8.1(c) executed by MFCII and the Company;
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The closing certificates referred to in Section
8.2(a);
The opinion of counsel of the Shareholders and the
Company referred to in Section 8.2(c);
Any Approvals and Permits required to be obtained
before consummation of the Acquisition referred to in Sections 6.5 and
8.2(d), unless waived by Buyer;
Proof, reasonably acceptable to Buyer, that prior to the
Closing, any indebtedness to Grossmont Bank under that certain Loan
Agreement dated as of October 29, 1997 has been repaid, the line of
credit terminated and all liens relating thereto released; and
Proof, reasonably acceptable to Buyer that, prior to Closing,
all rights related to the receivables identified in Schedule 10.1 have
been assigned to the Shareholders and that the Shareholders have assumed
all liabilities related to the underlying receivable, including without
limitation, transaction claims or counterclaims now or hereafter
asserted by any of the relevant parties.
DELIVERIES BY BUYER. At the Closing, Buyer shall deliver to
the Shareholders the following, in form and substance reasonably satisfactory
to Shareholders and Shareholders' counsel, against delivery of the items
specified in Section 2.7(b):
The Closing Cash Payment;
Certificates representing the Buyer Shares referred
to in Section 8.3(b), duly endorsed in blank or having affixed thereto
stock powers executed in blank, and in proper form for transfer, with
all requisite stock transfer stamps, if any, affixed to such
certificates;
The closing certificates referred to in Section
8.3(a); and
The opinion of counsel of Buyer referred to in
Section 8.3(f).
SIMULTANEOUS DELIVERY. All acts with respect to the Closing
shall be considered as having taken place simultaneously, and no delivery or
payment shall be considered as having been made until all deliveries, payments
and Closing transactions have been accomplished.
DELIVERY OF CLOSING DOCUMENTS. Each party shall cooperate with
the other to the fullest extent possible in exchanging instruments and
documents required to be delivered at or before the Closing, or drafts
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thereof, in sufficient time in advance of the Closing to provide to the other
party a reasonable opportunity to examine such documents or drafts thereof.
NO EQUITABLE CONVERSION. Before the Closing, neither the
execution of this Agreement nor the performance of any provision contained
herein shall cause Buyer to become liable for (i) the operations of the
Company or the business of the Company; (ii) the condition of the Company's
assets; (iii) the cost of any labor or materials furnished to any such
property; (iv) compliance with any laws, requirements, or regulations of, or
Taxes, or assessments or other charges now or hereafter due to, any
Governmental Entity; or (v) for any other Encumbrances or expenses whatsoever
pertaining to the conduct of the Company's Business or the ownership, title,
possession, use or occupancy of the property of the Company.
REPRESENTATIONS AND WARRANTIES
CONCERNING THE SHAREHOLDERS
Except as specifically set forth in this Agreement, the Exhibits
attached hereto, and in any schedules or lists referred to herein, each of
the Shareholders, severally and not jointly, hereby represent and warrant to
Buyer that:
OWNERSHIP OF STOCK.
Except as described on Exhibit A, (i) such Shareholder is the legal
and beneficial owner of the number of Shares listed opposite, his, hers or
its name on Exhibit A, and (ii) the Shares so listed are owned by such
Shareholder free and clear of all Encumbrances.
DELIVERY OF GOOD TITLE.
All consents, approvals, authorizations and orders necessary for
the sale and delivery of the Stock to be sold by such Shareholder hereunder
have been obtained, and such Shareholder has, and immediately before the
Closing will have, full right, power, authority and capacity to sell, assign,
transfer and deliver the Stock owned by such Shareholder pursuant to this
Agreement. Upon delivery by such Shareholder of the Stock owned by such
Shareholder and payment of the consideration therefor pursuant to this
Agreement, good and valid title to the Stock, free and clear of any and all
liens, trusts (constructive and other), equities, claims, marital rights or
other Encumbrances, will pass to Buyer.
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EXECUTION AND DELIVERY.
All consents, approvals, authorizations and orders necessary for
the execution and delivery by such Shareholder of this Agreement has been
obtained, and such Shareholder has full right, power, authority and capacity
to enter into and perform fully under this Agreement. This Agreement has
been duly executed and delivered by such Shareholder and constitutes a legal,
valid and binding agreement of such Shareholder, enforceable against such
Shareholder in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equitable principles relating to or limiting creditors'
rights generally.
NO CONFLICTS.
The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with
or result in a breach or violation of any term or provision of, or (with or
without notice or passage of time, or both) constitute a default under, any
Contract to which such Shareholder is a party or by which such Shareholder or
the any of the Stock owned by such Shareholder is bound, or violate the
provisions of any Law or Order of any Governmental Entity or any arbitrator,
having jurisdiction over such Shareholder or the property of such
Shareholder, nor will such action result in the creation or imposition of any
lien, claim, charge or other Encumbrance upon any of the Stock owned by such
Shareholder.
INVESTMENT INTENT.
Such Shareholder is acquiring the Buyer Shares for investment
purposes only, for such Shareholder's own account and not as a nominee or
agent for any other person, and not with a view to or for resale in
connection with any distribution thereof within the meaning of the Securities
Act.
BUSINESS RELATIONSHIP.
Such Shareholder has a preexisting business relationship with Buyer
and its officers and directors. Such Shareholder is generally familiar with
the business and affairs of Buyer and has discussed Buyer and its plans,
operations and financial condition with one or more of the officers or
directors of Buyer.
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DISCLOSURE/LEGEND.
Buyer has disclosed to such Shareholder that:
the sale of the Buyer Shares has not been registered under the
Securities Act, or qualified under the securities laws of any state and the
Buyer Shares must be held indefinitely unless a sale or transfer of the Buyer
Shares is subsequently registered under the Securities Act and qualified
under applicable state securities laws or exemptions therefrom are available;
and
any certificate representing the Buyer Shares will bear the
following legend restricting transfer:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
IN COMPLIANCE THEREWITH."
RULE 144.
Such Shareholder understands that in addition to the restrictions
described above: (a) the shares which constitute the Buyer Shares are
restricted securities within the meaning of Rule 144 promulgated under the
Securities Act; (b) exemption from registration under Rule 144 will not be
available in any event for at least one year from the date of sale of the
Buyer Shares to the Shareholders, and even then, Rule 144 will not be
available unless: (i) a public trading market then exists for the Buyer
Shares, (ii) adequate information concerning Buyer is then available to the
public, and (iii) the other terms and conditions of Rule 144 are met; and (c)
any unregistered sale of the Buyer Shares may be made by the Shareholders
only in accordance with the terms and conditions of Rule 144, or other
applicable exemption under the Act.
TRUST FORMATION.
The Trust represents and warrants that it was not specifically
formed for the purpose of purchasing the Buyer Shares.
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REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
Except as specifically set forth in this Agreement, the Exhibits
attached hereto, and any Schedules or lists referred to herein, each Company,
MFC, MAC and the Trust, severally and not jointly, represents and warrants to
Buyer that:
ORGANIZATION, GOOD STANDING AND RELATED MATTERS.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization. The Company has all necessary corporate power and corporate
authority to execute, deliver and perform this Agreement and any related
agreements to which it is a party. The Company has no Subsidiaries and does
not own, directly or indirectly, an equity interest in any other Person.
Schedule 4.1 lists the jurisdiction in which the Company was organized and each
jurisdiction in which the Company is required to be and qualified or licensed
to do business as a foreign Person. The Company has all necessary corporate
power and corporate authority to own its properties and assets and to carry on
its Business as now conducted and is duly qualified or licensed to do business
as a foreign corporation in good standing in all jurisdictions in which the
character or the location of the assets owned or leased by the Company or the
nature of the Business conducted by the Company requires licensing or
qualification. Schedule 4.1 correctly lists the current directors and
executive officers of the Company. True, correct and complete copies of the
respective charter documents of the Company as in effect on the date hereof
have been delivered to Buyer. The Company is not a registered or reporting
company under the Exchange Act.
CAPITALIZATION; OWNERSHIP OF STOCK.
The authorized capital stock of the Company consists of 100,000
shares of common stock, no par value, of which 1,000 shares are issued and
outstanding. There are no outstanding Contracts or other rights to subscribe
for or purchase, or Contracts or other obligations to issue or grant any rights
to acquire, any Equity Securities of the Company, or to restructure or
recapitalize the Company. There are no outstanding Contracts of the Company to
repurchase, redeem or otherwise acquire any Equity Securities of the Company.
All outstanding Equity Securities of the Company are duly authorized and
validly issued, are fully paid and nonassessable and were issued in conformity
with applicable Laws. There are no preemptive rights in respect of any Equity
Securities of the Company.
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FINANCIAL STATEMENTS; CHANGES; CONTINGENCIES.
AUDITED FINANCIAL STATEMENTS. Schedule 4.3(a) hereto contains
true and complete copies of the audited consolidated and consolidating balance
sheets for the Company for the twelve-month periods ended May 31, 1996 and
1997, and the related consolidated and consolidating statements of operations,
changes in shareholder's equity and changes in financial position or cash flow
for the period then ended. All such financial statements have been examined
and audited by the Auditors whose reports thereon are included with such
financial statements. All such financial statements have been prepared in
conformity with GAAP applied on a consistent basis (except for changes, if any,
required by GAAP and disclosed therein). Such statements of operations and
cash flow present fairly the results of operations and cash flows of the
Company for the periods covered, and the balance sheets present fairly the
financial condition of the Company as of their respective dates.
UNAUDITED INTERIM FINANCIAL STATEMENTS. Schedule 4.3(b) hereto
contains true and correct copies of the consolidated and consolidating balance
sheets for the Company for the five-month period ended November 30, 1997, and
the related consolidated and consolidating statements of operations and cash
flows and changes in shareholder's equity for the period then ended. Such
interim financial statements have been prepared from the books and records of
the Company consistent with past practice. The statements of operations and
cash flows present fairly the results of operations and cash flows of the
Company for the period covered, and the balance sheet presents fairly the
financial condition of the Company as of November 30, 1997. All such interim
financial statements reflect all adjustments (which consist only of normal
recurring adjustments not material in amount and include, but are not limited
to, estimated provisions for year-end adjustments) necessary for a fair
presentation. As of November 30, 1997, the Company had no material liability
(actual, contingent or accrued) that, in accordance with GAAP applied on a con
sistent basis, should have been shown or reflected in the interim financial
statements but was not.
AUDITORS' LETTERS. The Company has delivered to Buyer copies of
each management letter or other letter delivered to Shareholder or the Company
by the Auditors in connection with the audited, reviewed and/or unaudited
financial statements delivered to the Buyer or relating to any review by the
Auditors of the internal controls of the Company during the two years ended May
31, 1996 and 1997, or thereafter, and has made available for inspection by
Buyer all reports produced or developed by the Auditors or management in
connection with their audit, examination or review of such financial
statements, as well as all such reports for prior periods for which any tax
liability of the Company has not been finally determined or barred by
applicable statutes of limitation. Since June 1, 1997, there have been no
changes in any of the significant accounting policies, practices or procedures
of the Company.
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NO MATERIAL ADVERSE CHANGES. With respect to the Company, since
November 30, 1997, there has not been, occurred or arisen:
any change in or event affecting the Company, the Business
or the Stock that has had or may reasonably be expected to have a material
adverse effect on the Company, the Business, or the Stock,
any agreement, condition, action or omission which would be
proscribed by (or require consent under) Section 6.3 had it existed,
occurred or arisen after the date of this Agreement,
any strike or other labor dispute, or
any casualty, loss, damage or destruction (whether or not
covered by insurance) of any material property of the Company or that has
involved or may involve a loss to the Company of more than $50,000.
NO OTHER LIABILITIES OR CONTINGENCIES. Schedule 4.3(e) lists
all of the Company's liabilities. The Company has no liabilities of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, except liabilities that (i) are reflected or disclosed in the
most recent of the financial statements referred to in subsection (a) or (b)
above, or (ii) were incurred after November 30, 1997 in the ordinary course of
business and in the aggregate do not exceed $50,000, or (iii) are set forth in
Schedule 4.3(e) hereto, or (iv) are liabilities under the executory portion of
any written purchase order, sales order, lease, agreement or commitment of any
kind by which Company is bound and which was entered into in the ordinary
course of Company's Business and consistent with past practice, or (v) are
liabilities incurred or contemplated to be incurred by Company pursuant to this
Agreement.
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TAX AND OTHER RETURNS AND REPORTS.
Except as set forth on Schedule 4.4, the Company has timely filed or
will file all required Tax Returns and has paid all Taxes due for all periods
ending on or before the Closing Date. Adequate provision has been or, as of
the Closing Date, will be made in the books and records of the Company and in
the financial statements referred to in Section 4.3 above and to be delivered
to Buyer, for all Taxes accrued or accruing as of the Closing Date whether or
not due and payable and whether or not disputed. To the Shareholders
knowledge, Schedule 4.4 lists the date or dates through which the IRS and any
other Governmental Entity have examined the United States federal income tax
returns and any other Tax Returns of the Company. All required Tax Returns,
including amendments to date, have been prepared in good faith and are complete
and accurate in all material respects. No Governmental Entity has, during the
past three years, examined or is in the process of examining any Tax Returns of
the Company. No Governmental Entity has proposed (tentatively or defini
tively), asserted or assessed or threatened to propose or assert, any
deficiency, assessment or claim for Taxes.
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MATERIAL CONTRACTS.
Schedule 4.5 lists each Contract to which the Company is a party or
to which the Company or any of its properties is subject or by which any
thereof is bound that is deemed a Material Contract under this Agreement. Each
Contract that (a) after November 30, 1997 obligates the Company to pay an
amount of $50,000 or more, (b) has an unexpired term as of November 30, 1997 in
excess of one year, (c) represents a contract upon which the Business is
substantially dependent or which is otherwise material to the Business,
(d) provides for an extension of credit other than consistent with normal
vendor trade credit terms, (e) limits or restricts the ability of the Company
to compete or otherwise to conduct its Business in any manner or place,
(f) provides for a guaranty or indemnity by the Company, (g) grants a power of
attorney, agency or similar authority to another person or entity, (h) contains
a right of first refusal, (i) contains a right or obligation of any Affiliate,
officer or director or any Associate, of the Company to the Company,
(j) requires the Company to buy or sell goods or services with respect to which
there will be material losses or will be costs and expenses materially in
excess of expected receipts or (k) was not made in the ordinary course of
business, shall be deemed to be a Material Contract and has been identified on
such Schedule 4.5. True copies of the agreements appearing on Schedule 4.5,
including all amendments and supplements, have been delivered to Buyer. Each
Material Contract is valid and subsisting; the Company has duly performed all
its obligations thereunder to the extent that such obligations to perform have
accrued; and to the best of such Shareholders' knowledge, no breach or default,
alleged breach or default, or event which would (with the passage of time,
notice or both) constitute a breach or default thereunder by the Company, or
any other party or obligor with respect thereto, has occurred or as a result of
this Agreement or performance thereof will occur. Consummation of the
transactions contemplated by this Agreement will not (and will not give any
person a right to) terminate or modify any rights of, or accelerate or augment
any obligation of the Company under any of those agreements.
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REAL AND PERSONAL PROPERTY; TITLE TO PROPERTY; LEASES.
Schedule 4.6 lists all property (whether real or personal, tangible
or intangible), except for Intangible Property of the Company, material to
the Business, properly identifies each of such properties as real property
(or an interest in real property) or personal property and designates any
leasehold interests therein. The Company has good and marketable title to,
free of any and all Encumbrances, all items of real property, including fees,
leaseholds and all other interests in real property, and such other assets
and properties, including, but not limited to, all assets that they
respectively purport to own or have the right to use, except for Encumbrances
consisting of liens for Taxes not yet due or matters otherwise described in
Schedule 4.6. All material tangible properties of the Company are in a good
state of maintenance and repair (except for ordinary wear and tear). All
material leasehold properties held by the Company as lessee are held under
valid, binding and enforceable leases. There is no pending or, to the
knowledge of any Shareholder, threatened Action that would materially
interfere with the quiet enjoyment of any such leasehold by the Company.
INTANGIBLE PROPERTY.
The Company does not own, license or otherwise have an
interest in or use in connection with the Business any Intangible Property,
except for its trade names "Western States Plasma Company" and "TheraSource
International" (the "Trade Names"). The Company owns or otherwise has the
right to use the Trade Names, free and clear of any Encumbrance or other
adverse claim. The Company does not use the Trade Names, by consent of any
other Person, and is not required to and does not make any payments to others
with respect thereto. The Company has not received any written notice to the
effect (or is otherwise aware that) that the Trade Names or their use by the
Company conflicts with any rights of any Person and the Company has not
received any notice of infringement with respect to the use of the Company's
Trade Names. The execution, delivery and performance of this Agreement and
the consummation of the other transactions contemplated hereby will not cause
the forfeiture or termination or give rise to a right of forfeiture or
termination of, or in any way impair the right of the Company to use, sell,
license or dispose of or to bring any action for the infringement of, any
Intangible Property, Trade Name or the Products, or any portion thereof.
To the knowledge of any Shareholder, the sale of the Products by
Seller does not infringe any Intellectual Property Right of any other Person,
and there is no pending or, to the knowledge of any Shareholder threatened
Action against the Company contesting the Company's right to sell the
Products.
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AUTHORIZATION; NO CONFLICTS.
The execution, delivery and performance of this Agreement and any
related agreements by the Company has been duly and validly authorized by the
Board of Directors of the Company and by all other necessary corporate action
on the part of the Company. This Agreement and any related agreements
constitutes the legally valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors rights generally. The execution, delivery
and performance of this Agreement by the Company and the execution, delivery
and performance of any related agreements or contemplated transactions by the
Company will not violate, or constitute a breach or default (whether upon
lapse of time and/or the occurrence of any act or event or otherwise) under,
the charter documents or bylaws of the Company or any Contract of the
Company, result in the imposition of any Encumbrance against any asset or
properties of the Company, or violate any Law. Schedule 4.8 lists all
Permits and Approvals required to be obtained by the Company and the
Shareholders to consummate the transactions contemplated by this Agreement.
Except for matters identified in Schedule 4.8 as requiring that certain
actions be taken by or with respect to a third party or Governmental Entity,
the execution and delivery of this Agreement by the Company and the
performance of this Agreement and any related or contemplated transactions by
the Company will not require filing or regis tration with, or the issuance of
any Permit by, any other third party or Governmental Entity.
LEGAL PROCEEDINGS.
There is no Order or Action pending or, to the knowledge of any
Shareholder, threatened against or affecting the Company, or any of its
properties or assets that individually or when aggregated with one or more
other Orders or Actions has or might reasonably be expected to have a
material adverse effect on the Company, the Business, on the Company's or the
Shareholders' ability to perform this Agreement, or on any aspect of the
transactions contemplated by this Agreement. There is no Order, Action and
Labor Matter that involves a claim or potential claim of aggregate liability
in excess of $20,000 against, or that enjoins or compels or seeks to enjoin
or to compel any activity by the Company. There is no matter as to which the
Company or any of such Shareholders has received any written notice, claim or
assertion, or which to the knowledge of any of such Shareholders, otherwise
has been threatened in writing or is reasonably expected to be threatened or
initiated, against or affecting the Company or any director, officer,
employee, agent or representative of the Company or any other Person, nor to
the knowledge of any of such Shareholders is there any reasonable basis
therefor, in connection with which any such Person has or may reasonably be
expected to have any right to be indemnified by the Company.
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LABOR RELATIONS.
Except as set forth on Schedule 4.10, with respect to the Company
and its respective employees, independent sale representatives, consultants,
agents, officer and directors, (i) to the extent required, the Company has
paid and performed all material obligations with respect to their respective
employees, independent sales representatives, consultants, agents, officers
and directors, including without limitation all wages, salaries, commissions,
bonuses, severance pay, vacation pay, accrued vacation pay, benefits and
other direct compensation reimbursed to such persons; (ii) the Company is
compliance in all material respects with all federal, state, local and
foreign laws and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours; (iii) there is no
pending, or to any of such Shareholders' knowledge, threatened, charge,
complaint, allegation, application or other process against the Company
before the National Labor Relations Board or any comparable state, local or
foreign agency, governmental or administrative; (iv) there is no labor
strike, dispute, slowdown or work stoppage or other job action pending, or to
any of such Shareholders' knowledge, threatened against or otherwise
affecting or involving the Company; and (v) no employees of the Company are
covered by any collective bargaining agreements, and to the best knowledge of
such Shareholders, no effort is being made by any union to organize any of
the Company's employees. All costs attributable to vacation, sick leave,
medical and other similar employee benefits have been properly accrued on the
Company's Financial Statements.
MINUTE BOOKS.
The minute books of the Company accurately reflect all actions and
proceedings taken to date by the shareholders, board of directors and
committees of the Company, and such minute books contain true and complete
copies of the charter documents of the Company and all related amendments.
The stock record books of the Company reflect accurately all transactions in
the capital stock of all classes.
ACCOUNTING RECORDS; INTERNAL CONTROLS.
ACCOUNTING RECORDS. The Company has accounting records that
accurately and validly reflect its transactions.
DATA PROCESSING; ACCESS. Such accounting records, to the
extent they contain important information that is not easily and readily
available elsewhere, have been duplicated or backed-up, and such duplicates
or back-ups are stored safely and securely pursuant to procedures and
techniques utilized by company of comparable size in similar lines of
business.
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INSURANCE.
The Company is, and at all times during the past five years has
been, insured with reputable insurers against all risks normally insured
against by companies in similar lines of business. Schedule 4.13 lists all
insurance policies and bonds that are material to the Business and all of
such insurance policies and bonds maintained by the Company are in full force
and effect. To the best of each Shareholders' knowledge, the Company is not
in default under any such policy or bond. To the best of each Shareholders'
knowledge, the Company has timely filed claims with its insurers with respect
to all matters and occurrences for which it believes it has coverage. All
insurance policies maintained by the Company will remain in full force and
effect, and the Company has not received written notice or other indication
from any insurer or agent of any intent to cancel or not so renew any of such
insurance policies. The Company has complied with and implemented all
outstanding (i) requirements and recommendations of any insurance company
that has issued a policy with respect to any of the properties and assets of
the Company and (ii) requirements and recommendations of any Governmental
Entity that the Company or any of such Shareholders has actual knowledge of
with respect to any such insurance policy.
PERMITS.
The Company holds all Permits that are required by any Governmental
Entity to permit it to conduct the Business as now conducted, and all such
Permits are valid and in full force and effect and will remain so upon
consummation of the transactions contemplated by this Agreement. To the
knowledge of the Company, no suspension, cancellation or termination of any
of such Permits is threatened or imminent.
COMPLIANCE WITH LAW.
The conduct of the Company's Business has not violated, and as
presently conducted does not violate, any federal, state, local or foreign
laws, including, but not limited to, regulations or ordinances, or Order, or
any industry standards, nor has the Company received any written notice of
any such violation which remains outstanding. The Company is not subject to
any Order currently in effect which could have a material adverse effect on
the Company or the Business.
The Company possesses all Licenses related to the Business,
including all export licenses, FDA Master Files, or approvals and occupancy,
fire, business and other permits from local officials, and is in full
compliance with the terms thereof, except where the failure to hold any such
license or a violation thereof would not have a material adverse effect on
the Company or the Business. Schedule 4.15 sets forth a complete and
accurate list of all such Licenses related to the Business.
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The Company has adhered to standard operating procedures
accepted by the FDA and required by its customers (copies of which standard
operating procedures have previously been delivered to the Buyer) and has
properly tested and/or secured appropriate testing of all blood and plasma
products necessary for the conduct of the Business. Schedule 4.15 sets forth
a true, correct and complete list of all recall letters and warning letters
received by or relating to the Business and, with respect to each such
letter, (i) the date of recall or warning, (ii) the date each recall or
warning first appeared in FDA Enforcement Reports, (iii) an accurate
description of the facility involving the recall or warning, (iv) the number
of units involved, (v) the distribution of each of the recalled units by
state and/or country, (vi) the reason given by the FDA for each recall or
warning, and (vii) any continuing obligations arising from such recall or
warning.
DIVIDENDS AND OTHER DISTRIBUTIONS.
There has been no dividend or other distribution of assets or
securities whether consisting of money, property or any other thing of value,
declared, issued or paid subsequent to the date of the most recent financial
statements described in Section 4.3 by the Company.
EMPLOYEE BENEFITS.
EMPLOYEE BENEFIT PLANS, COLLECTIVE BARGAINING AND EMPLOYEE
AGREEMENTS, AND SIMILAR ARRANGEMENTS.
Schedule 4.17(a)(i) lists all employee benefit plans and
collective bargaining, employment or severance agreements or other
similar arrangements to which the Company is or ever has been a party or
by which it is or ever has been bound, legally or otherwise, including,
without limitation, (a) any profit-sharing, deferred compensation, bonus,
stock option, stock purchase, pension, retainer, consulting, retirement,
severance, welfare or incentive plan, agreement or arrangement, (b) any
plan, agreement or arrangement providing for "fringe benefits" or
perquisites to employees, officers, directors or agents, including, but
not limited to, benefits relating to Company automobiles, clubs,
vacation, child care, parenting, sabbatical, sick leave, medical, dental,
hospitalization, life insurance and other types of insurance, (c) any
employment agreement, or (d) any other "employee benefit plan" (within
the meaning of Section 3(3) of ERISA).
The Company has delivered to Buyer true and complete copies of
all documents and summary plan descriptions with respect to such plans,
agreements and arrangements, or summary descriptions of any such plans,
agreements or arrangements not otherwise in writing.
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There are no negotiations, demands or proposals that are
pending or have been made which concern matters now covered, or that would
be covered, by plans, agreements or arrangements of the type described in
this section.
The Company is in full compliance with the applicable
provisions of ERISA (as amended through the date of this Agreement), the
regulations and published authorities thereunder, and all other Laws
applicable with respect to all such employee benefit plans, agreements and
arrangements. The Company has performed all of its obligations under all
such plans, agreements and arrangements. There are no Actions (other than
routine claims for benefits) pending or threatened against such plans or
their assets, or arising out of such plans, agreements or arrangements,
and all such plans, agreements and arrangements have been operated in
compliance with their terms. No facts exist which could give rise to any
such Actions.
Except as specified in Schedule 4.17(a)(v), each of the
plans, agreements or arrangements can be terminated by the Company within
a period of 30 days following the Closing Date, without payment of any
additional compensation or amount or the additional vesting or
acceleration of any such benefits.
All obligations of the Company under each such plan,
agreement or arrangement (x) that are due prior to the Closing Date have
been paid or will be paid prior to that date, and (y) that have accrued
prior to the Closing Date have been or will be paid prior to the Closing
Date or properly accrued on the Company's balance sheet.
Except as set forth on Schedule 4.17(a)(vii), no employee,
consultant or agent of the Company is entitled to any severance, parachute
or other form of payment or benefit from the Company or its successors or
assigns arising or becoming due as a result of the consummation of the
Acquisition.
QUALIFIED PLANS. The only Plan listed in Schedule 4.17(a)(i)
which is a stock bonus, pension or profit-sharing plan within the meaning of
Section 401(a) of the Code is the Western States Group, Inc. Profit Sharing
Plan (the "Plan").
TITLE IV PLANS. No plan listed in Schedule 4.17(a)(i) is a plan
subject to Title IV of ERISA.
MULTIEMPLOYER PLANS. No plan listed in Schedule 4.17(a)(i) is a
"multiemployer plan" (within the meaning of Section 3(37) of ERISA). The
Company has not ever contributed to or had any obligation to contribute to any
multiemployer plan.
FINES AND PENALTIES. There has been no act or omission by the
Company that has given rise to or may give rise to fines, penalties,
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taxes, or related charges under Section 502(c) or (k) or Section 4071 of
ERISA or Chapter 43 of the Code.
CERTAIN INTERESTS.
No Affiliate of the Company, nor any officer or director of the
Company, nor Associate of any such individual, has any material interest in any
property used in or pertaining to the Business; no such Person is indebted or
otherwise obligated to the Company; and the Company is not indebted or
otherwise obligated to any such Person, except for amounts due under normal
arrangements applicable to all employees generally as to salary or
reimbursement of ordinary business expenses not unusual in amount or
significance. The consummation of the transactions contemplated by this
Agreement will not (either alone, or upon the occurrence of any act or event,
or with the lapse of time, or both) result in any benefit or payment (severance
or other) arising or becoming due from the Company or the successor or assign
of the Company to any Person.
The Company has not engaged in any transaction with the
Shareholders or any other Affiliate of the Shareholders. The Company does not
have any liabilities or obligations to the Shareholders or any other Affiliate
of the Shareholders and none of the Shareholders or such Affiliates has any
obligations to the Company. The consummation of the transactions contemplated
by this Agreement will not (either alone, or upon the occurrence of any act or
event, or with the lapse of time, or both) result in any payment arising or
becoming due from the Company or the successor or assign of the Company to the
Shareholders or any Affiliate of the Shareholders, other than obligations
arising under this Agreement and the related Employment Agreements referred to
herein.
BANK ACCOUNTS AND POWERS.
Schedule 4.19 lists each bank, trust company, savings institution,
brokerage firm, mutual fund or other financial institution with which the
Company has an account or safe deposit box and the names and identification of
all Persons authorized to draw thereon or to have access thereto, and lists the
names of each Person holding powers of attorney or agency authority from the
Company and a summary of the terms thereof.
NO BROKERS OR FINDERS.
No agent, broker, finder, or investment or commercial banker, or
other Person or firm engaged by or acting on behalf of the Shareholders, the
Company or any of their respective Affiliates in connection with the
negotiation, execution or performance of this Agreement or the transactions
contemplated by this Agreement, is or will be entitled to any brokerage or
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finder's or similar fee or other commission as a result of this Agreement or
such transactions.
ACCURACY OF INFORMATION.
None of the information supplied or to be supplied by or on behalf of
the Shareholders or the Company (a) to any Person for inclusion in any document
or application filed with any Governmental Entity having jurisdiction over or
in connection with the transactions contemplated by this Agreement or (b) to
Buyer, its agents or representatives in connection with these transactions,
this Agreement or the negotiations leading up to this Agreement, did contain,
or at the respective times such information is or was delivered, will contain
any untrue statement of a material fact, or omitted or will omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If any of such information at any time subsequent to delivery
and prior to Closing becomes untrue or misleading, in any material respect, the
Company and the Shareholders will promptly notify Buyer in writing of such fact
and the reason for such change.
INVENTORIES.
All inventories of the Company are of good merchantable quality,
reasonably in balance, have been recorded in accordance with GAAP, and salable
(in the case of inventory held for sale) or currently usable (in the case of
other inventory) in the ordinary course of business. The value of obsolete,
damaged or excess inventory and of inventory below standard quality has been
written down on the most recent balance sheet delivered to Buyer pursuant to
Section 4.3(b) or, with respect to inventories purchased since such balance
sheet date, on the books and records of the Company, to ascertainable market
value, or adequate reserves described on such balance sheet have been provided
therefor, and the value at which inventories are carried reflects the customary
inventory valuation policy of the Company (which fairly reflects the value of
obsolete, spoiled or excess inventory) for stating inventory, in accordance
with GAAP consistently applied.
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RECEIVABLES AND COMMISSIONS PAYABLE.
Except as listed on Schedule 4.23, all receivables of the Company,
reflected on the balance sheets, represent sales actually made in the ordinary
course of business, and are current and fully collectible net of any reserves
shown on the balance sheets, referred to in Section 4.3, (which reserves were
calculated on a basis consistent with GAAP and past practices). The Company
has delivered to Buyer a complete and accurate aging list of all receivables of
the Company. All Commissions payable to sales agents of the Company reflected
on the Company's financial statements, represent commissions actually made in
the ordinary course of business, and are properly recorded and current. The
Company has delivered to Buyer a complete and accurate aging list of all
commissions payable of the Company.
CUSTOMERS AND SUPPLIERS.
Schedule 4.24 lists the names of and describes all Contracts with,
and the appropriate percentage of Business attributable to, the ten largest
customers of the Business at the date of this Agreement, and any sole-source
suppliers of significant goods or services (other than electricity, gas,
telephone or water) to the Company with respect to which alternative sources of
supply are not readily available on comparable terms and conditions. To the
best knowledge of the Company and such Shareholders, except as set forth in
Schedule 4.24, there have been no adverse changes in the relationships between
the Company and its suppliers to the business of the Business since November
30, 1997.
ENVIRONMENTAL COMPLIANCE.
Except as set forth in Schedule 4.25, (a) the Company has not
generated, used, transported, treated, stored, released or disposed of, or has
suffered or permitted anyone else to generate, use, transport, treat, store,
release or dispose of any Hazardous Substance in material violation of any
Laws; (b) there has not been any generation, use, transportation, treatment,
storage, release or disposal of any Hazardous Substance in connection with the
conduct of the Business of the Company or the use of any property or facility
of the Company which has created or to any of such Shareholder's knowledge
might reasonably be expected to create any liability of the Company under any
Laws or which would require reporting by the Company to or notification of any
Governmental Entity; (c) no asbestos or polychlorinated biphenyl or underground
storage tank is contained in or located at any facility of the Company; and
(d) any Hazardous Substance handled or dealt with in any way in connection with
the Business of the Company, during the Shareholders' ownership, has been and
is being handled or dealt with in all respects in material compliance with
applicable Laws.
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NO HEALTH PLANS OR GROUP HEALTH PLANS.
The Company has never operated, and does not operate as of the
Closing Date, any health plan or group health plan for the benefit of the
Company's employees or for the benefit of any other party or entity.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Shareholders that:
ORGANIZATION AND RELATED MATTERS.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Buyer has all necessary
corporate power and authority to carry on its business as it is now being
conducted. Buyer has the necessary corporate power and authority to execute,
deliver and perform this Agreement and any related agreements to which it is
are party. Buyer has delivered to Shareholders true and correct copies of its
Certificate of Incorporation and Bylaws, certified by its Secretary.
AUTHORIZATION.
The execution, delivery and performance of this Agreement and any
related agreements by Buyer have been duly and validly authorized by the Board
of Directors of Buyer and by all other necessary corporate action on the part
of Buyer. This Agreement constitutes the legal, valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
NO CONFLICTS.
The execution, delivery and performance of this Agreement and any
related agreements by Buyer will not violate the provisions of, or constitute a
breach or default, whether upon lapse of time and/or the occurrence of any act
or event or otherwise, under (a) the charter documents or bylaws of Buyer or
(b) any Law to which Buyer is subject, or (c) any material contract to which
the Buyer is a party; provided that the appropriate regulatory approvals are
received as contemplated by Section 6.5 and specified consents, if any, are
secured.
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NO BROKERS OR FINDERS.
No agent, broker, finder or investment or commercial banker, or other
Person or firms engaged by or acting on behalf of Buyer or its Affiliates in
connection with the negotiation, execution or performance of this Agreement or
the transactions contemplated by this Agreement, is or will be entitled to any
broker's or finder's or similar fees or other commissions as a result of this
Agreement or such transactions.
LEGAL PROCEEDINGS.
There is no Order or Action pending or, to the best knowledge of
Buyer, threatened against Buyer that individually or when aggregated with one
or more other Actions has or might reasonably be expected to have a material
adverse effect on the Buyer, its business, or Buyer's ability to perform its
obligations under this Agreement or any related agreements.
CAPITALIZATION OF BUYER.
Buyer has delivered to Shareholders true and correct copies of its
Certificate of Incorporation and Bylaws, certified by its Secretary. From the
date of such delivery there have been no amendments thereto and the same are in
full force and effect. As of the Closing Date, and after giving effect to the
transactions contemplated hereby, the authorized capital stock of Buyer shall
consist of (a) 25,000,000 shares of Common Stock, par value $.001 per share, of
which 6,741,413 shares shall be issued and outstanding, and (b) 25,000,000
shares of Preferred Stock, par value $.001 per share, of which 3,600 shares
shall have been designated Series A Preferred Stock (2,000 shares of which
shall be issued and outstanding), and 15,000 shares shall have been designated
Series B Preferred Stock (of which 15,000 shares shall be issued and
outstanding). The outstanding shares of Common Stock and Preferred Stock of
the Buyer have been validly issued and are fully paid and nonassessable. The
issuance and delivery of the Buyer Shares pursuant to this Agreement has been
duly authorized by all necessary corporate action on the part of Buyer. Upon
issuance in accordance with the terms of this Agreement, the Buyer Shares will
be validly issued, fully paid and nonassessable. Except as disclosed on
Schedule 5.6, as of the Closing Date, there will be no outstanding securities
convertible into or exchangeable for any shares of capital stock of the Buyer,
or any rights to subscribe for or to purchase, or any options for the purchase
of, or any agreements providing for the issuance of, or any calls or
commitments relating to the issuance of, any capital stock of the Buyer.
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ACCURACY OF INFORMATION IN EXCHANGE ACT REPORTS.
Each periodic report filed with the SEC by Buyer pursuant to either
of Section 13 or Section 15 of the Exchange Act, as of the date such report was
filed and as amended, did not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Since
November 30, 1997, there has been no change in or event affecting the Buyer
which has had or is reasonably expected to have a material adverse effect on
the business, financial condition or results of operations of the Buyer and its
subsidiaries, taken as a whole.
INVESTMENT INTENT.
Buyer has such knowledge and experience in financial and business
matters as to be capable of evaluating the risks and merits of an investment in
the Company's Stock. Buyer is acquiring the Stock for investment purposes
only, for such Buyer's own account and not as a nominee or agent for any other
person, and not with a view to or for resale in connection with any
distribution thereof within the meaning of the Securities Act.
BUSINESS RELATIONSHIP.
Buyer is generally familiar with the business and affairs of the
Company and has discussed the Company and its plans, operations and financial
condition with one or more of the officers or directors of the Company.
DISCLOSURE/LEGEND.
Shareholders have disclosed to the Buyer that:
the sale of the Stock has not been registered under the
Securities Act, or qualified under the securities laws of any state and the
Stock must be held indefinitely unless a sale or transfer of the Stock is
subsequently registered under the Securities Act and qualified under applicable
state securities laws or exemptions therefrom are available; and
any certificate representing the Stock will bear the following
legend restricting transfer:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
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ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH."
COVENANTS WITH RESPECT TO CONDUCT OF THE COMPANY
PRIOR TO CLOSING
ACCESS.
The Shareholders shall cause the Company to authorize and
permit, and the Company shall authorize and permit, Buyer and its
representatives (which term shall be deemed to include its independent
accountants and counsel) to have access during normal business hours, upon
reasonable notice and in such manner as will not unreasonably interfere with
the conduct of the Business, to all of its properties, books, records,
operating instructions and procedures, Tax Returns and all other information
with respect to the Business as Buyer may from time to time request, and to
make copies of such books, records and other documents and after first securing
any of the Shareholders' prior consent, which may not be unreasonably withheld,
to discuss the Business with such other Persons, including, without limitation,
their respective directors, officers, employees, accountants, counsel,
suppliers, customers, and creditors, as Buyer considers necessary or
appropriate for the purposes of familiarizing itself with the Business,
obtaining any necessary Approvals of or Permits for the transactions
contemplated by this Agreement and conducting an evaluation of the organization
and Business of the Company. Without limiting the generality of the foregoing,
Buyer shall be entitled to conduct or cause to be conducted on any real
property of the Company after first securing any of the Shareholders' prior
consent, which may not be unreasonably withheld, such soils and geological
tests and environmental inspections, audits and tests (including the taking of
soils and ground water samples) and such structural and other physical
inspections as Buyer shall deem necessary or useful in connection with the
Acquisition.
The Shareholders and the Company each agree to provide Buyer
with notice of all meetings of the Company's board of directors and to furnish
concurrently to Buyer copies of all materials distributed to members of its
board of directors in connection with such meetings.
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MATERIAL ADVERSE CHANGES; REPORTS; FINANCIAL STATEMENTS.
The Shareholders and the Company will promptly notify Buyer of
any event of which any of the Shareholders or the Company obtain knowledge
which has had or might reasonably be expected to have a material adverse effect
on the Business or which if known as of the date hereof would have been
required to be disclosed to Buyer.
The Shareholders and the Company will furnish to Buyer (i) as
soon as available, and in any event within five days after it is prepared, any
report by the Company for submission to its board of directors and the working
papers related thereto and other operating or financial reports (including any
projections and budgets) prepared for management of the Business and the
working papers related thereto, (ii) as soon as available, copies of all
portions of all reports, renewals, filings, certificates, statements and other
documents filed with any Governmental Entity, (iii) monthly and quarterly
unaudited balance sheets, statements of operations and cash flow and changes in
Shareholder's equity for the Company, and (iv) such other reports as Buyer may
reasonably request relating to the Company. Each of the financial statements
delivered pursuant to this Section 6.2(b) shall be prepared in the ordinary
course of business consistent with prior practices. Each of the financial
statements delivered pursuant to this Section 6.2(b) shall be accompanied by a
certificate of the chief financial officer of the Company to the effect that
such financial statements present fairly the financial condition and results of
operations of the Company for the periods covered and reflect all adjustments
(which consist only of normal recurring adjustments not material in amount)
necessary for a fair presentation.
CONDUCT OF BUSINESS.
The Shareholders and the Company agree with and for the benefit of
Buyer that without the prior consent in writing of Buyer, which shall not be
unreasonably withheld or delayed, after November 30, 1997 the Company shall
not, and the Shareholders shall not permit the Company or cause the Company to:
conduct the Business in any manner except in the ordinary course
substantially as now conducted; or
except as required by their terms, amend, terminate or
renegotiate any Material Contract or default (or take or omit to take any
action that, with or without the giving of notice or passage of time,
would constitute a default) in any of its obligations under any Material
Contract or enter into any new Material Contract or take any action that
would jeopardize the continuance of its material supplier or customer
relationships; or
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terminate, amend or fail to renew any existing insurance
coverage; or
terminate or fail to renew or preserve any Permits; or
incur or agree to incur any obligation or liability (absolute or
contingent) that individually calls for payment by the Company of more
than $50,000 in any specific case or $100,000 in the aggregate, except in
the ordinary course of business and consistent with past practice and
where the liability or obligation is offset by a corresponding asset; or
engage in any transaction exceeding $100,000 out of the usual and
ordinary course of business; or
make any loan, guaranty or other extension of credit, or enter
into any commitment to make any loan, guaranty or other extension of
credit, to or for the benefit of any director, officer, employee,
stockholder or any of their respective Associates or Affiliates; or
grant any general or uniform increase in the rates of pay or
benefits to officers, directors or employees (or a class thereof) or any
increase in salary or benefits of any officer, director, employee or agent
or pay any special bonus to any person, or enter into any new employment
of any Person with a salary in excess of $60,000 per year, collective
bargaining or severance agreement; or
except as set forth in Section 7.6, adopt or amend in any
material respect any employee pension, profit-sharing, retirement, bonus,
deferred compensation, insurance, incentive compensation, severance,
thrift, vacation or other plan, agreement, trust fund or arrangement for
the benefit of its employees (whether or not legally binding) other than
amendments of existing benefit plans effected after consultation with
Buyer that are necessary to conform to legal requirements or to consummate
the transactions contemplated by this Agreement; or
sell, transfer, mortgage, encumber or otherwise dispose of any
assets or any liabilities, except (i) for dispositions of property not
material in amount, or (ii) in the ordinary course of business; or
issue, sell, redeem or acquire for value, or agree to do so, any
debt obligations or Equity Securities of the Company; or
declare, issue, make or pay any dividend or other distribution
of assets, whether consisting of money, other personal property, real
property or other thing of value, to its shareholders, or split, combine,
dividend, distribute or reclassify any shares of its Equity Securities; or
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change or amend its charter documents or bylaws; or
make any capital expenditures or commitments with respect
thereto, except for those that it is obligated to make under an agreement
disclosed in Schedule 4.5 hereto; or
make special or extraordinary payments to any Person; or
make any material investment, by purchase, contributions to
capital, property transfers, or otherwise, in any other Person; or
dispose of or permit to lapse any rights to the use of any
Intangible Property or dispose of or disclose any Intangible Property that
is not a matter of public knowledge; or
compromise or otherwise settle any claims, or adjust any
assertion or claim of a deficiency in Taxes (or interest thereon or
penalties in connection therewith), or file any appeal from an asserted
deficiency, except in a form previously approved by Buyer in writing, or
file or amend any Tax Return, in any case before furnishing a copy to
Buyer and affording Buyer an opportunity to consult with respect thereto;
or
cancel, compromise, release or discharge any claim of the Company
upon or against any Person, or waive any right of the Company to institute,
settle or agree to settle any Action or proceeding before any court or
governmental body, other than in the usual and ordinary course of business;
or
make any Tax election or make any change in any method or period
of accounting or in any accounting policy, practice or procedure; or
take, or permit the Company to take, or cause or suffer to be
taken, any action that would cause any of the representations or
warranties of the Shareholders or the Company in this Agreement to be
untrue, incorrect, incomplete or misleading; or
solicit or encourage, or authorize or permit any officer,
director or employee of, or any investment banker, attorney, accountant or
other representative of the Company or any of the Shareholders or any
Affiliate of any of them, to solicit or encourage (including by way of
furnishing nonpublic information), any inquiries or the making of any
proposal that may reasonably be expected to lead to any proposal of
partial or total acquisition of the Company or its assets (collectively
"Inquiry or Proposal") (if any of the Shareholders, the Company or any
officer, director or employee of the Company, or investment banker,
attorney, accountant or other representative of the Company or any of the
Shareholders or any Affiliate of any of them, receives an Inquiry or
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Proposal, then the Shareholders and/or the Company shall promptly notify
Buyer by telephone and telecopy of such fact and shall transmit to Buyer a
copy of any such written Inquiry or Proposal); or
commence any proceeding to merge, consolidate or liquidate or
dissolve or obligate the Company to do so; or
agree to or make any commitment to take any actions prohibited
by this Section 6.3; or
purchase inventory in excess or a 30-day supply, or return or other
post-sale support rights of customers, or enter into an agreement to do
any of the foregoing.
NOTIFICATION OF CERTAIN MATTERS.
The Shareholders and the Company shall give prompt notice to Buyer,
and Buyer shall give prompt notice to the Shareholders, of (i) the occurrence,
or failure to occur, of any event that would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this Agreement
to the Closing Date and (ii) any failure of Buyer, the Shareholders or the
Company, as the case may be, to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement.
PERMITS AND APPROVALS.
The Shareholders and the Company each agree to cooperate with
Buyer's efforts to obtain, all registrations, filings and applications, re
quests and notices preliminary to all Approvals and Permits that may be
necessary, or which may be reasonably requested by Buyer, to consummate the
transactions contemplated by this Agreement.
To the extent that the Approval of a third party with respect to
any Material Contract is required in connection with the transactions
contemplated by this Agreement, the Shareholders and the Company each agree to
use their best efforts to obtain such Approval prior to the Closing Date. In
the event that any such Approval is not obtained prior to the Closing Date (but
without limitation on Buyer's rights under Section 8.2), the Shareholders shall
cooperate with Buyer to ensure that Buyer obtains the benefits of each such
Contract.
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PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE.
During the period beginning on the date hereof and ending on the
Closing Date, (a) the Shareholders and the Company will each use its best
efforts to preserve the Business and to preserve the goodwill of customers,
suppliers and others having business relations with the Company and (b) the
Shareholders, the Company and Buyer will consult with each other concerning,
and the Shareholders and the Company each will cooperate to keep available to
Buyer, the services of the officers and employees of the Company that Buyer may
wish to have the Company retain. Nothing in this Section shall obligate (i)
MAC to remain in the employ of the Company after the Closing Date, or (ii)
Buyer or the Company to retain or offer employment to any officer or employee
of the Company after the Closing.
ELIMINATION OF INTERCOMPANY AND AFFILIATE LIABILITIES.
Prior to the Closing Date, the Shareholders shall purchase, cause to
be repaid or (with respect to guarantees) assume liability for (a) any and all
loans or other extensions of credit made or guaranteed by the Company to or for
the benefit of any director, officer, or employee of the Company, or any of its
Associates and (b) any and all loans, guarantees or other extensions of credit
of any amount made to or for the benefit of any of the Shareholders or any
Affiliate of any of the Shareholders. At the Closing Date, neither Buyer nor
the Company shall have any continuing commitment, obligation or liability of
any kind with respect to the persons referred to in subsections (a) and (b)
above.
TERMINATION OF GROSSMONT BANK LOAN.
Prior to the Closing, the Shareholders shall terminate the loan
agreement between Grossmont Bank and the Company and shall cause Grossmont Bank
to release any and all liens and other claims in favor of Grossmont Bank
against the Company and the Company's assets.
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ADDITIONAL CONTINUING COVENANTS
NON-COMPETITION.
RESTRICTIONS ON COMPETITIVE ACTIVITIES. The Shareholders agree
that after the Closing, Buyer and the Company shall be entitled to the goodwill
and going concern value of the Business and to protect and preserve the same to
the maximum extent permitted by law. The Shareholders also acknowledge that
any of the Shareholders' management contributions to the Business have been
uniquely valuable and involve proprietary information that would be
competitively unfair to make available to any competitor of the Company.
Accordingly, each of MFC, MAC and MFCII agrees that during the term that he or
she is employed by the Company, he or she will not, directly or indirectly,
own, invest in or serve as a consultant, employee or other paid assistant or in
any like role or capacity with, or otherwise materially participate in the
management of, any other competing or potentially competing company with like
operations, business strategies, or objectives and doing business in any
county, state or country in which the Company now or hereafter does business.
In addition, for a period (the "Non-Competition Period") ending on the earlier
of (i) three years after the date hereof or (ii) two years after such
Shareholder is no longer employed by the Company, such Shareholder may work
within the industry but shall not own, invest in or serve as a consultant,
employee or similar position with, or otherwise materially participate in the
management of, any business, company or enterprise in any manner which has or
could reasonably be expected to have an adverse effect upon the business
operations or prospects of the Company. The Shareholders agree that the
restrictions contained in this Section 7.1 are a material inducement to Buyer
to enter this Agreement but that no other separate compensation or
consideration is being paid with respect to the provisions contained in this
Section 7.1.
EXCEPTIONS. Nothing contained herein shall limit the right of
the Shareholders as investors to hold and make investments in securities of any
Person that is registered on a national securities exchange or admitted to
trading privileges thereon or actively traded in a generally recognized over-
the-counter market, provided the Shareholders' equity interest therein does not
exceed 5% of the outstanding shares or interests in such Person.
RESTRICTIONS ON SOLICITING EMPLOYEES. In addition, to protect
Buyer against any efforts by the Shareholders to cause employees of the Company
to terminate their employment, the Shareholders agree that until the end of the
Non-Competition Period, the Shareholders will not directly or indirectly
(i) induce any employee of the Company with a then current compensation of more
than $20,000 annually to leave the Company or to accept any other employment or
position, or (ii) assist any other entity in hiring any such employee.
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SPECIAL REMEDIES AND ENFORCEMENT. The Shareholders recognize
and agree that a breach by the Shareholders of any of the covenants set forth
in this Section 7.1 could cause irreparable harm to Buyer, that Buyer's
remedies at law in the event of such breach would be inadequate, and that,
accordingly, in the event of such breach a restraining order or injunction or
both may be issued against breaching Shareholders, in addition to any other
rights and remedies which are available to Buyer. If this Section 7.1 is more
restrictive than permitted by the Laws of the jurisdiction in which Buyer seeks
enforcement hereof, this Section 7.1 shall be limited to the extent required to
permit enforcement under such Laws. Without limiting the generality of the
foregoing, the Parties intend that the covenants contained in the preceding
portions of this Section 7.1 shall be construed as a series of separate
covenants, one for each county, state and city or other location specified.
Except for geographic coverage, each such separate covenant shall be deemed
identical in terms. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants deemed included in this Section 7.1, then
such unenforceable covenant shall be deemed eliminated from these provisions
for the purpose of those proceedings to the extent necessary to permit the
remaining separate covenants to be enforced.
NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
Neither the Shareholders nor any of the Shareholders' representatives
shall, at any time, make use of, divulge or otherwise disclose (other than to
Buyer), directly or indirectly, any Confidential Information concerning the
business or policies of the Company that the Shareholders or any representative
of the Shareholders may have learned as a shareholder, employee, officer or
director of the Company.
TAX COOPERATION.
After the Closing, the Shareholders shall, and shall cause their
respective Affiliates to, cooperate fully with Buyer and the Company in the
preparation of all Tax Returns and shall provide, or cause to be provided at
the Shareholders' sole cost and expense, to Buyer and the Company any records
and other information requested by such parties in connection therewith as well
as access to, and the cooperation of, the accountants of the Shareholders. The
Shareholders shall, and shall cause the Shareholders' Affiliates to, cooperate
fully with Buyer and the Company in connection with any Tax investigation,
audit or other proceeding. Any information obtained pursuant to this
Section 7.3 or pursuant to any other Section hereof providing for the sharing
of information or the review of any Tax Return or other Schedule relating to
Taxes shall be subject to Section 12.9.
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RELEASE.
Effective as of the Closing, each Shareholder agrees not to sue
and fully releases and discharges the Company, including, without limitation,
its directors, officers, employees, shareholders, representatives, agents,
assigns and successors, past and present (collectively "Releasees"), with
respect to and from any and all claims, issuances of the Company's stock, notes
or other securities, any demands, rights, liens, agreements, contracts,
covenants, actions, suits, causes of action, obligations, debts, costs,
expenses, damages, judgments, orders and liabilities of whatever kind or nature
in law, equity or otherwise, whether now known or unknown, and whether or not
concealed or hidden, all of which such Shareholder now owns or holds or has at
any time owned or held against Releasees; provided, however, that nothing in
this Section 7.4(a) will constitute a waiver of any claims such Shareholder may
have against the Company pursuant to the terms of this Agreement, or claims for
indemnification against third party claims as permitted by the Company's
Articles of Incorporation and the California Corporate Code.
It is the intention of the Shareholders that such release be
effective as a bar to each and every claim, demand and cause of action
hereinabove specified. In furtherance of this intention the Shareholders
hereby expressly waive, effective as of the Closing, any and all rights and
benefits conferred upon them by the provisions of Section 1542 of the
California Civil Code and expressly consent that this release shall be given
full force and effect according to each and all of its express terms and
provisions, including as well, those related to unknown and unsuspected claims,
demands and causes of action, if any, as those relating to any other claims,
demands and causes of action hereinabove specified, but only to the extent such
section is applicable to releases such as this. Section 1542 provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Nothing in this Section 7.4 shall in any way affect any rights
that the Shareholders may have against Buyer under this Agreement, including,
without limitation, any right of indemnification pursuant to Article X hereof.
UNCOLLECTIBLE RECEIVABLES.
Buyer may assign to the Shareholders any and all receivables that the
Buyer reasonably determines are uncollectible after the Closing Date (the
"Uncollectible Receivables"). In exchange for the assignment of Uncollectible
Receivables to the Shareholders, the Shareholders shall pay to Buyer (on a pro
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rata basis) the total face amount of the Uncollectible Receivable. All
Uncollectible Receivables are not subject to the indemnification limitations
set forth in Section 10.5. and shall be handled solely through the mechanisms
set forth in this Section 7.5 or through the right of offset in Section 2.5.
PROFIT SHARING PLAN.
Following the Closing, the Shareholders, the Company and the Buyer
shall take such steps as are necessary to terminate the Plan consistent with
applicable law. The Shareholders hereby assume all liabilities and
obligations the Company, the Buyer and any of their employees, officers,
directors or agents have or may have relating to the Plan, and the
Shareholders, severally and not jointly, shall indemnify and hold harmless
the Company, the Buyer and any of their employees, officers, directors or
agents against any and all costs, liabilities and expenses relating to the
Plan and its termination, including but not limited to attorneys' fees and
costs in defending against any such costs, liabilities or expenses.
CONDITIONS OF PURCHASE
GENERAL CONDITIONS.
The obligations of the Parties to effect the Closing shall be
subject to the following conditions, except to the extent waived in writing
by the Parties:
NO ORDERS; LEGAL PROCEEDINGS. No Law or Order shall have been
enacted, entered, issued, promulgated or enforced by any Governmental Entity,
nor shall any Action have been instituted and remain pending or have been
threatened and remain so by any Governmental Entity at what would otherwise
be the Closing Date, which prohibits or restricts or would (if successful)
prohibit or restrict the transactions contemplated by this Agreement or (with
respect to obligations of Buyer only) which would not permit the Business as
presently conducted to continue unimpaired following the Closing Date. No
Governmental Entity shall have notified any party to this Agreement that
consummation of the transactions contemplated by this Agreement would
constitute a violation of any Laws of any jurisdiction or that it intends to
commence proceedings to restrain or prohibit such transactions or force
divestiture or rescission, unless such Governmental Entity shall have
withdrawn such notice and abandoned any such proceedings prior to the time
which otherwise would have been the Closing Date.
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EMPLOYMENT OF MFC. MFC and the Company shall have entered
into an employment agreement substantially in the form, attached hereto as
Exhibit B.
EMPLOYMENT OF MFCII. MFCII and the Company shall have entered
into an employment agreement substantially in the form of Exhibit C attached
hereto.
CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of Buyer to effect the Closing shall be subject to
the following conditions, except to the extent waived in writing by Buyer:
REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE
SHAREHOLDERS AND THE COMPANY. The representations and warranties of each of
the Shareholders and the Company herein contained shall be true at the
Closing Date with the same effect as though made at such time; each of the
Shareholders and the Company shall have performed all obligations and
complied with all covenants and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing Date, and each of
the Shareholders and the Company shall have delivered to Buyer certificates
in form and substance satisfactory to Buyer, dated the Closing Date, to such
effect. The Company's certificate shall be signed by its chief executive
officer and chief financial officer.
NO MATERIAL ADVERSE CHANGE. There shall not have been any
material adverse change in or affecting the Business subsequent to November
30, 1997.
OPINION OF COUNSEL. Buyer shall receive at the Closing from
Luce, Forward, Hamilton & Scripps LLP, counsel to the Shareholders, an
opinion dated the Closing Date, in form and substance as set forth in Exhibit
D.
APPROVALS AND PERMITS. Each of the Shareholders and the
Company shall have obtained and provided to Buyer all required Approvals and
Permits listed on Schedule 4.8 and referred to in Section 6.5, each in form
and substance reasonably satisfactory to Buyer.
NO REGULATORY CHANGES. No action shall have been taken by any
Governmental Entity, and no Law shall have been proposed or enacted, which
would (or, in the case of a proposed Law, if enacted would) materially and
adversely affect the financial condition, operations or prospects of Buyer,
the Business or the Company, or the regulatory compliance status of the
Company or Buyer.
GROSSMONT BANK LOAN AGREEMENT TERMINATION. Proof, reasonably
acceptable to Buyer, that prior to the Closing, any indebtedness to Grossmont
Bank under that certain Loan Agreement dated as of October 29, 1997,
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has been repaid, the line of credit terminated and all liens relating thereto
released.
CERTAIN RECEIVABLE. Proof, reasonably acceptable to Buyer
that, prior to Closing, all rights related to the receivables referred to in
Section 10.1, have been assigned to the Shareholders and that the
Shareholders have assumed all liabilities related to the underlying,
including without limitation, transaction claims or counterclaims now or
hereafter asserted by any of the invoice parties.
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS AND THE COMPANY.
The obligations of each of the Shareholders and the Company to
effect the Closing shall be subject to the following conditions, except to
the extent waived in writing by the Shareholders:
REPRESENTATIONS AND WARRANTIES AND COVENANTS OF BUYER. The
representations and warranties of Buyer herein contained shall be true in all
material respects at the Closing Date with the same effect as though made at
such time; Buyer shall have in all material respects performed all
obligations and complied with all covenants and conditions required by this
Agreement to be performed or complied with by Buyer at or prior to the
Closing Date, and Buyer shall have delivered to the Shareholders a
certificate in form and substance satisfactory to the Shareholders, dated the
Closing Date to such effect.
DELIVERY OF BUYER SHARES. Buyer shall have delivered
certificates representing the Buyer Shares.
AUTHORIZATION DOCUMENTS. The Shareholders shall have received
a copy of the resolutions of the Board of Directors of Buyer approving the
Acquisition.
NO MATERIAL ADVERSE CHANGE. There shall not have been any
material adverse change in or affecting the Buyer's business subsequent to
November 30, 1997.
NO REGULATORY CHANGES. No action shall have been taken by any
Governmental Entity, and no Law shall have been proposed or enacted, which
would (or, in the case of a proposed Law, if enacted would) materially and
adversely affect the financial condition, operations or prospects of
Shareholders, the Business or the Company, or the regulatory compliance
status of the Company or Buyer.
OPINION OF COUNSEL. Shareholders shall receive at the Closing
from O'Melveny & Myers LLP, counsel to Buyers, an opinion dated the Closing
Date, in form and substance as set forth in Exhibit E.
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TERMINATION OF OBLIGATIONS; SURVIVAL
TERMINATION OF AGREEMENT.
Anything herein to the contrary notwithstanding, this Agreement and
the transactions contemplated by this Agreement shall terminate if the
Closing does not occur on or before the close of business on February 15,
1998, unless extended by mutual consent in writing of Buyer, the Company and
the Shareholders, and otherwise may be terminated at any time before the
Closing as follows and in no other manner:
MUTUAL CONSENT. By mutual consent in writing of Buyer, the
Company and the Shareholders.
CERTAIN CONDITIONS NOT MET BY EARLIER DATE. By Buyer by
written notice to the Shareholders and the Company if any conditions set
forth in Section 8.2 shall not have been met by February 15, 1998.
INACCURATE INFORMATION. By Buyer or by Shareholders if any
material information (whether or not in writing) delivered by or on behalf of
the Buyer, Shareholders or the Company to Buyer or Shareholders is inaccurate
or incomplete in any material respect.
MATERIAL BREACH. By Buyer or the Shareholders and the Company
if there has been a material misrepresentation or other material breach by
the other party (in the case of Buyer, by the Shareholders or the Company and
in the case of the Shareholders or the Company, by Buyer) in its
representations, warranties and covenants set forth herein; provided,
however, that if such breach is susceptible to cure, the breaching party
shall have ten business days after receipt of notice from the other party of
its intention to terminate this Agreement if such breach continues in which
to cure such breach.
FORCE MAJEURE. By Buyer or by Shareholders if any of the
following conditions exist or shall have occurred and, at the time Buyer or
Shareholders give notice to any Party of Buyer's or Shareholders' intent to
invoke this provision, shall be continuing: (i) any general suspension of
trading in, or limitation on prices for, securities on the Nasdaq National
Market, (ii) a declaration of a banking moratorium by federal or state
authorities or any suspension of payments in respect of banks in the United
States, (iii) the commencement of a war, armed hostilities or other national
or international calamity directly or indirectly involving the United States
which commenced after the date hereof, (iv) any material limitation (whether
or not mandatory) imposed by any federal or state authority on the extension
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of credit by lending institutions in the United States, or (v) any other
occurrence or circumstance beyond the control of Buyer (including, but not
limited to, sudden actions of the elements, actions by any Governmental
Entity, epidemic, riot, unavailability of resources due to national defense
priorities, delays resulting from the failure of a third party to perform any
related matter which such third party is required to perform, strikes,
walkouts, major accidents, flood, drought, earthquake, storm, fire,
pestilence, lightning, volcanic eruption, or other natural catastrophe or
civil disturbance) that renders more burdensome the obligations, or less
valuable the rights, of Buyer or Shareholders hereunder.
EFFECT OF TERMINATION.
In the event that this Agreement shall be terminated pursuant to
Section 9.1, all further obligations of the Parties under this Agreement
shall terminate without further liability of any party to another; provided
that the obligations of the Parties contained in Article X and Section 12.9
and Section 12.12 shall survive any such termination. A termination under
Section 9.1 shall not relieve any party of any liability for a breach of, or
for any misrepresentation under this Agreement, or be deemed to constitute a
waiver of any available remedy (including specific performance if available)
for any such breach or misrepresentation.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in or made pursuant to
this Agreement shall survive until the second anniversary of the Closing,
except for the representations and warranties made concerning Taxes in
Section 4.4, which shall survive until the applicable statute of limitations
bars recovery by the Buyer or any successor to Buyer, and except for the
representations contained in Section 3.2 with respect to title to the Stock,
which shall survive indefinitely.
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INDEMNIFICATION
INDEMNIFICATION OF BUYER.
Each of MFC, MAC and the Trust, severally and not jointly,
covenants and agrees, and in the event the transaction contemplated by this
Agreement is not consummated, the Company covenants and agrees, to indemnify
and hold harmless Buyer, and its directors, officers, employees, affiliates,
agents, representatives and assigns, and the Company (in the event the
transaction contemplated by this Agreement is consummated and only to the
extent applicable), and its respective directors, officers, employees,
affiliates, agents, representatives and assigns, from and against any and all
Losses of Buyer or the Company, directly or indirectly, as a result of, or
based upon or arising from:
any inaccuracy in or breach or nonperformance of any of the
representations, or warranties, made by such Shareholder or the Company in or
pursuant to this Agreement;
the failure of such Shareholder or the Company to perform or
observe fully any covenant, provision or agreement to be performed or
observed by it pursuant to this Agreement;
any actual or threatened claim, suit, action or proceeding
arising out of or resulting from the conduct by the Company or its Business
or operations on or before the Closing Date, including, but not limited to,
those arising out of or relating to the employment relationship existing
before Closing between the Company and its Affiliates and any and all current
or former employees of any of them;
any failure to have obtained all Permits and Approvals
required in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby (but only to the
extent such Losses are caused by the action or inaction of the Shareholders);
any and all Loss related to a "Products Liability," claim or
claims relating to the quality of Products produced or sold by the Company
prior to the Closing Date (a "Products Loss"). With respect to any Products
Loss, (i) the Shareholders shall defend such claim and select counsel
reasonably acceptable to Buyer for such defense and as such counsel submits
its legal fees to the Shareholders, the Shareholders have the right to be
indemnified by Buyer from those reasonable legal fees and settlement expenses
up to $100,000, and (ii) Product Loss of any nature in excess of $100,000
shall be indemnified by the Shareholders to the Buyer and the Shareholders
must hold the Buyer harmless from any and all further Product Loss, however,
the Shareholders' indemnification responsibility shall be limited to and
shall not exceed the Purchase Price; or
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any and all Loss related to the dispute with a distributor as
described in that certain letter dated February 11, 1998 from Luce Forward
Hamilton & Scripps LLP to O'Melveny & Myers LLP; or
any of the specific indemnification matters referenced on
Schedule 10.1.
Provided, however, with respect to any claim for indemnification under this
Agreement the liability of each Shareholder shall be several in proportion to
his, her or its respective ownership percentage, as set forth on Exhibit A
hereto (except that, for purposes of this provision, the ownership percentage
of MFCII shall be attributed equally to MFC and MAC). Each Shareholder
agrees to reimburse Buyer, the Company, or any other Indemnified Party, as
the case may be, promptly upon demand for any unreimbursed payment made or
Loss suffered by Buyer, the Company, or any other indemnified party, as the
case may be, at any time after the Closing Date in respect of any damage,
loss, cost, expense, deficiency, liability, judgment, claim, action or demand
to which the foregoing indemnity relates.
INDEMNIFICATION OF THE SHAREHOLDERS.
Buyer agrees to indemnify and hold harmless the Shareholders from
and against any and all Losses of the Shareholders, directly or indirectly,
as a result of, or based upon or arising from:
any inaccuracy in or breach or nonperformance of any of the
representations or warranties, made by Buyer in or pursuant to this Agreement;
the failure of Buyer to perform or observe fully any covenant,
provision or agreement to be performed or observed by it pursuant to this
Agreement; or
any actual or threatened claim, suit, action or proceeding
arising out of or resulting from the conduct by the Company of its Business
or operations after the Closing Date, provided that such Loss is not a result
of or based upon or does not arise in connection with any neglect, disregard
or intentional misconduct on the part of the Shareholders.
Buyer agrees to reimburse the Shareholders promptly upon demand for any
unreimbursed payment made or loss suffered by the Shareholders at any time
after the Closing Date in respect of any damage, loss, cost, expense,
deficiency, liability, judgment, claim, action or demand to which the
foregoing indemnity relates.
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CERTAIN TAX MATTERS.
INDEMNIFICATION OF BUYER. Each of MFC, MAC and the Trust,
severally and not jointly, covenant and agree to indemnify, defend and hold
harmless Buyer and the Company against the following tax matters (the "Tax
Matters"): (i) any Tax payable by or on behalf of the Shareholders or any of
the Shareholders' Affiliates, or the Company, for any taxable period ending
on or prior to the Closing Date, (ii) any deficiencies in any Tax payable by
or on behalf of the Shareholders or any of the Shareholders' Affiliates, or
the Company arising from any audit by any taxing agency or authority with
respect to any period ending on or prior to the Closing Date, (iii) Taxes of
any member of a consolidated or combined tax group of which the Shareholders
or any of the Shareholders' Affiliates is, or was at any time, a member, for
which the Company is jointly or severally liable as a result of its inclusion
in such group, (iv) any Tax liabilities arising out of the transfer of the
Stock, and (v) subject to Section 12.20, any Taxes due from the Company for
the Tax period ending as of the Closing Date (net of any applicable cash
reserves for such Taxes on deposit and reflected on the balance sheet of the
Company as of the Closing Date), calculated on the basis of the Company's
operating results through the Closing Date and as if the period ended on the
Closing Date.
AUDIT MATTERS. The Shareholders shall have the responsibility
for, at the Shareholders' expense, the audit (and disposition thereof) of any
Tax Return relating to periods ending on or prior to the Closing Date and to
participate in the disposition of the audit of any Tax Return relating to the
periods ending after the Closing Date if such audit or disposition thereof
could give rise to a claim for indemnification hereunder. Buyer shall have
the right directly or through its designated representatives, to review in
advance and comment upon all submissions made in the course of audits or
appeals thereof to any Governmental Entity relating to periods on or prior to
the Closing Date and consent to, which consent shall be made in good faith
and shall not be unreasonably withheld or delayed, the disposition of any
audit adjustment with respect to such periods if such disposition will or
might be expected to result in, directly or indirectly, an increase in Taxes
of Buyer or the Company for any period beginning at or after the Closing.
PROCEDURE.
NOTICE. Any party seeking indemnification with respect to any
Loss shall give notice to the party required to provide indemnity hereunder
(the "Indemnifying Party").
DEFENSE. In the event any person or entity not a party to
this Agreement shall make a demand or claim or file or threaten to file or
continue any lawsuit, which demand, claim or lawsuit may result in liability
to an Indemnified Party in respect of matters embraced by the indemnity under
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this Agreement, or in the event that a potential loss, damage or expense
comes to the attention of any party in respect of matters embraced by the
indemnity under this Agreement, then the Party receiving notice or aware of
such event shall promptly notify the other Party or Parties of the demand,
claim or lawsuit (the "Notice"). Except as provided in the next sentence,
within ten (10) days after Notice by the Indemnified Party to an Indemnifying
Party of such demand, claim or lawsuit, the Indemnifying Party shall have the
option, at its sole cost and expense, to retain counsel for the Indemnified
Party, to defend any such demand, claim or lawsuit, provided that counsel who
will conduct the defense of such demand, claim or lawsuit will be approved by
the Indemnified Party whose approval will not unreasonably be withheld or
delayed. The Indemnified Party shall have the right, at its own expense, to
participate in the defense of any suit, action or proceeding brought against
it with respect to which indemnification may be sought hereunder; provided,
however, if (a) the named parties to any such proceeding (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party and representation of both Parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, or
(b) the employment of counsel by such Indemnified Party has been authorized
in writing by the Indemnifying Party, or (c) the Indemnifying Party has not
in fact employed counsel to assume the defense of such action within a
reasonable time; then, the Indemnified Party shall have the right to retain
its own counsel at the sole cost and expense of the Indemnifying Party, which
costs and expenses shall be paid by the Indemnifying Party on a current
basis. No Indemnifying Party, in the defense of any such demand, claim or
lawsuit, will consent to entry of any judgment or enter into any settlement
without the consent of the Indemnified Party. If any Indemnified Party has
been advised by counsel chosen by it that there may be one or more legal
defenses available to such Indemnified Party which are different from or
additional to those available to and which have not been asserted by the
Indemnifying Party, the Indemnifying Party will not have, at the election of
the Indemnified Party, the right to continue the defense of such demand,
claim or lawsuit on behalf of such Indemnified Party and will reimburse such
Indemnified Party and any person controlling such Indemnified Party on a
current basis for the reasonable fees and expenses of any counsel retained by
the Indemnified Party to undertake the defense. In the event that the
Indemnifying Party shall fail to respond within ten (10) days after receipt
of the Notice, the Indemnified Party may retain counsel and conduct the
defense of such demand, claim or lawsuit, as it may in its sole discretion
deem proper, at the sole cost and expense of the Indemnifying Party, which
costs and expenses shall be paid by the Indemnifying Party on a current
basis. Except as explicitly provided in this Section 10.4(b), failure to
provide Notice shall not limit the rights of such party to indemnification.
CERTAIN LIMITATIONS. Notwithstanding Sections 10.1(e) and
10.4(b), in the event that any demand, claim or lawsuit for which
indemnification is payable hereunder relates with respect to the Shareholders
or the Company to a criminal investigation, quasi criminal investigation,
governmental or regulatory claim, civil claim involving allegations of
criminal conduct or a matter in which the licensure of Buyer or the Company
or
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the ability to continue business operations is threatened by imminent action
to revoke such licensure or enjoin such business operations, Buyer shall have
the sole right to retain counsel to represent it or the Company in such
matter and the Shareholders shall pay the fees and expenses of such counsel
on a current basis, and Buyer shall have the right to conduct and control the
defense, compromise or settlement of any such Indemnifiable Claim if Buyer
chooses to do so, on behalf of and for the account and risk of the
Shareholders who shall be bound by the result so obtained, provided however,
in effecting any settlement the Buyer will use commercially reasonable
efforts to mitigate the Shareholders' liability.
TAX ADJUSTMENTS. Any amounts payable by the Indemnifying
Party to or on behalf of an Indemnified Party in respect of a Loss shall be
adjusted as follows:
If an Indemnified Party is liable for any additional Taxes
as a result of the payment of amounts in respect of an Indemnifiable
Claim, the Indemnifying Party will pay to the Indemnified Party in
addition to such amounts in respect of the Loss within 10 days after being
notified by the Indemnified Party of the payment of such liability (x) an
amount equal to such additional Taxes (the "Tax Reimbursement Amount")
plus (y) any additional amounts required to pay additional Taxes imposed
with respect to the Tax Reimbursement Amount and with respect to amounts
payable under this clause (y), with the result that the Indemnified Party
shall have received from the Indemnifying Party, net of the payment of
Taxes, an amount equal to the Loss; and
The Indemnified Party shall reimburse the Indemnifying
Party an amount equal to the net reduction in any year in the liability
for Taxes (that are based upon or measured by income) of the Indemnified
Party or any member of a consolidated or combined tax group of which the
Indemnified Party is, or was at any time, part, which reduction is
actually realized with respect to any period after the Closing Date and
which reduction would not have been realized but for the amounts paid (or
any audit adjustment or deficiency with respect thereto, if applicable) in
respect of a Loss, or amounts paid by the Indemnified Party pursuant to
this paragraph (a "Net Tax Benefit"). The amount of any Net Tax Benefit
shall be paid not later than 15 days after the date on which such Net Tax
Benefit shall be realized. For purposes of this clause 10.4(d)(ii), the
Net Tax Benefit shall be deemed to be actually realized on the date on
which such Net Tax Benefit is used to compute an obligation to pay in
stallments of estimated tax or, if earlier, reported earnings; PROVIDED,
HOWEVER, that if the amount of any Net Tax Benefit is subsequently
affected by reason of any event or events, including, without limitation,
any payment of Taxes by such Indemnified Party with respect to the loss of
such Net Tax Benefit upon audit or litigation, appropriate adjustments and
payments to take into account the increase or decrease in such Net Tax
Benefit shall be made between the Indemnified Party and the Indemnifying
Party within 15 days after such
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event or events. Any expenses associated with the realization of a Net
Tax Benefit or any contest or proceeding with respect to a Net Tax Benefit
shall be deemed to reduce such Net Tax Benefit.
INSURANCE MATTERS. Nothing in this Section 10.4 shall be
deemed to obligate any person to maintain any insurance or to pursue any
claim against any insurer or third party.
WAIVER OF SUBROGATION AND OTHER RIGHTS. Any Indemnifying
Party shall not be required to proceed against any particular Indemnifying
Party for indemnification or otherwise in respect of any losses before
enforcing their rights hereunder against any other Indemnifying Party, and
the Buyer and the Shareholders expressly waive all rights the Buyer and the
Shareholders may respectively have, now or in the future, under any statute,
at common law, or at law or in equity, or otherwise, to compel an
Indemnifying Party to proceed against any other Indemnifying Party in respect
of any losses before proceeding against, or as a condition to proceeding
against, any other Indemnifying Party.
LIMITATIONS.
With the exception of claims asserted by Buyer with respect to
(i) delivery of good title of the Stock (Section 3.2), (ii) Taxes (Section
4.4) or (iii) the receivables assigned to the Shareholders prior to Closing,
the Shareholders shall not be liable to Buyer under Sections 10.1 unless
Buyer shall have asserted a claim thereunder by giving written notice to
Shareholders of the basis of its claim not later than two years following the
Closing Date.
With the exception of claims asserted by Buyer with respect to
(i) delivery of good title of the Stock (Section 3.2), (ii) Taxes (Sections
4.4 and 10.3) (iii) Products Liability (Section 10.1(e)) and (iv) the
receivables assigned to the Shareholders prior to Closing, the Shareholders
shall not be liable to Buyer under Section 10.1 until the aggregate amount of
Damages suffered by Buyer shall exceed $100,000 (the "Minimum Loss") in the
aggregate by Buyer or the Company, at which time Shareholders shall be liable
for the total aggregate Damages (not just the amount in excess of $100,000).
Shareholders' indemnification obligations shall not apply to
any Losses which in an individual case is less than $1,000 (a "de minimis
Loss") and no such de minimis Loss shall be counted towards the Minimum Loss.
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MAXIMUM SHAREHOLDERS' AND BUYER'S LIABILITY.
Notwithstanding any other provision of this Agreement, Shareholders
shall have no indemnification obligations or liability to Buyer under this
Article X in excess of the Purchase Price (the "Maximum Shareholders'
Liability"); likewise, notwithstanding any other provision of this Agreement,
Buyer shall have no indemnification obligation or liability to Shareholders
under this Article X in excess of the Purchase Price ("Maximum Buyer
Liability").
SURVIVAL.
This Article X shall survive any termination of this Agreement
other than by mutual agreement. This indemnification further shall survive
the Closing and shall remain in effect indefinitely. Any matter as to which
a claim has been asserted by notice to the other party that is pending or
unresolved at the end of any applicable limitation period shall continue to
be covered by this Article X notwithstanding any applicable statute of
limitations (which the Parties hereby waive) until such matter is finally
terminated or otherwise resolved by the Parties or by a court of competent
jurisdiction and any amounts payable hereunder are finally determined and
paid.
NOTICE.
The Shareholders and Buyer agree to notify Buyer or Shareholders
respectively of any liabilities, claims or misrepresentations, breaches or
other matters covered by this Article X promptly upon discovery or receipt of
notice thereof (other than from each other), whether before or after Closing.
ARBITRATION
ARBITRATION.
Except as otherwise provided in this Agreement, any controversy or
claim arising out of or relating to this Agreement or the breach hereof shall
be settled by arbitration in Orange County, State of California.
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JUDICIAL ARBITRATION AND MEDIATION SERVICES, THE COMPANY.
The arbitration shall be administered by Judicial Arbitration and
Mediation Services ("JAMS") in its Orange County office.
ARBITRATION PANEL.
The arbitration shall be conducted before a panel of three
arbitrators selected as follows: each party hereto shall appoint one
arbitrator from the JAMS panel of retired judges, after which, and within ten
days of the appointment of such arbitrators, these two arbitrators shall
appoint a third arbitrator from the JAMS panel of retired judges. If within
ten days the two arbitrators appointed by the parties hereto cannot agree upon
a third arbitrator, such third arbitrator shall be appointed by JAMS in
accordance with its rules.
PROVISIONAL REMEDIES.
Each of the Parties reserves the right to file with a court of
competent jurisdiction an application for temporary or preliminary injunctive
relief, writ of attachment, writ of possession, temporary protective order
and/or appointment of a receiver on the grounds that the arbitration award to
which the applicant may be entitled may be rendered ineffectual in the absence
of such relief.
ENFORCEMENT OF JUDGMENT.
Judgment upon the award rendered by the arbitration panel may be
entered in any court having jurisdiction thereof.
DISCOVERY.
The Parties may obtain discovery in aid of the arbitration to the
fullest extent permitted under law, including California Code of Civil
Procedure Section 1283.05. All discovery disputes shall be resolved by the
arbitration panel.
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CONSOLIDATION.
Any arbitration hereunder may be consolidated by JAMS with the
arbitration of any other dispute arising out of or relating to the same subject
matter when the arbitration panel determines that there is a common issue of
law or fact creating the possibility of conflicting rulings by more than one
arbitration panels. Any disputes over which the arbitration panel shall hear
any consolidated matter shall be resolved by JAMS.
POWER AND AUTHORITY OF ARBITRATOR.
The arbitration panel shall not have any power to alter, amend,
modify or change any of the terms of this Agreement nor to grant any remedy
which is either prohibited by the terms of this Agreement or not available in a
court of law.
LAW TO BE APPLIED.
All questions in respect of procedure to be followed in conducting
the arbitration as well as the enforceability of this agreement to arbitrate
which may be resolved by state law shall be resolved according to the law of
the State of California. Any action brought to enforce the provisions of this
Section shall be brought in a court of competent jurisdiction in Orange County.
COSTS.
The costs of the arbitration, including any JAMS administration fee,
and arbitrator's fee, and costs of the use of facilities during the hearings,
shall be borne equally by the Parties. Costs and attorneys' fees shall be
awarded to the prevailing party as contemplated by Section 12.14 hereof.
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GENERAL
AMENDMENTS; WAIVERS.
This Agreement and any schedule or exhibit attached hereto may be
amended only by agreement in writing of all Parties. No waiver of any
provision nor consent to any exception to the terms of this Agreement or any
agreement contemplated hereby shall be effective unless in writing and signed
by the party to be bound and then only to the specific purpose, extent and
instance so provided.
SCHEDULES; EXHIBITS; INTEGRATION.
Each schedule and exhibit delivered pursuant to the terms of this
Agreement shall be in writing and shall constitute a part of this Agreement,
although schedules need not be attached to each copy of this Agreement. This
Agreement, together with such schedules and exhibits, constitutes the entire
agreement among the Parties pertaining to the subject matter hereof and
supersedes all prior agreements and understandings of the Parties in connection
therewith, including, but not limited to, any letter or letters of intent
between Buyer, the Company and the Shareholders.
BEST EFFORTS; FURTHER ASSURANCES.
STANDARD. Each party will use its best efforts to cause all
conditions to its obligations to be timely satisfied and to perform and fulfill
all obligations on its part to be performed and fulfilled under this Agreement,
to the end that the transactions contemplated by this Agreement shall be
effected substantially in accordance with its terms as soon as reasonably
practicable. The Parties shall cooperate with each other in such actions and
in securing requisite Approvals. Each party shall execute and deliver both
before and after the Closing such further certificates, agreements and other
documents and take such other actions as the other party may reasonably request
to consummate or implement the transactions contemplated hereby or to evidence
such events or matters.
LIMITATION. As used in this Agreement, the term "best efforts"
shall not mean efforts which require the performing party to do any act that is
unreasonable under the circumstances, to make any capital contribution or to
expend any funds other than reasonable out-of-pocket expenses incurred in
satisfying its obligations hereunder, including, but not limited to, the fees,
expenses and disbursements of its accountants, actuaries, counsel and other
professionals.
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GOVERNING LAW.
This Agreement, the legal relations between the Parties and any
Action, whether contractual or non-contractual, instituted by any party with
respect to matters arising under or growing out of or in connection with or in
respect of this Agreement, including, but not limited to, the negotiation,
execution, interpretation, coverage, scope, performance, breach, termination,
validity, or enforceability of this Agreement, shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts made and performed in such State and without regard to conflicts of
law doctrines, except to the extent that certain matters are preempted by
federal law or are governed as a matter of controlling law by the law of the
jurisdiction of incorporation of the respective Parties.
Each party hereby irrevocably submits to and accepts for itself
and its properties, generally and unconditionally, the exclusive jurisdiction
of and service of process pursuant to the laws of the State of California and
the rules of its courts, waives any defense of forum non conveniens and agrees
to be bound by any judgment rendered thereby arising under or out of in respect
of or in connection with this Agreement or any related document or obligation.
NO ASSIGNMENT.
Neither this Agreement nor any rights or obligations under it are
assignable, however, this Agreement and all rights and obligations under it are
binding with respect to all successors of the Buyer.
HEADINGS.
The descriptive headings of the Articles, Sections and subsections of
this Agreement are for convenience only and do not constitute a part of this
Agreement.
COUNTERPARTS.
This Agreement and any amendment hereto or any other agreement (or
document) delivered pursuant hereto may be executed in one or more counterparts
and by different Parties in separate counterparts. All of such counterparts
shall constitute one and the same agreement (or other document) and shall
become effective (unless otherwise provided therein) when one or more
counterparts have been signed by each party and delivered to the other party.
Fax signatures shall constitute original signatures for all purposes of this
Agreement.
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PUBLICITY AND REPORTS.
The Shareholders and Buyer shall coordinate all publicity relating to
the transactions contemplated by this Agreement and no party shall issue any
press release, publicity statement or other public notice relating to this
Agreement, or the transactions contemplated by this Agreement, without
obtaining the prior consent of the Shareholders and Buyer except to the extent
that a particular action is required by applicable law.
CONFIDENTIALITY.
All information disclosed by any party (or its representatives)
whether before or after the date hereof, in connection with the transactions
contemplated by, or the discussions and negotiations preceding, this Agreement
to any other party (or its representatives) shall be kept confidential by such
other party and its representatives and shall not be used by any Persons other
than as contemplated by this Agreement, except to the extent that such
information (a) was known by the recipient when received, (b) it is or
hereafter becomes lawfully obtainable from other sources, (c) is necessary or
appropriate to disclose to a Governmental Entity having jurisdiction over the
Parties, (d) as may otherwise be required by law or (e) to the extent such duty
as to confidentiality is waived in writing by the other party. If this
Agreement is terminated, each party shall use all reasonable efforts to return
upon written request from the other party all documents (and reproductions
thereof) received by it or its representatives from such other party (and, in
the case of reproductions, all such reproductions made by the receiving party),
unless the recipients provide assurances reasonably satisfactory to the
requesting party that such documents have been destroyed.
PARTIES IN INTEREST.
This Agreement shall be binding upon and inure to the benefit of each
Party, and nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement. Nothing in this Agreement is intended to relieve
or discharge the obligation of any third person to any party to this Agreement.
NOTICES.
Any notice or other communication hereunder must be given in writing
and (a) delivered in person, (b) transmitted by telex, telefax or
telecommunications mechanism provided that any notice so given is also mailed
as provided in clause (c) or (c) mailed by certified or registered mail,
postage prepaid), receipt requested as follows:
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IF TO BUYER, ADDRESSED TO:
SeraCare, Inc.
1925 Century Park East, Suite 1970
Los Angeles, California 90067
Facsimile: (310) 772-7770
Attn: Mr. Barry Plost
WITH A COPY TO:
O'Melveny & Myers LLP
610 Newport Center Drive, Suite 1700
Newport Beach, California 92660-6429
Facsimile: (714) 669-6994
Attn: David A. Krinsky, Esq.
IF TO THE SHAREHOLDERS, ADDRESSED TO:
Michael F. Crowley and Mary A. Crowley as trustees of the Trust
3887 Alta Vista Drive
Fallbrook, CA 92028
Facsimile: (760) 723-4487
Michael F. Crowley
3887 Alta Vista Drive
Fallbrook, CA 92028
Facsimile: (760) 723-4487
Mary A. Crowley
3887 Alta Vista Drive
Fallbrook, CA 92028
Facsimile: (760) 723-4487
Michael F. Crowley II
1211 Pomani Court
Oceanside, CA 92056
WITH A COPY TO:
Luce, Forward, Hamilton & Scripps LLP
600 West Broadway, Suite 2600
San Diego, California 92101
Facsimile: (619) 232-8311
Attention: James A. Mercer III, Esq.
Robert G. Copeland, Esq.
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IF TO THE COMPANY, ADDRESSED TO:
The Western States Group, Inc.
3887 Alta Vista Drive
Fallbrook, California 92028
Facsimile: (760) 723-4487
Attn: President
WITH A COPY TO:
Luce, Forward, Hamilton & Scripps LLP
600 West Broadway
Suite 2600
San Diego, California 92101
Facsimile: (619) 232-8311
Attention: James A. Mercer III, Esq.
Robert G. Copeland, Esq.
or to such other address or to such other person as either party shall have
last designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 12.11 and an appropriate answerback is received, (ii) if given by
mail, three days after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid or (iii) if given by any
other means, when actually delivered at such address.
EXPENSES.
The Shareholders and Buyer shall each pay their own expenses incident to
the negotiation, preparation and performance of this Agreement and the
transactions contemplated hereby, including, but not limited to, the fees,
expenses and disbursements of their respective investment bankers,
accountants and counsel.
REMEDIES; WAIVER.
Except to the extent this Section 12.13 is inconsistent with any other
provision in this Agreement or applicable law, all rights and remedies
existing under this Agreement and any related agreements or documents are
cumulative to and not exclusive of, any rights or remedies otherwise
available. No failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver thereof, nor shall
any single or partial exercise preclude any further or other exercise of such
or any other right.
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ATTORNEY'S FEES.
In the event of any Action by any party arising under or out of, in
connection with or in respect of, this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and expenses incurred in
such Action. Attorneys' fees incurred in enforcing any judgement in respect
of this Agreement are recoverable as a separate item. The Parties intend
that the preceding sentence be severable from the other provisions of this
Agreement, survive any judgment and, to the maximum extent permitted by law,
not be deemed merged into such judgment.
KNOWLEDGE CONVENTION.
Whenever any statement herein or in any schedule, exhibit, certificate
or other document delivered to any party pursuant to this Agreement is made
"to its knowledge" or "to its best knowledge" or words of similar intent or
effect of any party or its representative, such person shall be deemed to
have knowledge of a fact or matter if (i) such individual is actually aware
of such fact or other matter; or (ii) a prudent individual could be expected
to discover or otherwise become aware of such fact or other matter in the
course of conducting a reasonably comprehensive investigation concerning the
existence of such fact or matter.
REPRESENTATION BY COUNSEL; INTERPRETATION.
The Shareholders, the Company and Buyer each acknowledge that each party
to this Agreement has been represented by counsel in connection with this
Agreement and the transactions contemplated by this Agreement. Accordingly,
any rule of Law, including, but not limited to, Section 1654 of the
California Civil Code, or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement against the party
that drafted it has no application and is expressly waived. The provisions
of this Agreement shall be interpreted in a reasonable manner to effect the
intent of Buyer, the Shareholders and the Company.
SPECIFIC PERFORMANCE.
The Shareholders, the Company and Buyer each acknowledge that, in view
of the uniqueness of the Business and the transactions contemplated by this
Agreement, each Party would not have an adequate remedy at law for money
damages in the event that this Agreement has not been performed in accordance
with its terms, and therefore agrees that the other party shall be entitled
to specific enforcement of the terms hereof in addition to any other remedy
to which it may be entitled, at law or in equity.
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SEVERABILITY.
If any provision of this Agreement is determined to be invalid, illegal
or unenforceable by any Governmental Entity, the remaining provisions of this
Agreement shall remain in full force and effect provided that the economic
and legal substance of the transactions contemplated is not affected in any
manner materially adverse to any party. In event of any such determination,
the Parties agree to negotiate in good faith to modify this Agreement to
fulfill as closely as possible the original intents and purposes hereof. To
the extent permitted by Law, the Parties hereby to the same extent waive any
provision of Law that renders any provision hereof prohibited or
unenforceable in any respect.
CONSTRUCTION.
Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter.
ACCOUNTING AND ECONOMIC EFFECTIVE DATE.
The effective date of this Agreement for accounting purposes is January
1, 1998. Buyer will pay all Taxes attributable to the results of operations
commencing as of January 1, 1998.
ASSIGNMENT OF RECEIVABLE.
Prior to the Closing Date, the Shareholders shall accept assignment and
assume any and all receivables related to the receivables identified on
Schedule 10.1 and Shareholders shall assume any liabilities related to the
transaction and any liabilities related to any of the invoice parties for
those receivables identified on Schedule 10.1. The Shareholders shall retain
all legal claims and counterclaims with respect to the those receivables
identified on Schedule 10.1 The receivables identified on Schedule 10.1
shall not be included in the Net Asset Amount set forth in Section 2.3(b).
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PIGGY-BACK REGISTRATION RIGHTS
REGISTRATION NOTICE.
If, at any time within five (5) years from the period beginning six
months following the Closing of the Acquisition, the Buyer proposes to
register any of its securities under the Securities Act (including for this
purpose a registration effected by the Buyer for other shareholders to the
extent so permitted by such other shareholders) in connection with the public
offering of such securities (other than a registration form relating to: (i)
a registration of a stock option, stock purchase or compensation or incentive
plan or of stock issued or issuable pursuant to any such plan, or a dividend
investment plan; (ii) a registration of securities proposed to be issued in
exchange for securities or assets or in connection with a merger or
consolidation; or (iii) a registration of securities proposed to be issued in
exchange for or upon exercise or conversion of other securities of the
Buyer), then the Buyer shall, each such time, promptly give the Shareholders
and each other holder of registration rights (the Shareholders and such
holders individually being referred to herein as a "Holder") written notice
of such registration together with a list of the jurisdictions in which the
Buyer intends to attempt to qualify such securities under applicable state
securities laws. Upon the written request of any Holder given within 30 days
after receipt of such written notice from the Buyer, the Buyer shall,
subject to the provisions of Section 13.2 (in the case of an underwritten
offering), cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered.
The terms "register," "registered," and "registration" refer to a
registration under the Securities Act effected by preparing and filing a
registration statement (the "Registration Statement") or similar document in
compliance with the Securities Act or an amendment thereto, and the
declaration or ordering by the Securities and Exchange Commission ("SEC") of
effectiveness of such registration statement, document or amendment thereto.
"Registerable Securities" shall mean (i) the Buyer Shares owned by Holders,
(ii) any common stock of Buyer issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, such Buyer Shares, and (iii) any other securities of the
Buyer with respect to which any Holder has been granted registration rights,
excluding in all cases, however, any shares of common stock of Buyer which
may be freely sold without registration under the Securities Act or without
regard to any restrictions set forth in Rule 144 under the Securities Act.
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UNDERWRITING REQUIREMENTS.
(a) The right of any Holder to "piggyback" in an underwritten public
offering of the Buyer's securities pursuant to Section 13.1 shall be con
ditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Buyer and any other
holders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or
underwriters selected for underwriting by the Buyer, which form will include
customary indemnification obligations of the Holders. Notwithstanding any
other provision of Section 13.1 and this Section 13.2, if the underwriter
determines that marketing factors require a limitation of the number of
shares to be underwritten, then the underwriter may exclude some or all
Registrable Securities from such registration and underwriting. Holders
acknowledge and agree that the inclusion of the shares will be subject to
cutback on a pro rata basis with other stockholders of Buyer if the
underwriters deem it necessary or advisable. The persons that are permitted
to sell common stock of Buyer following such limitation shall be permitted to
sell their common stock of Buyer in proportion, as nearly as practicable, to
the total number of shares held by such persons at the time of the filing of
the registration statement and requested to be included in the registration.
If any Holder disapproves of the terms of any such underwriting, it may elect
to withdraw therefrom by written notice to the Buyer and the underwriter.
Any Registrable Securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration. Each Holder shall be solely responsible
for all underwriting discounts and selling commissions applicable to the sale
of such Holder's Registrable Securities and the fees and expenses of such
Holder's counsel.
(b) Notwithstanding any other provision contained in Section 13.1 or in
this Section 13.2:
(i) the Holders shall not have the right to "piggyback" or
otherwise participate in any underwritten public offering of the Buyer's
securities effected pursuant to Section 2.1 of that certain Registration
Rights Agreement dated as of February 13, 1998 by and among the Buyer
and the Investors named therein (entered into in connection with the
Buyer's issuance of 12% Senior Subordinated Debentures and Warrants to
such Investors) (the "Senior Registration Rights Agreement") unless (A)
the managing underwriter of such offering shall have advised each holder
of Registrable Securities (as defined in the Senior Registration Rights
Agreement) to be covered by the registration statement that the
inclusion of the Holders' Registrable Securities would not, in such
underwriter's reasonable judgment, adversely affect the marketing or the
selling price of the Registrable Securities to be covered by such
registration, and (B) the holders of a majority of Registrable
Securities (as defined in the Senior Registration Rights Agreement) to
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be covered by such registration shall have consented in writing to the
inclusion of the Holders' Registrable Securities; and
(ii) In the event of any underwritten public offering of the
Buyer's securities, the registration of which is governed by Section 2.3
of the Senior Registration Rights Agreement, any cutback of the number
of securities to be included in such registration which, in the judgment
of the underwriter, is necessary for marketing reasons may be applied
first upon the Holders and all other holders of securities other than
Registrable Securities (as defined in the Senior Registration Rights
Agreement).
REGISTRATION COVENANTS.
Whenever required under this Article XIII to effect the registration of
any Registrable Securities, the Buyer shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities within 60 days and use its best
efforts to cause such registration to become effective as soon as
practicable and, upon the request of the Holder, keep such registration
statement effective for 180 days to permit Holder to dispose of the
securities covered by such registration statement (but such registration
statement need not be kept effective after Holder is free to sell such
securities under the provisions of Rule 144(k) under the Securities Act).
(ii) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(iii) Permit the Holder the right to review and comment as to
information relating to Holder or the Registrable Securities included in
the registration statement and furnish to the Holder such numbers of
conformed copies of the registration statement and each amendment or
supplement, including each prospectus and preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as the Holder may reasonably request in order to facilitate
the disposition of Registrable Securities owned by Holder.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under the securities or blue sky
laws of such jurisdictions as shall be reasonably requested by Holder,
PROVIDED that the Buyer shall not
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be required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service and process in
any such states or jurisdictions.
(v) Notify Holder 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 material fact or omits 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.
(vi) Notify the Holder promptly after the Buyer shall have
received notice thereof of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement and use its
best efforts to obtain withdrawal if such stop order should be issued.
HOLDER COVENANTS.
Each Holder will furnish to the Buyer in connection with any
registration under this Article XIII such information regarding itself, the
Registrable Securities and other securities of the Buyer held by it, and the
intended method of disposition of such securities as shall be required to
effect the registration of the Registrable Securities held by Holder. Each
Holder hereby agrees not to, directly or indirectly, offer, sell, offer to
sell, contract to sell, grant any option to purchase or otherwise sell,
transfer, pledge, or dispose (or announce any offer, sale, offer of sale,
contract of sale, grant of any option to purchase or other sale, transfer,
pledge or disposition) (collectively, a "Transfer") of any of the shares of
common stock of Buyer or any securities convertible into, or exchangeable or
exercisable for, shares of common stock of Buyer for a period commencing as
of 14 days prior to and ending 180 days after the effective date of the
registration statement covering any underwritten public offering of Buyer's
securities or such earlier date as the underwriters or Buyer may require.
Each Holder agrees and consents to the entry of stop transfer instructions
with Buyer's transfer agent against the Transfer of Buyer's securities
beneficially owned by such Holder during such period.
65
<PAGE>
INDEMNIFICATION.
The Buyer shall indemnify, defend and hold harmless each Holder of
Registrable Securities which are included in a registration statement pursuant
to the provisions of this Article XIII, any underwriter (as defined in the
Securities Act) for such Holder, and the directors, officers and controlling
persons of such Holder or underwriter from and against any and all claims,
suits, demands, causes of action, losses, damages, liabilities, costs or
expenses ("Liabilities") to which any of them may become subject under the
Securities Act or otherwise, arising from or relating to (i) any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
PROVIDED, HOWEVER, that the Buyer shall not be liable in any such case to the
extent that any such Liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made
in conformity with written information furnished by such Holder specifically
for use in the preparation thereof. This indemnification will survive the
transfer of the Shares.
Each Holder of Registrable Securities included in a registration
pursuant to the provisions of this Article XIII shall indemnify, defend, and
hold harmless the Buyer, its directors, officers and controlling persons with
respect to, any and all Liabilities to which any of them may become subject
under the Securities Act or otherwise, arising from or relating to (i) any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, any prospectus contained therein or any amendment
or supplement thereto, or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was so made in reliance upon and in conformity with written information
furnished by or on behalf of such Holder for use in the preparation thereof.
This indemnification shall survive the transfer of the Shares.
Promptly after receipt by an indemnified party pursuant to the
provisions of this Section 13.5 of notice of the commencement of any action
involving the subject matter of the foregoing indemnity provisions, such
indemnified party shall, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of this Section 13.5, promptly
notify the indemnifying party of the commencement thereof; PROVIDED, HOWEVER,
that the failure to so notify the indemnifying party shall not relieve it from
its indemnification obligations hereunder except to the extent that the
indemnifying party is materially prejudiced by such failure. If such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party shall have the right
66
<PAGE>
to participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; PROVIDED, HOWEVER, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there is conflict of interest which would prevent counsel for the
indemnifying party from also representing the indemnified party, the
indemnified party shall have the right to select separate counsel to
participate in the defense of such action on behalf of such indemnified party
at the expense of the indemnifying party. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
pursuant to this Section 13.5 for any expense of counsel subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnified party shall have
employed counsel in accordance with the provisions of the preceding sentence,
or (ii) the indemnifying party shall not have employed counsel satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after the notice of the commencement of the action. An indemnifying party
shall not be responsible for amounts paid in settlement without its consent,
provided that its consent may not be unreasonably withheld. Upon any
settlement or entry of final judgment, the indemnifying part will promptly
indemnify the indemnified party.
REGISTRATION EXPENSES.
With respect to the inclusion of Registrable Securities in a
registration statement pursuant to this Article XIII, all fees, costs and
expenses of and incidental to such registration, inclusion and public offering
shall be borne by the Buyer; PROVIDED, HOWEVER, that any securityholders,
including the Shareholders, participating in such registration shall bear their
pro rata share of the underwriting discounts and commissions, if any. The
fees, costs and expenses of registration to be borne by the Buyer as provided
in this Section 13.6 shall include, without limitation, all registration,
filing and NASD fees, printing expenses, fees and disbursements of counsel and
accountants for the Buyer, and all legal fees and disbursements and other
expenses of complying with state securities or Blue Sky laws of any
jurisdiction or jurisdictions in which securities to be offered are to be
registered and qualified. Fees and disbursements of counsel and accountants
for the selling securityholders shall, however, be borne by the respective
selling securityholder.
NO ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to cause the Buyer to register Registrable Securities
pursuant to this Agreement may not be assigned by the Shareholders.
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<PAGE>
IN WITNESS WHEREOF, each of the Parties hereto has executed or caused
this Agreement to be executed by its duly authorized officers as of the day and
year first above written.
"BUYER"
SERACARE, INC.,
a Delaware corporation
By: /S/ BARRY D. PLOST
-----------------------------------------------------
Barry D. Plost
Chairman of the Board, President and
Chief Executive Officer
"SHAREHOLDERS"
The Crowley Charitable Remainder Unitrust
By: /s/ MICHAEL F. CROWLEY
-----------------------------------------------------
Michael F. Crowley, Trustee
By: /s/ Mary A. Crowley
-----------------------------------------------------
Mary A. Crowley, Trustee
/s/ Michael F. Crowley II
----------------------------------------------------------
Name: Michael F. Crowley II
/s/ Michael F. Crowley
----------------------------------------------------------
Name: Michael F. Crowley
/s/ Mary A. Crowley
----------------------------------------------------------
Name: Mary A. Crowley
"COMPANY"
THE WESTERN STATES GROUP, INC.,
a California corporation
<PAGE>
By: /s/ Michael F. Crowley
----------------------------------------------------------
Name: Michael F. Crowley
----------------------------------------------------------
Title: President
---------------------------------------------------
NB1-325805 S-1 Stock Purchase Agreement
<PAGE>
LIST OF OMITTED SCHEDULES AND EXHIBITS*
SCHEDULES
SCHEDULE 1.1 Products
SCHEDULE 4.1 Jurisdictions in which Company is Required to be
Qualified to Do Business as a Foreign Person; Directors
and Executive Officers
SCHEDULE 4.3(a) Audited Financial Statements
SCHEDULE 4.3(b) Unaudited Financial Statement
SCHEDULE 4.3(e) Liabilities
SCHEDULE 4.4 Tax Returns
SCHEDULE 4.5 Material Contracts
SCHEDULE 4.6 Real and Personal Property
SCHEDULE 4.8 Permits and Approvals
SCHEDULE 4.10 Labor Relations
SCHEDULE 4.13 Insurance
SCHEDULE 4.15 Compliance with Law
SCHEDULE 4.17(a)(i) Employee Benefit Plans, and Collective Bargaining and
Employee Agreements
SCHEDULE 4.17(a)(v) Termination of Plans
SCHEDULE 4.17(a)(vii) Employees, Consultants and Agents Entitled to
Severance, Parachute or Other Payments or Benefits
SCHEDULE 4.19 Bank Accounts, Powers, etc.
SCHEDULE 4.23 Receivables and Commissions Payable
SCHEDULE 4.24 Customers and Suppliers
SCHEDULE 4.25 Environmental Compliance
SCHEDULE 5.6 Capitalization of Buyer
SCHEDULE 10.1 Specific Indemnification Matters
EXHIBITS
Exhibit A Ownership and Percentage Interests in the Company
Exhibit B MFC Employment Agreement
Exhibit C MFCII Employment Agreement
Exhibit D Form of Opinion of Counsel of the Shareholders and the Company
Exhibit E Form of Opinion of Counsel of the Buyer
_______________________________
* Registrant agrees to furnish supplementally a copy of any of the
omitted Schedules and Exhibits listed above to the Commission upon
request.
S-3
<PAGE>
EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
dated as of
February 13, 1998,
by and among
SERACARE, INC.,
a Delaware corporation,
as Buyer
and
CONSOLIDATED TECHNOLOGIES, INC.,
a Texas corporation, and
CONCO ASSOCIATES, INC. (dba Cone Biotech),
a Texas corporation
as Sellers
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I DEFINITIONS................................................1
ARTICLE II PURCHASE OF ASSETS/DISCHARGE OF LIABILITIES/CLOSING........8
2.1 Purchase and Sale of Assets................................8
2.2 Assumption of Certain Liabilities.........................10
2.3 Purchase Price and Allocation.............................11
2.4 Right to Offset Against Buyer Shares......................13
ARTICLE III CLOSING...................................................13
3.1 Closing Matters...........................................13
3.2 Items to be Delivered at the Closing By Seller............14
3.3 Items to be Delivered at the Closing by Buyer.............15
3.4 Resale of Inventory.......................................15
3.5 Third Party Approvals.....................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLERS.....16
4.1 Organization, Good Standing and Related Matters...........16
4.2 Authorization; No Conflicts...............................17
4.3 Financial Statements; Changes; Contingencies..............17
4.4 Tax and Other Returns and Reports.........................19
4.5 Material Contracts........................................20
4.6 Intentionally Omitted.....................................21
4.7 Real and Personal Property; Title to and Condition
of Purchased Assets; Leases...............................21
4.8 Intangible Property.......................................22
4.9 Legal Proceedings.........................................23
4.10 Labor Relations...........................................24
4.11 Insurance.................................................24
4.12 Permits and Licenses......................................24
4.13 Compliance with Law.......................................25
4.14 Employee Benefits.........................................25
4.15 Certain Interests.........................................27
4.16 No Brokers or Finders.....................................27
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Page
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4.17 Accuracy of Information...................................27
4.18 Inventories...............................................28
4.19 Customers and Suppliers...................................28
4.20 Environmental Compliance..................................28
4.21 Investment Intent.........................................29
4.22 Business Relationship.....................................29
4.23 Disclosure/Legend.........................................29
4.24 Rule 144..................................................30
4.25 Powers of Attorney........................................30
4.26 Capital Adequacy and Reasonably Equivalent Value
for the Purchased Assets..................................30
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...................31
5.1 Organization and Related Matters..........................31
5.2 Authorization.............................................31
5.3 No Conflicts..............................................31
5.4 No Brokers or Finders.....................................32
5.5 Legal Proceedings.........................................32
5.6 Buyer's Stock.............................................32
5.7 Accuracy of Information in Exchange Act Reports...........32
ARTICLE VI COVENANTS WITH RESPECT TO CONDUCT OF THE SELLERS
PRIOR TO CLOSING..........................................33
6.1 Access....................................................33
6.2 Material Adverse Changes; Reports;
Financial Statements......................................33
6.3 Conduct of Business.......................................34
6.4 Notification of Certain Matters...........................36
6.5 Permits and Approvals.....................................36
6.6 Preservation of Business Prior to Closing Date............37
6.7 Payments to Creditors.....................................37
6.8 Passage of Title and Risk of Loss.........................37
ARTICLE VII ADDITIONAL CONTINUING COVENANTS...........................37
7.1 Employment Matters........................................38
7.2 Expenses and Taxes........................................38
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Page
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7.3 Payment of Costs Associated with Lease Assignments........38
7.4 Registration Rights.......................................39
7.5 Nomination of WJC to Board of Directors...................39
7.6 Discharge of Company Liabilities..........................39
7.7 Intentionally Omitted.....................................39
7.8 Proration of Recurring Expenses...........................40
7.9 Real Property Transfer Documentation......................40
7.10 Maintenance of Books and Records..........................41
7.11 Payments Received.........................................41
ARTICLE VIII CONDITIONS OF PURCHASE....................................41
8.1 General Conditions........................................41
8.2 Conditions to Obligations of Buyer........................42
8.3 Conditions to Obligations of the Sellers..................43
ARTICLE IX TERMINATION OF OBLIGATIONS; SURVIVAL......................44
9.1 Termination of Agreement..................................44
9.2 Effect of Termination.....................................44
ARTICLE X INDEMNIFICATION...........................................45
10.1 Indemnification of Buyer..................................45
10.2 Indemnification of the Sellers............................46
10.3 Procedure.................................................47
10.4 Survival..................................................48
10.5 Notice....................................................49
10.6 Not Exclusive Remedy......................................49
10.7 Aggregate Dollar Limitation...............................49
ARTICLE XI ARBITRATION...............................................49
11.1 Arbitration...............................................49
11.2 Judicial Arbitration and Mediation
Services, the Sellers.....................................49
11.3 Arbitration Panel.........................................50
11.4 Provisional Remedies......................................50
11.5 Enforcement of Judgment...................................50
11.6 Discovery.................................................50
11.7 Consolidation.............................................50
11.8 Power and Authority of Arbitrator.........................51
11.9 Law to be Applied.........................................51
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Page
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11.10 Costs.....................................................51
ARTICLE XII GENERAL...................................................51
12.1 Amendments; Waivers.......................................51
12.2 Schedules; Exhibits; Integration..........................51
12.3 Best Efforts; Further Assurances..........................52
12.4 Governing Law.............................................52
12.5 Assignment................................................53
12.6 Headings..................................................53
12.7 Counterparts..............................................53
12.8 Publicity and Reports.....................................54
12.9 Confidentiality...........................................54
12.10 Parties in Interest.......................................54
12.11 Notices...................................................54
12.12 Expenses..................................................55
12.13 Remedies; Waiver..........................................56
12.14 Attorney's Fees...........................................56
12.15 Knowledge Convention......................................56
12.16 Representation By Counsel; Interpretation.................56
12.17 Specific Performance......................................57
12.18 Severability..............................................57
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
SCHEDULE 1.1 Products
SCHEDULE 2.1(a) Purchased Assets
SCHEDULE 2.2(b) Assumed Liabilities
SCHEDULE 2.3 Purchase Price Allocation
SCHEDULE 2.4 Sellers Liabilities
SCHEDULE 4.1 Jurisdictions in which Sellers is Required to be Qualified
to Do Business as a Foreign Person; Directors and Executive
Officers
SCHEDULE 4.2 Permits and Approvals
SCHEDULE 4.3 Capitalization
SCHEDULE 4.3(a) Audited Financial Statements
SCHEDULE 4.3(b) Unaudited Interim Financial Statements
SCHEDULE 4.3(c) Auditors' Letters
SCHEDULE 4.3(d) Material Adverse Changes
iv
<PAGE>
SCHEDULE 4.3(e) Liabilities
SCHEDULE 4.4 Tax Returns
SCHEDULE 4.5 Material Contracts
SCHEDULE 4.5(b) Assumed Contracts
SCHEDULE 4.7(a) Real and Personal Property
SCHEDULE 4.8 Intangible Property
SCHEDULE 4.9 Orders, Actions and Labor Matters
SCHEDULE 4.10 Labor Relations
SCHEDULE 4.11 Insurance
SCHEDULE 4.12 Permits and Licenses
SCHEDULE 4.13 Law Compliance
SCHEDULE 4.13(a) Licenses Related to the Business
SCHEDULE 4.14(a)(i) Employee Benefit Plans, and Collective Bargaining and
Employee Agreements
SCHEDULE 4.14(a)(vii) Employees, Consultants and Agents Entitled to Severance,
Parachute or Other Payments or Benefits
SCHEDULE 4.15 Certain Interests
SCHEDULE 4.19 Customers and Suppliers
SCHEDULE 4.20 Environmental Compliance
SCHEDULE 5.6 Buyer's Stock
SCHEDULE 7.6 Liabilities and Obligations of Sellers
SCHEDULE 7.9 Real Property Owned by Sellers
SCHEDULE 8.2(e) Assignment of Intellectual Property Rights
SCHEDULE 8.2(g) Permitted Liens
EXHIBITS
Exhibit A Percentage Interest in the Sellers
Exhibit B Bill of Sale
Exhibit C Assignment and Assumption of Lease
Exhibit D Assignment and Assumption Agreement
Exhibit E Form of Opinion of Counsel of the Sellers
Exhibit F Non-Competition Agreement
Exhibit G Opinion of Counsel of the Buyer
Exhibit H Registration Rights
Exhibit I Employment Agreement of William J. Cone
Exhibit J Employment Agreement of Kerry Cone
</TABLE>
v
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of February 13,
1998, by and among SeraCare, Inc., a Delaware corporation ("Buyer"),
Consolidated Technologies, Inc., a Texas corporation ("CTI") and Conco
Associates, Inc., a Texas corporation ("Biotech") (collectively referred to
herein as the "Sellers") (the Buyer and the Sellers are collectively referred
to herein as the "Parties" or individually as the "Party").
B A C K G R O U N D
A. The Sellers develop and manufacture intermediate biological
materials, invitro diagnostic products and proficiency testing specimens; and
B. Sellers desire to sell, and Buyer desires to purchase, such
business and certain of the assets used therein on the terms and conditions
set forth in this Agreement.
A G R E E M E N T
In consideration of the mutual covenants and agreements as set
forth herein and intending to be legally bound, the Parties agree as follows:
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the terms defined in this
Article I have the meanings assigned to them in this Article I and include
the plural as well as the singular,
<PAGE>
all accounting terms not otherwise defined herein have the meanings
assigned under generally accepted accounting principles,
all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of the body of this Agreement,
pronouns of either gender or neuter shall include, as appropriate,
the other pronoun forms, and
the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
As used in this Agreement and the Exhibits and Schedules delivered
pursuant to this Agreement, the following definitions shall apply.
"Acquisition" means the acquisition of the Purchased Assets by the
Buyer as contemplated by this Agreement.
"Action" means any action, complaint, petition, investigation, suit
or other proceeding, whether civil or criminal, in law or in equity, or
before any arbitrator or Governmental Entity.
"Affiliate" means a Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, a specified Person.
"Agreement" means this Agreement by and among the Buyer and the
Sellers, as such may be amended or supplemented, together with all Exhibits
and Schedules attached or incorporated by reference.
"Approval" means any approval, authorization, assignment, consent,
qualification or registration, or any waiver of any of the foregoing,
required to be obtained from, or any notice, statement or other communication
required to be filed with or delivered to, any Governmental Entity or any
other Person.
2
<PAGE>
"Associate" of a Person means:
a corporation or organization (other than a Party to this
Agreement) of which such Person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities;
any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or in a
similar capacity; and
any relative or spouse of such Person or any relative of such
spouse who has the same home as such Person or who is a director or officer
of the Sellers or any of their Affiliates.
"Assumed Contracts" means the Leases and each Contract of the
Sellers specifically identified on Schedule 4.5 as a Contract which will be
assigned to and assumed by Buyer.
"Assumed Liabilities" has the meaning specified in Section 2.2(b).
"Auditors" means BDO Seidman LLP, independent public accountants to
the Sellers.
"Business" means the business of the Sellers, and shall be deemed
to include any of the following incidents of such business: income, cash
flow, operations, condition (financial or other), assets, properties,
anticipated revenues and income, prospects, liabilities, personnel and
management, but shall not include the Excluded Assets.
"Buyer Shares" has the meaning set forth in Section 2.3.
"Buyer's Common Stock" means the common stock, par value $.001 per
share, of SeraCare, Inc.
"Closing" means the consummation of the purchase and sale of the
Purchased Assets under this Agreement.
"Closing Date" means the date of the Closing.
"Code" means the U.S. Internal Revenue Code of 1986, as amended.
3
<PAGE>
"Confidential Information" means all information and material which
is proprietary to a party, whether or not marked as "confidential" or
"proprietary," which is disclosed to the other and relates to the party's
past, present or future business activities, including, without limitation,
all of the following: data, documentation, diagrams, flow charts, research,
development, processes, procedures, Know How, new product information,
marketing techniques and materials, marketing timetables, strategies and
development plans, including trade names, trademarks, client supplier or
personnel names and other information related to clients, suppliers or
personnel, pricing policies, projections and other financial information, and
other information of a similar nature, whether or not reduced to writing or
other tangible form, and any other Trade Secrets or non-public business
information. Confidential Information shall not include information which
(i) is currently in the public domain or subsequently comes into the public
domain through no fault of the receiving party and not in breach of this
Agreement; (ii) was already known to the receiving party on the date of
disclosure through a proper and lawful source, provided that such prior
knowledge can be substantiated and proved by documentation; or (iii) properly
and lawfully becomes available to the receiving party from sources
independent of the party.
"Contract" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, Leases, license or
understanding, whether or not in writing.
"Customer Deposits" means all deposits paid to the Sellers in
connection with the Business on account of merchandise purchased by customers
and not delivered by the Sellers prior to the Closing Date and all amounts
received by the Sellers in payment for services (or portions thereof) to be
rendered in connection with the Business on or after the Closing Date.
"Encumbrance" means any claim, charge, easement, encumbrance,
lease, covenant, security interest, lien, option, pledge, rights of others,
or restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise, except
for any restrictions on transfer generally arising under any
4
<PAGE>
applicable federal or state securities law and except for any encumbrance
securing payment or performance of any Assumed Liability.
"Equity Securities" means any capital stock or other equity
interest or any securities convertible into or exchangeable for capital stock
or any other rights, warrants or options to acquire any of the foregoing
securities.
"ERISA" means the U.S. Employee Retirement Income Security Act of
1974, as amended, and the related regulations and published interpretations.
"Exchange Act" means the U.S Securities Exchange Act of 1934, as
amended.
"Excluded Assets" means the assets identified in Section 2.1(b).
"Excluded Liabilities" has the meaning specified in Section 2.2(a).
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.
"Hazardous Substance" means substances that are defined or listed
in, or otherwise classified pursuant to, any applicable Laws as "hazardous
substances," "hazardous materials," "hazardous wastes" or "toxic substances,"
or any other formulation intended to define, list or classify substances by
reason of deleterious properties such as ignitibility, corrosivity,
reactivity, radioactivity, carcinogenicity, reproductive toxicity or "EP
toxicity," and petroleum and drilling fluids, produced waters and other
wastes associated with the exploration, development, or production of crude
oil, natural gas or geothermal energy.
5
<PAGE>
"Indemnifiable Claim" means any Loss for or against which any party
is entitled to indemnification under this Agreement
"Indemnified Party" means the Party entitled to indemnity under this
Agreement.
"Indemnifying Party" means the Party obligated to provide
indemnification under this Agreement.
"Intangible Property" means any patents, patent applications (pending
or otherwise), industrial and intellectual property rights, copyrights,
unpublished works, inventions, Trade Secrets, Know How, research and
development findings, computer firmware and software (existing in any form),
marketing rights, contractual rights, licenses and all related agreements and
documentation, and all Marks.
"Intellectual Property Rights" means all industrial and intellectual
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyrights, computer programs and other computer
software, inventories, Know How, Trade Secrets, proprietary processes and
formulae.
"Inventory" has the meaning specified in Section 2.1(a).
"IRS" means the U.S. Internal Revenue Service or any successor
entity.
"Know How" means any information, including, but not limited to,
invention records, research and development records and reports, experimental
and engineering reports, pilot designs, production designs, production
specifications, raw material specifications, quality control reports and
specifications, drawings, photographs, models, tools, parts, algorithms,
processes, methods, market and competitive analysis, or other information
possessed by the Sellers, whether or not considered proprietary or a Trade
Secret.
6
<PAGE>
"Law" means any constitutional provision, statute or other law, rule,
regulation, or interpretation of any Governmental Entity and any Order.
"Leases" mean (a) that certain lease agreement dated July 10, 1989 by
and between Biotech and Teachers Realty Corporation , as amended and as
assigned to CTI pursuant to that certain Assignment of Lease and Assumption
Agreement dated March 6, 1990, and (b) that certain Real Estate Lease dated
January 1, 1994, between Robert O. Cone and William J. Cone as landlord and CTI
as Tenant relating to the premises located at 4531 Alternate 90, Seguin, Texas
78155, in each case relating to the real property leasehold interests used by
the Sellers in connection with the operation of the Business, together with all
amendments, modifications, alterations and other changes thereto.
"License" means all licenses, permits, consents, authorizations,
registrations and approvals related to the Business, with or from Governmental
Entities which have jurisdiction over it, including all export licenses, Food
and Drug Administration ("FDA") certificates and licenses, Clinical Laboratory
Improvement Amendments ("CLIA") licenses or approvals and occupancy, fire,
business and other permits from local officials.
"Loss" means any action, cost, damage, disbursement, expense,
liability, loss, obligation, penalty or settlement of any kind or nature,
whether foreseeable or unforeseeable, including, but not limited to, interest
or other carrying costs, penalties, legal, accounting and other professional
fees and expenses incurred in the investigation, collection, prosecution and
defense of claims, actual or threatened, and amounts paid in settlement, that
may be imposed on or otherwise incurred or suffered by the specified person;
provided, however, "Loss" shall not include any amount that is received by such
specified person under a valid and collectible insurance policy.
"Mark" means any brand name, copyright, patent, service mark,
trademark, trade name, and all registrations or applications for registration
of any of the foregoing.
7
<PAGE>
"Material Contract" means any Contract meeting the criteria set forth
in Section 4.5 hereof.
"Non-Competition Period" has the meaning set forth in Exhibit F.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ of any Governmental Entity, including, but not limited to,
the OSHA and the FDA.
"Permit" means any license, permit, franchise, certificate of
authority, authorization, or order, or any waiver of the foregoing, required to
be issued by any Governmental Entity.
"Person" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
Governmental Entity.
"Prepaid Expenses" mean all advance payments, security deposits, rent
deposits and utility deposits paid by the Sellers to third parties in
connection with the Purchased Assets that remain outstanding as credit balances
in favor of the Sellers on the Closing Date.
"Products" means products, technology and services, sold, licensed,
or otherwise exploited by either of the Sellers in connection with their
Business as described in Schedule 1.1.
"Purchase Price" has the meaning set forth in Section 2.3.
"Purchased Assets" has the meaning set forth in Section 2.1.
"Real Property" means all Purchased Assets consisting of real
property, appurtenances thereto, rights in connection therewith, and any
interest therein, including without limitation leasehold estates.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
8
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"Tax" means any foreign, federal, state, county or local income,
sales and use, ad valorem, excise, franchise, real and personal property,
transfer, gross receipt, capital stock, production, business and occupation,
disability, employment, payroll, severance or withholding tax or charge imposed
by any Governmental Entity, any interest and penalties (civil or criminal)
related thereto or to the nonpayment thereof, and any Loss in connection with
the determination, settlement or litigation of any Tax liability.
"Tax Return" means a report, return or other information required to
be supplied to a Governmental Entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for any group of
entities that includes the Sellers.
"Trade Secrets" mean formulas, patterns, devices or compilations of
information used in connection with or relating to the Business and which gives
an opportunity to obtain an advantage over competitors who do not know or use
it, including, but not limited to, formulas for chemical compounds, processes
of manufacturing, treating or preserving materials, patterns for machines or
any forms, plans, drawings, specifications, customer lists, marketing and
competition analysis and project management, inventory and cost control systems
and techniques.
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PURCHASE OF ASSETS/DISCHARGE OF LIABILITIES/CLOSING
PURCHASE AND SALE OF ASSETS.
PURCHASED ASSETS. Subject to the terms and conditions of this
Agreement, on the Closing Date the Sellers shall sell, convey, assign, transfer
and deliver to Buyer, and Buyer shall purchase, acquire and accept from the
Sellers, all of the assets, properties, rights, privileges, claims and rights
of every kind and nature, real and personal, tangible and intangible, absolute
or contingent, wherever located, owned by the Sellers or used in connection
with the Business (the "Purchased Assets"), except the assets specifically
identified in Section 2.1(b) (the "Excluded Assets"). The Purchased Assets
include, but are not limited to, the following assets, except as changed by
assets acquired or disposed of in the ordinary course of the Business after the
date hereof through the Closing Date:
All Real Property owned by or any leasehold interest in
Real Property held by either of the Sellers, except to the extent rejected
by Buyer pursuant to Section 7.9 hereof;
All fixtures and improvements attached to the Real Property
owned by Sellers or to any Real Property in which each Seller has a
leasehold interest;
All machinery, apparatus, office equipment, furniture and
fixtures, warehouse equipment, medical equipment, supplies, owned and
leased vehicles, and all other equipment of every type owned or leased by
the Sellers and used in connection with the Business;
All inventory of usable goods, including all merchandise,
raw materials, work in progress, finished products and other tangible
personal property held for sale or used in connection with the Business as
of the date hereof (the "Inventory"), together with any additions thereto
and subject to any reductions therefrom received or incurred by Sellers
operating the Business in the ordinary course after the date hereof
through the Closing Date;
All of the Sellers' rights and interests arising under or
in connection with any Contracts to which either of the Sellers is a party
and which relate to the Business, or under any other documents relating to
the Business;
Information services systems and computer hardware and
equipment;
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Sales data, including all sales representative account
books, logs and other documents reflecting sales strategies and
appointments, customer lists, information relating to customers,
suppliers' names, mailing lists, advertising matter and all rights thereto
relating to the Business;
All of Sellers' right, title and interest in and to all
livestock used in the operation of the Business;
All of Sellers' Intangible Property, and corporate and
trade names and Marks, including all of Sellers' rights in their
respective corporate names and Marks in any location in the United States
or in any foreign country;
All of Sellers' books and records relating to the Business
(except as excluded pursuant to Section 2.1(b));
Transferable Permits;
All Customer Deposits (if any) and all Prepaid Expenses;
and
All goodwill associated with the foregoing.
EXCLUDED ASSETS. The assets that constitute Excluded Assets
shall include only:
Cash, bank deposits and other cash equivalents of the
Sellers as of the Closing Date;
The consideration delivered to Sellers pursuant to this
Agreement;
Sellers' articles of incorporation, nontransferable
franchises, corporate seals, minute books, stock books and other corporate
records having to do with the corporate organization and capitalization of
either of the Sellers, and all income tax records and nontransferable
Permits;
Sellers' books of account, provided, however, that copies
of such books of account shall be provided to Buyer at or promptly
following the Closing;
Any shares of the capital stock of Sellers held as treasury
shares;
All of Sellers' accounts receivable;
Any assets of Sellers' employee benefit plans; and
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The assets specifically described on Schedule 2.1(a).
ASSUMPTION OF CERTAIN LIABILITIES.
(a) LIABILITIES NOT ASSUMED. Except for the liabilities and
obligations specifically assumed pursuant to and identified in Section 2.2(b)
below, Buyer shall NOT assume, shall NOT take subject to and shall NOT be
liable for, any liabilities or obligations of any kind or nature, whether
absolute, contingent, accrued, known or unknown, of Sellers or any Affiliate of
Sellers, the ("Excluded Liabilities") including, but not limited to, the
following:
Any liabilities or obligations incurred arising from or out
of or in connection with Sellers' operations, the condition of their
assets or places of business, their ownership of the Purchased Assets, or
the issuance, sale, repayment or repurchase of any of their securities.
Any liabilities or obligations incurred, arising from or
out of, in connection with or as a result of claims made by or against
Sellers whether before or after the Closing Date that arise out of events
occurring prior to the Closing Date.
Any liabilities or obligations incurred, arising from or
out of, in connection with or as a result of any alleged or actual defect
in any Products or in connection with any alleged or actual breach of
warranty (whether express or implied) in relation to any Products sold or
manufactured by Sellers prior to the Closing Date.
Any liabilities or obligations (whether assessed or
unassessed) of Sellers for any Taxes, including any Taxes arising by
reason of the transactions contemplated herein, as of, or for any period
ending on or prior to, the Closing Date.
All fees and expenses of Sellers in connection with the
transactions contemplated herein.
Any obligations or liabilities of Sellers relating to the
Excluded Assets.
Any liabilities or obligations of Sellers to former or
current stockholders, officers, directors, employees or Affiliates of
Sellers, including without limitation any liabilities or obligations of
Sellers in connection with any employee benefit plans or collective
bargaining, labor or employment agreement or other similar arrangement or
obligations in respect of retiree health benefits.
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Any liabilities or obligations of Sellers incurred, arising
from or out of or in connection with this Agreement or the events or
negotiations leading up to this Agreement.
(b) ASSUMED LIABILITIES. Notwithstanding Section 2.2(a), on the
Closing Date Buyer shall assume the liabilities or obligations specifically
identified on Schedule 2.2(b) attached hereto and incorporated herein by this
reference (the "Assumed Liabilities").
PURCHASE PRICE AND ALLOCATION.
PAYMENT OF PURCHASE PRICE. Subject to adjustment as provided
in this Section, the aggregate consideration to be paid by Buyer to the Sellers
pursuant to this Agreement (the "Purchase Price") shall consist of and be paid
as follows:
Effective as of the Closing Date, Buyer shall assume the
Assumed Liabilities.
On the Closing Date, Buyer shall pay to CTI the sum of $4.6
million and to Biotech the sum of $1 million (collectively, the "Closing
Cash Payments") by wire transfer of immediately available funds to such
accounts as may be designated by the respective Sellers prior to the
Closing.
On the Closing Date, Buyer shall issue 436,364 shares of
Buyer's Common Stock (the "Buyer Shares"), registered in the name of CTI;
PROVIDED, HOWEVER, that:
(A) Buyer shall retain the certificate evidencing
390,910 of the Buyer Shares and (subject to any right of offset in
favor of Buyer hereunder) shall promptly deliver such certificate and
such Buyer Shares to CTI upon receipt of evidence reasonably
satisfactory to Buyer that Sellers have satisfied and discharged
certain of its liabilities and obligations in accordance with Section
7.6 of this Agreement;
(B) Buyer shall retain the certificate evidencing
45,454 of the Buyer Shares and (subject to any right of offset in
favor of Buyer hereunder) shall deliver such certificate and such
Buyer Shares to CTI
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on the date which is 180 days after the Closing Date; and
(C) Buyer shall have a right of offset against the
Buyer Shares as provided in Section 2.4 of this Agreement.
ALLOCATION OF PURCHASE PRICE. The Purchase Price
(consisting of the Assumed Liabilities, the Closing Cash Payments and the
Buyer Shares) shall be allocated among the Purchased Assets and the
Non-Competition Agreement as determined in good faith by the Parties and
their respective accountants within 60 days following the Closing. Buyer and
each of the Sellers agree to file all federal, state, local and foreign Tax
returns in accordance with the allocation as so determined. Each of the
Parties agrees to complete within 60 days of the Closing Date IRS Form 8594
(Asset Acquisition Statement) as required by Section 1060 of the Code, and
further agree not to make any change or file any amendment or supplement
thereto unless it has given at least 15 days advance written notice to the
other Party (together with an explanation and copy of the proposed amendment
or supplement).
CLOSING INVENTORY ADJUSTMENT.
Sellers hereby represent and warrant that the aggregate net
book value of the Inventory delivered to Buyer on the Closing Date (the
"Closing Inventory") will not be less than $750,000. Within 45 days
following the Closing Date, Buyer shall conduct a physical inspection,
count and valuation of the Closing Inventory and Buyer shall permit a
representative of Sellers to monitor such process. Such inspection, count
and valuation of the Closing Inventory (the "Closing Inventory Audit")
shall be conducted by Buyer in good faith and in accordance with GAAP.
Promptly following completion of the Closing Inventory Audit, Buyer shall
notify Sellers in writing of Buyer's calculation of the net book value of
the Closing Inventory. Sellers shall have 15 days from the receipt of
Buyer's written notice to review the results of the Closing Inventory
Audit and to notify Buyer if Sellers intend to dispute Buyer's
determination, and Sellers' failure to respond to Buyer within such period
shall be deemed acceptance of Buyer's determination. If the Parties do
not agree on the Closing Inventory value, such dispute may be submitted
for final determination by the Auditors; provided, however, that at any
Party's election, the Closing Inventory Value shall be determined by
arbitration pursuant to Article XI hereof.
The net book value of the Closing Inventory, as determined
pursuant to clause (i) above, is referred to herein as the "Closing
Inventory Value." Promptly upon final determination of the Closing
Inventory Value, the Sellers shall pay to Buyer in cash the amount (if
any) by which the Closing Inventory value is less than
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$750,000 or, at Sellers' option, shall notify Buyer in writing to offset
such amount against the Buyer shares held by Buyer pursuant to Section
2.3(a)(iii).
RIGHT TO OFFSET AGAINST BUYER SHARES.
In addition to any other available remedies, Buyer may set-off
against delivery of the Buyer Shares any amounts which may become due from
Sellers to Buyer pursuant to either of Section 2.3(c)(ii) or Section 10.1 of
this Agreement and which remain unpaid for a period of five (5) or more
calendar days following delivery by Buyer to Sellers of a written demand for
payment. If at any time Buyer exercises its rights pursuant to this Section
2.4, the number and value of Buyer Shares to be delivered to CTI under
Section 2.3 of this Agreement shall be reduced by the amount of the Sellers'
obligation that Buyer has elected to set-off. For purposes of this
provision, the Buyer Shares shall have a value equal to the average closing
bid price reported by NASDAQ (or any other exchange or automated quotation
system on which Buyer's Common Stock is traded or quoted) for the last 10
trading days immediately preceding the date of final determination of the
amount owed.
CLOSING
CLOSING MATTERS.
CLOSING. The Closing will take place effective as of 11:59
p.m., California time, on February 13, 1998 (the "Closing Date"), following the
fulfillment or waiver of all conditions precedent to the Closing and shall be
held at the offices of O'Melveny & Myers LLP in Newport Beach, California.
Such Closing Date may be changed by agreement among the Parties.
SIMULTANEOUS DELIVERY. All acts with respect to the Closing
shall be considered as having taken place simultaneously, and no delivery or
payment shall be considered as having been made until all deliveries, payments
and Closing transactions have been accomplished.
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NO EQUITABLE CONVERSION. Before the Closing, neither the
execution of this Agreement nor the performance of any provision contained
herein shall cause Buyer to become liable for (i) the operations of the
Sellers or the Business of the Sellers; (ii) the condition of the Sellers'
assets; (iii) the cost of any labor or materials furnished to any such
property; (iv) compliance with any laws, requirements, or regulations of, or
Taxes, or assessments or other charges now or hereafter due to, any
Governmental Entity; or (v) for any other Encumbrances or expenses whatsoever
pertaining to the conduct of the Sellers' Business or the ownership, title,
possession, use or occupancy of the property of the Sellers.
ITEMS TO BE DELIVERED AT THE CLOSING BY SELLERS.
At the Closing, the Sellers shall deliver or cause to be delivered
to Buyer the following, in form and substance satisfactory to Buyer and
Buyer's counsel, against delivery of the items specified in Section 3.3:
A Percentage Interest in the Sellers in the form of
Exhibit A;
A Bill of Sale in the form of Exhibit B;
Assignment and Assumption of the Leases in the form of
Exhibit C (and related estoppel certificates from lessors) with respect to
each facility covered by the Leases, together with any necessary consents
of the lessors;
Assignment and Assumption Agreement in the form of
Exhibit D;
Instruments of transfer in the form customarily used in
commercial transactions in the area in which the personal property is
located sufficient to transfer each personal property interest owned by
Sellers and used in the Business and not otherwise transferred by the Bill
of Sale referred to in clause (b) above;
The employment agreement referred to in Section 8.1(b)
executed by William J. Cone ("WJC");
The employment agreement referred to in Section 8.1(c)
executed by Kerry Cone ("KC");
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The closing certificates referred to in Section 8.2(a);
The opinion of counsel of Sellers referred to in Section
8.2(c) in the form of Exhibit E and the certificates, consents and other
documents referred to herein as then deliverable by Sellers;
Any Approvals and Permits required to be obtained before
consummation of the Acquisition referred to in Sections 6.5 and 8.2(d);
The assignments of Intellectual Property Rights referred to
in Section 8.2(h) executed by the Sellers;
A Non-Competition Agreement in substantially the form of
Exhibit F, duly executed by William J. Cone;
A current list of the locations of all items included in
the Purchased Assets held by other persons, if any;
The keys to all vehicles and all locks located on or in the
Purchased Assets (and any and all cards, devices or things necessary to
access any of the Purchased Assets) shall be surrendered on request to
Buyer's representatives at the facilities where such assets are located;
Evidence of the receipt of the consent to the assignment of
any Assumed Contract specified by Buyer prior to the Closing; and
Such other instruments of transfer necessary or appropriate
to transfer to and vest in Buyer all of Sellers' right, title and interest
in and to the Purchased Assets.
Sellers shall take or cause to be taken all such actions as may reasonably be
required to put Buyer in actual possession and operating control of the
Purchased Assets.
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ITEMS TO BE DELIVERED AT THE CLOSING BY BUYER.
At the Closing, Buyer shall deliver or cause to be delivered to
Sellers as provided in Section 2.3 (i) the Closing Cash Payment, (ii) the
Assignment and Assumption Agreement in the form of Exhibit D, (iii) the
opinion of counsel to Buyer in the form of Exhibit G, (iv) the employment
agreements with each of William J. Cone and Kerry Cone, executed by the
Buyer, and (v) the certificates, consents and other documents referred to
herein as then deliverable to Sellers against delivery of the items specified
in Section 3.2.
RESALE OF INVENTORY.
Buyer is purchasing certain of the Inventory for resale and shall
deliver to Sellers on the Closing Date a certificate certifying that the
Inventory is being purchased for resale to the extent stated therein.
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THIRD PARTY APPROVALS.
To the extent that Sellers' rights under any Contracts,
authorizations, Permits, equipment leases or other of the Purchased Assets to
be assigned to Buyer hereunder may not be assigned without the Approval of
another Person, which Approval has not been obtained prior to the Closing,
this Agreement shall not constitute an agreement to assign the same if an
attempted assignment would constitute a breach thereof or be unlawful, and
Sellers, at their expense, shall use their commercially reasonable efforts to
obtain any such required Approval(s) as promptly as possible after Closing.
If any such Approvals are not obtained or if any attempted assignment would
be ineffective or would impair Buyer's rights under the Purchased Asset in
question so that Buyer would not in effect acquire the benefit of all such
rights, Sellers, to the maximum extent permitted by law and by the terms of
any documents affecting the Purchased Asset, at Sellers' expense, shall act
for six months after the Closing as Buyer's agent in order to obtain for
Buyer the benefits thereunder and shall cooperate, to the maximum extent
permitted by law and by the terms of any document affecting the Purchased
Assets, with Buyer in any other reasonable arrangement designed to provide
such benefits to Buyer.
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REPRESENTATIONS AND WARRANTIES
CONCERNING THE SELLERS
The Sellers, jointly and severally, hereby represent and warrant to
Buyer that:
ORGANIZATION, GOOD STANDING AND RELATED MATTERS.
Each of the Sellers is a duly organized corporation, validly
existing and in good standing under the laws of its respective jurisdiction
of incorporation or organization. Each of the Sellers has all necessary
corporate power and authority to execute, deliver and perform this Agreement
and any related agreements to which it is a party. Schedule 4.1 correctly
sets forth the jurisdictions in which each of the Sellers is organized and
each jurisdiction in which the Sellers are qualified or licensed to do
business as a foreign Person. The Sellers have all necessary corporate power
and authority to own their respective properties and assets and to carry on
their respective businesses as now conducted and are duly qualified or
licensed to do business as foreign corporations in good standing in all
jurisdictions in which the character or the location of the assets owned or
leased by either of the Sellers or the nature of the business conducted by
either of the Sellers requires licensing or qualification, except where any
such failure would not have a material adverse effect on their respective
businesses, assets or financial condition. Except as set forth on Schedule
4.1, neither of the Sellers has any subsidiaries or holds any direct or
indirect equity interest in any other Person. Schedule 4.1 lists all names
under which either of the Sellers has conducted business during the last five
years.
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AUTHORIZATION; NO CONFLICTS.
The execution, delivery and performance of this Agreement and any
related agreements by the Sellers has been duly and validly authorized by the
Boards of Directors of the Sellers and by all other necessary corporate
action on the part of the Sellers. This Agreement and each of the related
agreements constitutes the legally valid and binding obligations of the
Sellers, enforceable against the Sellers in accordance with their respective
terms except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors rights generally. Except as disclosed on
Schedule 4.2, the execution, delivery and performance of this Agreement by
the Sellers and the execution, delivery and performance of any related
agreements or contemplated transactions by the Sellers will not violate, or
constitute a breach or default (whether upon lapse of time and/or the
occurrence of any act or event or otherwise) under, the charter documents or
bylaws of the Sellers or any Material Contract of the Sellers, result in the
imposition of any Encumbrance against any asset or properties of the Sellers
or any of the Purchased Assets, or violate any Law. Schedule 4.2 lists all
Permits and Approvals required to be obtained by each of the Sellers to
consummate the transactions contemplated by this Agreement. Except for
matters identified in Schedule 4.2 as requiring that certain actions be taken
by or with respect to a third party or Governmental Entity, the execution and
delivery of this Agreement by the Sellers and the performance of this
Agreement and any related or contemplated transactions by the Sellers will
not require filing or regis tration with, or the issuance of any Permit by,
any other third party or Governmental Entity.
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FINANCIAL STATEMENTS; CHANGES; CONTINGENCIES.
AUDITED FINANCIAL STATEMENTS. Attached as Schedule 4.3(a)
hereto are true and complete copies of the audited combined balance sheets
for each of the Sellers as of December 31, 1995 and 1996 and the related
combined statements of operations, changes in shareholders' deficit and cash
flows for the twelve month periods then ended (collectively, the "Audited
Financial Statements" and, together with the Unaudited Financial Statements,
the "Financial Statements"). All such Audited Financial Statements have been
examined and audited by the Auditors whose reports thereon are included with
such Audited Financial Statements. All such Audited Financial Statements
have been prepared in conformity with GAAP applied on a consistent basis
(except for changes, if any, required by GAAP and disclosed therein). Such
statements of operations and cash flow present fairly the results of
operations and cash flows of each of the Sellers for the periods covered, and
the balance sheets present fairly the financial condition of each Seller as
of their respective dates.
UNAUDITED INTERIM FINANCIAL STATEMENTS. Attached as
Schedule 4.3(b) hereto are true and correct copies of the consolidated and
consolidating balance sheets for each of the Sellers for the twelve-month
period ended December 31, 1997, and the related combined statements of
operations and cash flows and changes in shareholder's equity for the period
then ended (the "Unaudited Financial Statements"). The Unaudited Financial
Statements have been certified by the respective chief financial officers of
the Sellers. The Unaudited Financial Statements have been prepared in
conformity with GAAP applied on a consistent basis (except for changes, if
any, required by GAAP and disclosed therein). The statements of operations
and cash flows present fairly the results of operations and cash flows of the
Sellers for the period covered, and the balance sheets present fairly the
financial condition of each Seller as of December 31, 1997. All such
Unaudited Financial Statements reflect all adjustments (which consist only of
normal recurring adjustments not material in amount and include, but are not
limited to, estimated provisions for year-end adjustments) necessary for a
fair presentation. At the dates of such balance sheets, neither of the
Sellers had any material liability (actual, contingent or accrued) that, in
accordance with GAAP applied on a consistent basis, should have been shown or
reflected therein but was not.
AUDITORS' LETTERS. The Sellers have delivered to Buyer
copies of each management letter or other letter delivered to Sellers by the
Auditors in connection with the Financial Statements delivered to the Buyer
or relating to any review by the Auditors of the internal controls of the
Sellers during the two years ended December 31, 1995 and 1996, or thereafter,
and have made available for inspection by Buyer all reports and working
papers produced or developed by the Auditors or management in connection with
their audit, examination or review of such financial statements, as well as
all such reports and working papers for prior periods for which any tax
liability of the Sellers have not been finally determined or barred by
applicable statutes of limitation. Since January 1, 1995, there have been no
changes in any of the significant accounting policies, practices or
procedures of either Seller.
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NO MATERIAL ADVERSE CHANGES. Except as disclosed on
Schedule 4.3(d), with respect to the Sellers, since December 31, 1997,
whether or not in the ordinary course of business, there has not been,
occurred or arisen:
any change in or event affecting the Sellers, the Business
or the Purchased Assets that has had or may reasonably be expected to have
a material adverse effect on the Sellers, the Business, or the Purchased
Assets,
any agreement, condition, action or omission which would be
proscribed by (or require consent under) Section 6.3 had it existed,
occurred or arisen after the date of this Agreement,
any strike or other labor dispute,
any casualty, loss, damage or destruction (whether or not
covered by insurance) of any Purchased Assets of the Sellers that has in
volved or may involve a loss to the Sellers of more than $5,000, or
any sale, lease or other disposition of any of the
Purchased Assets for a price in excess of $5,000, except in the ordinary
course of business.
NO OTHER LIABILITIES OR CONTINGENCIES. Neither of the
Sellers has any liabilities of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, probable of
assertion or not, except liabilities that (i) are reflected or disclosed in
the Financial Statements, or (ii) were incurred after December 31, 1997 in
the ordinary course of business or in the aggregate do not exceed $5,000, or
(iii) liabilities under the executory portion of any written purchase order,
sales order, lease, agreement or commitment of any kind by which the Sellers
are bound and which was entered into in the ordinary course of Sellers'
business and consistent with past practice, or (iv) are liabilities incurred
or contemplated to be incurred by Sellers pursuant to this Agreement.
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TAX AND OTHER RETURNS AND REPORTS.
Except as set forth on Schedule 4.4, each Seller has timely filed
or will file all required Tax Returns and has paid all Taxes due for all
periods ending on or before the Closing Date. Adequate provision has been
made in the books and records of each Seller, and in the Financial Statements
referred to in Section 4.3 above, for all Taxes whether or not due and
payable and whether or not disputed. Schedule 4.4 lists the date or dates
through which the IRS and any other Governmental Entity have examined the
United States federal income tax returns and any other Tax Returns of each
Seller. All required Tax Returns, including amendments to date, have been
prepared in good faith without negligence or willful misrepresentation and
are complete and accurate in all material respects. Except as set forth in
the Schedule 4.4, no Governmental Entity has, during the past three years,
examined or is in the process of examining any Tax Returns of either Seller.
Except as set forth on Schedule 4.4, no Governmental Entity has proposed,
asserted or assessed or threatened in writing to propose or assert, any
deficiency, assessment or claim for Taxes and, to Sellers' knowledge, there
would be no basis for any such deficiency, assessment or claim.
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MATERIAL CONTRACTS.
Schedule 4.5 lists each Material Contract to which either
Seller is a party or to which either Seller and any of its respective
properties are subject or by which any thereof is bound. Unless otherwise so
noted on Schedule 4.5, each such Material Contract was entered into in the
ordinary course of business. For purposes of this Agreement, each Contract
that (a) after December 31, 1997 obligates either of the Sellers to pay an
amount of $5,000 or more, (b) has an unexpired term as of December 31, 1997
in excess of one year, (c) represents a contract upon which the Business is
substantially dependent or which is otherwise material to the Business or to
the financial condition or results of operations of the Sellers, (d) provides
for an extension of credit other than consistent with normal credit terms,
(e) limits or restricts the ability of the Sellers to compete or otherwise to
conduct their Business in any manner or place, (f) provides for a guaranty or
indemnity by the Sellers, (g) grants a power of attorney, agency or similar
authority to another person or entity, (h) contains a right of first refusal
with respect to any of the Purchased Assets, (i) contains a right or
obligation of any Affiliate, officer or director or any Associate, of the
Sellers to the Sellers, (j) was not made in the ordinary course of business,
shall be deemed to be a Material Contract and has been identified on such
Schedule 4.5. True copies of the agreements appearing on Schedule 4.5,
including all amendments and supplements, have been delivered to Buyer. Each
Material Contract is valid and subsisting; each Seller has duly performed all
its obligations thereunder to the extent that such obligations to perform
have accrued; and no breach or default, alleged breach or default, or event
which would (with the passage of time, notice or both) constitute a breach or
default thereunder by the Sellers or, to Seller's knowledge, any other party
or obligor with respect thereto, has occurred or as a result of this
Agreement or performance thereof will occur. Except as otherwise disclosed on
Schedule 4.5, consummation of the transactions contemplated by this Agreement
will not (and will not give any person a right to) terminate or modify any
rights of, or accelerate or augment any obligation of the Sellers under any
of the Material Contracts so listed.
The Assumed Contracts are those Material Contracts of
Sellers which are to be assigned to and assumed by Buyer effective as of the
Closing, all as expressly indicated on Schedule 4.5.
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INTENTIONALLY OMITTED.
REAL AND PERSONAL PROPERTY; TITLE TO AND CONDITION OF
PURCHASED ASSETS; LEASES.
Schedule 4.7(a) lists all property (whether real or personal),
except for Intangible Property of the Sellers, which is owned or leased by
either of the Sellers and which is used in or otherwise material to the
operation of the Business as presently conducted by Sellers. Sellers have
good and marketable title to each of the Purchased Assets, free and clear of
any Encumbrances except for Encumbrances consisting of liens for Taxes not
yet due or matters otherwise described in Schedule 4.7(a), and at the
Closing, will deliver the Purchased Assets (other than the Real Property
which is the subject of Section 7.9 hereof) to the Buyer, free and clear of
any such Encumbrances. The Purchased Assets constitute the principal assets
necessary for the operation of the Business in the manner presently conducted
by Sellers. Except as disclosed on Schedule 4.7(a), all of the Purchased
Assets are in a good state of maintenance and repair (except for ordinary
wear and tear) and are adequate for the Business. Each Seller has all right,
power and authority to sell, convey, assign, transfer and deliver the
Purchased Assets to Buyer in accordance with the terms of this Agreement.
The Real Property listed on Schedule 4.7(a) consists of all of
the real property and real property leasehold interests used by Sellers in
the conduct of the Business. With respect to the Leases:
The Leases are valid, binding and enforceable, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws and equitable principles relating to or limiting
creditors' rights generally;
Each of the Leases (copies of which have been delivered to
Buyer) constitutes the entire agreement to which the Sellers are a party
with respect to the subject properties which are demised pursuant
thereto;
To Sellers' knowledge, all conditions precedent to the
enforceability of the Leases have been satisfied and there exists no
breach or default, nor state of facts which, with the passage of time,
notice, or both, would result in a breach or default on the part of
either the Sellers or the lessors thereunder;
To Sellers' knowledge, all space and improvements leased by
the Sellers have, in all material respects, been fully and
satisfactorily completed and furnished in accordance with the provisions
of the Leases;
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To Sellers' knowledge, the Sellers have received no notice of
noncompliance with any restriction encumbering any leased property, nor
have the Sellers received written notice of any zoning violations
affecting any leased property; and
There is no pending or, to Sellers' knowledge, threatened
Action that would materially interfere with the quiet enjoyment of any
such leasehold by the Sellers or, after the Closing, by Buyer.
INTANGIBLE PROPERTY.
Schedule 4.8, lists all of the Intangible Property in which
either of the Sellers has an interest and which is material to the
Business. Such assets include all Permits or other rights with respect
to any of the foregoing. Except as described in Schedule 4.8, each
Seller has complete rights to and ownership of all Intangible Property
required for use in connection with the Business, the absence of which
would have a material adverse effect on the Business. Except as
described in Schedule 4.8, neither Seller uses any Intangible Property
by consent of any other Person, and neither Seller is required to or
makes any payments to others with respect thereto, and such Intangible
Property is fully assignable free and clear of any Encumbrances. Each
Seller has in all material respects performed all obligations required
to be performed by it, and is not in default in any material respect
under any Material Contract relating to any of the foregoing. Neither of
the Sellers has received any written notice to the effect that (or is
otherwise aware that) the Intangible Property or their use of the
Intangible Property conflicts with any rights of any Person.
Except as described in Schedule 4.8:
each Seller owns, has the exclusive right to use, sell,
license or dispose of, and has the right to bring actions for the
infringement of its respective interest in the Products as in existence
on the date hereof;
each Seller owns, has the exclusive right to use, sell,
license or dispose of, and has the right to bring actions for the
infringement of, its respective interest in all Intangible Property
which is material to the conduct of the Business as presently conducted;
the execution, delivery and performance of this Agreement
and the consummation of the other transactions contemplated hereby will
not breach, violate or conflict with any Intangible Property, will not
cause the forfeiture or termination or give rise to a right of
forfeiture or termination of, or in any way impair the right of either
Seller to use, sell, license or dispose of or to bring any action for
the infringement of, any Intangible Property or the Products, or portion
thereof, except in each case as would not have a material adverse effect
on the Purchased Assets or the Business;
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there are no royalties, honoraria, fees or other payments
payable by either Seller to any Person by reason of the ownership, use,
license, sale or disposition of the Intangible Property or the Products;
the manufacture, marketing, license, sale or use of any
product presently licensed or sold by each Seller, including the
Products, will not violate any license or agreement with any third party
or infringe any Intellectual Property Right of any other party;
there is no pending or, to Sellers' knowledge, threatened
Action, contesting the validity, ownership or right to use, sell,
license or dispose of any of the Products, nor to Sellers' knowledge is
there any basis for any such Action, nor has either Seller received any
notice asserting that any of the Products or the proposed use, sale,
license or disposition thereof conflicts or will conflict with the
rights of any other party, nor to Sellers' knowledge is there any basis
for any such assertion;
each Seller has taken all steps reasonably necessary to
safeguard and maintain the secrecy and confidentiality of, and their
proprietary rights in, all such Intangible Property and rights; and
employees and Affiliates of the Sellers, and each of
their Associates, if applicable, have taken all actions necessary to
irrevocably assign or otherwise transfer to the Sellers all of their
respective right, title and interest in and to any Intangible Property
owned by them which are material for the conduct of the Business as
presently conducted.
LEGAL PROCEEDINGS.
There is no Order or Action pending or, to Sellers' knowledge,
threatened against the Sellers, or any of the Purchased Assets, that
individually or when aggregated with one or more other Orders or Actions have
or might reasonably be expected to have a material adverse effect on the
Sellers, the Business or Purchased Assets, or on the Sellers' ability to
perform this Agreement. Schedule 4.9 lists each Order, Action and Labor
Matter that involves a claim or potential claim of aggregate liability in
excess of $5,000 against, or that enjoins or compels or seeks to enjoin or to
compel any activity by either Seller.
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LABOR RELATIONS.
With respect to each Seller and its employees, independent sales
representatives, consultants, agents, officers and directors, (i) to the
extent required, the Sellers have paid and performed all material obligations
with respect to their respective employees, independent sales
representatives, consultants, agents, officers and directors, including
without limitation all wages, salaries, commissions, bonuses, severance pay,
vacation pay, benefits and other direct compensation reimbursed to such
persons; (ii) the Sellers are in compliance in all material respects with all
federal, state, local and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours; (iii) there is no pending, or to the Sellers' knowledge, threatened,
charge, complaint, allegation, application or other process against the
Sellers or before the National Labor Relations Board or any comparable state,
local or foreign agency, governmental or administrative; (iv) there is no
labor strike, dispute, slowdown or work stoppage or other job action pending,
or to the Sellers' knowledge, threatened against or otherwise affecting or
involving the Sellers; and (v) no employees of the Sellers are covered by any
collective bargaining agreements and to the best knowledge of the Sellers, no
effort is being made by any union to organize any of the Sellers' employees.
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INSURANCE.
The Sellers are, and at all times during the past five years have
been, insured with reputable insurers against all risks normally insured
against by companies in similar lines of business, and all of the insurance
policies and bonds maintained by the Sellers are in full force and effect.
Schedule 4.11 lists all insurance policies and bonds that are material to the
Business and as in effect as of the Closing Date. Neither of the Sellers is
in default under any such policy or bond. All insurance policies maintained
by the Sellers will remain in full force and effect through the Closing Date,
and neither of the Sellers has received written notice or other indication
from any insurer or agent of any intent to cancel or not so renew any of such
insurance policies. The Sellers have complied with and implemented all
outstanding (i) requirements and recommendations of any insurance company
that has issued a policy with respect to any of the Purchased Assets or
Business and (ii) to Seller's knowledge, requirements and recommendations of
any Governmental Entity with respect to any such insurance policy.
PERMITS AND LICENSES.
Schedule 4.12 lists all Permits and Licenses that are required by
any Governmental Entity and that are material to the conduct of the Business
as now conducted or the ownership and operation of the Purchased Assets. All
such Permits and Licenses are valid and in full force and effect and, except
as disclosed in Schedule 4.12, will remain so upon consummation of the
transactions contemplated by this Agreement. To Sellers' knowledge, no
suspension, cancellation or termination of any such Permit or License is
threatened or imminent.
COMPLIANCE WITH LAW.
The conduct of the Business by Sellers has not violated,
and as presently conducted does not violate, in any material respect, any
federal, state, local or foreign laws, including, but not limited to, CLIA
rules, regulations or ordinances, or Order, or any industry standards, nor
has either Seller received any notice of any such violation which remains
outstanding except those listed on Schedule 4.13.
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The Sellers have adhered to standard operating procedures
accepted by the FDA (copies of which standard operating procedures have
previously been delivered to the Buyer) and have tested and/or secured
appropriate testing of all blood and plasma products necessary for the
conduct of the Business according to standard industry practice. Schedule
4.13(a) sets forth a true, correct and complete list of all recall letters
and warning letters from the FDA received by the Sellers or relating to the
Business during the last 5 years and, with respect to each such letter, (i)
the date of recall or warning, (ii) the date each recall or warning first
appeared in FDA Enforcement Reports, (iii) an accurate description of the
facility involving the recall or warning, (iv) the number of units involved,
(v) the distribution of each of the recalled units by state and/or country,
(vi) the reason given by the FDA for each recall or warning, and (vii) any
continuing obligations arising from such recall or warning.
EMPLOYEE BENEFITS.
EMPLOYEE BENEFIT PLANS, COLLECTIVE BARGAINING AND
EMPLOYEE AGREEMENTS, AND SIMILAR ARRANGEMENTS.
Schedule 4.14(a)(i) lists all employee benefit plans
and collective bargaining, employment or severance agreements or other
similar arrangements to which each Seller is or within the last three
years has been a party or by which it is or within the last three years
has been bound, including, without limitation, (a) any profit-sharing,
deferred compensation, bonus, stock option, stock purchase, pension,
retainer, consulting, retirement, severance, welfare or incentive plan,
agreement or arrangement, (b) any plan, agreement or arrangement
providing for "fringe benefits" or perquisites to employees, officers,
directors or agents, including, but not limited to, benefits relating to
Sellers' automobiles, clubs, vacation, child care, parenting,
sabbatical, sick leave, medical, dental, hospitalization, life insurance
and other types of insurance, (c) any employment agreement, or (d) any
other "employee benefit plan" (within the meaning of Section 3(3) of
ERISA).
The Sellers have delivered to Buyer true and complete
copies of all documents and summary plan descriptions with respect to
such plans, agreements and arrangements, or summary descriptions of any
such plans, agreements or arrangements not otherwise in writing.
To Sellers' knowledge, there are no negotiations, demands
or proposals that are pending or have been made which concern matters
now covered, or that would be covered, by plans, agreements or
arrangements of the type described in this section.
The Sellers are in substantial compliance with the
applicable provisions of ERISA (as amended through the date of this
Agreement), the regulations and published
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authorities thereunder, and all other Laws applicable with respect to
all such employee benefit plans, agreements and arrangements. The
Sellers have performed all of their obligations under all such plans,
agreements and arrangements. There are no Actions (other than routine
claims for benefits) pending or, to Sellers' knowledge, threatened
against such plans or their assets, or arising out of such plans,
agreements or arrangements, and all such plans, agreements and
arrangements have been operated in compliance with their terms. To
Sellers' knowledge, no facts exist which could give rise to any such
Actions.
Except as set forth on Schedule 4.14(a)(i), no
employee, consultant or agent of either Seller is entitled to any
severance, parachute or other form of payment or benefit from the
Sellers or their respective successors or assigns arising or becoming
due as a result of the consummation of the Acquisition.
QUALIFIED PLANS. No plan listed in Schedule 4.14(a)(i) is
a stock bonus, pension or profit-sharing plan within the meaning of Section
401(a) of the Code.
TITLE IV PLANS. No plan listed in Schedule 4.14(a)(i) is
a plan subject to Title IV of ERISA.
MULTIEMPLOYER PLANS. No plan listed in Schedule
4.14(a)(i) is a "multiemployer plan" (within the meaning of Section 3(37) of
ERISA). Neither of the Sellers has ever contributed to or had any obligation
to contribute to any multiemployer plan.
HEALTH PLANS. All group health plans of the Sellers have
been operated in compliance with the group health plan continuation coverage
requirements of the Code to the extent such requirements are applicable.
FINES AND PENALTIES. There has been no act or omission by
the Sellers that has given rise to or, to Sellers' knowledge, may give rise
to fines, penalties, taxes, or related charges under Section 502(c) or (k) or
Section 4071 of ERISA or Chapter 43 of the Code.
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CERTAIN INTERESTS.
Except as disclosed on Schedule 4.15, no Affiliate of the Sellers,
nor any officer or director of any thereof, nor Associate of any such
individual, has any material interest in any of the Purchased Assets or in any
other property used in or pertaining to the Business; no such Person is
indebted or otherwise obligated to the Sellers; and neither of the Sellers is
indebted or otherwise obligated to any such Person, except for amounts due
under normal arrangements applicable to all employees generally as to salary or
reimbursement of ordinary business expenses not unusual in amount or
significance. Except as disclosed on Schedule 4.15, the consummation of the
transactions contemplated by this Agreement will not (either alone, or upon the
occurrence of any act or event, or with the lapse of time, or both) result in
any benefit or payment (severance or other) arising or becoming due from the
Sellers or the successor or assign of the Sellers to any Person.
NO BROKERS OR FINDERS.
No agent, broker, finder, or investment or commercial banker, or
other Person or firm engaged by or acting on behalf of the Sellers or any of
their respective Affiliates in connection with the negotiation, execution or
performance of this Agreement or the transactions contemplated by this
Agreement, is or will be entitled to any brokerage or finder's or similar fee
or other commission as a result of this Agreement or such transactions.
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ACCURACY OF INFORMATION.
None of the information supplied or to be supplied by or on behalf of
the Sellers (a) to any Person for inclusion in any document or application
filed with any Governmental Entity having jurisdiction over or in connection
with the transactions contemplated by this Agreement or (b) to Buyer, its
agents or representatives in connection with these transactions, this Agreement
or the negotiations leading up to this Agreement, did contain, or at the
respective times such information is or was delivered, contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except as disclosed to Buyer in the information identified in
this Agreement and on the Schedules, there is no fact or information known to
the Sellers that has or is likely to have a material adverse effect on the
Business or the Purchased Assets. If any of such information at any time
subsequent to delivery and prior to Closing becomes untrue or misleading, in
any material respect, the Sellers will promptly notify Buyer in writing of such
fact and the reason for such change.
INVENTORIES.
Sellers have maintained their respective Inventories in the ordinary
course of business consistent with standards and practices generally accepted
and used within the industry. The value of obsolete, damaged or excess
inventory and of inventory below standard quality has been written down on the
most recent balance sheet included in the Financial Statements or, with respect
to Inventories purchased since such balance sheet date, on the books and
records of the Sellers, to ascertainable market value, or adequate reserves
described on such balance sheet have been provided therefor, and the value at
which inventories are carried reflects the customary inventory valuation policy
of the Sellers (which fairly reflects the value of obsolete, spoiled or excess
inventory) for stating inventory, in accordance with GAAP consistently applied.
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CUSTOMERS AND SUPPLIERS.
Schedule 4.19 lists the names of and describes all Contracts with,
and the appropriate percentage of Business attributable to, the ten largest
customers of the Business at the date of this Agreement, and any sole-source
suppliers of material goods or services (not including electricity, gas,
telephone or water) to the Sellers with respect to which alternative sources of
supply are not readily available on comparable terms and conditions. To
Sellers' knowledge, except as set forth in Schedule 4.19, there have been no
adverse changes in the relationships between the Sellers and any significant
customers of the Business since December 31, 1997.
ENVIRONMENTAL COMPLIANCE.
Except as set forth in Schedule 4.20, (a) neither of the Sellers has
generated, used, transported, treated, stored, released or disposed of, or has
suffered or permitted anyone else to generate, use, transport, treat, store,
release or dispose of any Hazardous Substance in violation of any Laws; (b)
there has not been any generation, use, transportation, treatment, storage,
release or disposal of any Hazardous Substance in connection with the conduct
of the Business of the Sellers or the use of any property or facility of the
Sellers or, to Sellers' knowledge, any nearby or adjacent properties or
facilities, which has created or might reasonably be expected to create any
liability under any Laws or which would require reporting to or notification of
any Governmental Entity; (c) no asbestos or polychlorinated biphenyl or
underground storage tank is contained in or located at any facility of the
Sellers or any facility or improvement used in the operation of the Business;
and (d) any Hazardous Substance handled or dealt with in any way in connection
with the Business of the Sellers, whether before or during the Sellers'
ownership, has been and is being handled or dealt with in all material respects
in compliance with applicable Laws.
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INVESTMENT INTENT.
CTI is acquiring the Buyer Shares for investment purposes only, for
its own account and not as a nominee or agent for any other person, and not
with a view to or for resale in connection with any distribution thereof within
the meaning of the Securities Act. CTI was not organized for the specific
purpose of acquiring the Buyer Shares.
BUSINESS RELATIONSHIP.
CTI is or, by reason of its business or financial experience or the
business or financial experience of its professional advisors who are
unaffiliated with and who are not compensated by the Buyer or any affiliate or
selling agent of the Buyer directly or indirectly, could be reasonably assumed
to have the capacity to protect its own interests in connection with the Buyer
Shares and to evaluate the merits and risks of its investment therein. CTI is
generally familiar with the business and affairs of Buyer and has discussed
with Buyer Buyer's plans, operations and financial condition.
DISCLOSURE/LEGEND.
Buyer has disclosed to the Sellers that:
the sale of the Buyer Shares has not been registered under the
Securities Act, or qualified under the securities laws of any state, and the
Buyer Shares must be held indefinitely unless a sale or transfer of the Buyer
Shares is subsequently registered under the Securities Act and qualified under
applicable state securities laws or exemptions therefrom are available; and
any certificate representing the Buyer Shares will bear the
following restrictive transfer legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF
COUNSEL
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IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
IS IN COMPLIANCE THEREWITH."
RULE 144.
CTI understands that in addition to the restrictions described above:
(a) the shares which constitute the Buyer Shares are restricted securities
within the meaning of Rule 144 promulgated under the Securities Act; (b) the
exemption from registration provided under Rule 144 will not be available in
any event for at least one year from the date of sale of the Buyer Shares to
the Sellers, and even then, Rule 144 will not be available unless: (i) a public
trading market then exists for the Buyer Shares, (ii) adequate information
concerning Buyer is then available to the public, and (iii) the other terms and
conditions of Rule 144 are met; and (c) any unregistered sale of the Buyer
Shares may be made by CTI only in accordance with the terms and conditions of
Rule 144 or other exemption from the registration requirements of the
securities laws.
POWERS OF ATTORNEY.
Neither of the Sellers has given any power of attorney (irrevocable
or otherwise) to any person or entity for any purpose relating to the Business,
Purchased Assets or Assumed Liabilities, other than powers of attorney given to
regulatory authorities in connection with routine qualifications to do business.
CAPITAL ADEQUACY AND REASONABLY EQUIVALENT VALUE FOR THE
PURCHASED ASSETS.
Each of the Sellers, after giving effect to the transactions
contemplated by this Agreement, will have assets exceeding its liabilities on
both a balance sheet and market value basis. Neither of the Sellers has
incurred or will incur debts beyond its ability to pay as such debts mature.
Each of the Sellers has the intent and capacity to discharge all of its current
and anticipated obligations both before and after giving
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effect to the transactions contemplated hereby. Each of the Sellers represents
and acknowledges that it is receiving "reasonably equivalent value" for the
Purchased Assets hereunder within the meaning of 11 U.S.C. Section 548.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Sellers that:
ORGANIZATION AND RELATED MATTERS.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly qualified or
licensed to do business as a foreign corporation and is in good standing in all
jurisdictions in which the character or location of the assets owned or leased
by Buyer or the nature of the business conducted by Buyer requires such
licensing or qualification, except where the failure to be so licensed or
qualified would not have a material adverse effect on the business, financial
condition or results of operations of Buyer. Buyer has all necessary corporate
power and authority to carry on its business as it are now being conducted.
Buyer has the necessary corporate power and authority to execute, deliver and
perform this Agreement and any related agreements to which it is a party.
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AUTHORIZATION.
The execution, delivery and performance of this Agreement and any
related agreements by Buyer has been duly and validly authorized by the Board
of Directors of Buyer and by all other necessary corporate action on the part
of Buyer. This Agreement and each of the related agreements constitute the
legal, valid and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws and equitable principles relating to or limiting creditors' rights
generally.
NO CONFLICTS.
The execution, delivery and performance of this Agreement and any
related agreements by Buyer will not violate the provisions of, or constitute a
breach or default, whether upon lapse of time and/or the occurrence of any act
or event or otherwise, under (a) the respective charter documents or bylaws of
Buyer, (b) any Law to which Buyer is subject, or (c) any Contract to which
Buyer is a party that is material to the financial condition, results of
operations or conduct of the business of Buyer, provided that the appropriate
regulatory approvals are received as contemplated by Section 6.5 and specified
consents, if any, are secured.
NO BROKERS OR FINDERS.
No agent, broker, finder or investment or commercial banker, or other
Person or firms engaged by or acting on behalf of Buyer or its Affiliates in
connection with the negotiation, execution or performance of this Agreement or
the transactions contemplated by this Agreement, is or will be entitled to any
broker's or finder's or similar fees or other commissions as a result of this
Agreement or such transactions.
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LEGAL PROCEEDINGS.
There is no Order or Action pending or to the best knowledge of
Buyer, threatened against Buyer that individually or when aggregated with one
or more other Actions has or might reasonably be expected to have a material
adverse effect on Buyer's ability to perform this Agreement or on Buyer's
business or assets.
BUYER'S STOCK.
As of the Closing Date, and after giving effect to the transactions
contemplated hereby, the authorized capital stock of Buyer shall consist of
(a) 25,000,000 shares of Common Stock, par value $.001 per share, of which
6,741,413 shares shall be issued and outstanding, and (b) 25,000,000 shares
of Preferred Stock, par value $.001 per share, of which 3,600 shares shall
have been designated Series A Preferred Stock (2,000 shares of which shall be
issued and outstanding), and 15,000 shares shall have been designated Series
B Preferred Stock (of which 15,000 shares shall be issued and outstanding).
The outstanding shares of Common Stock and Preferred Stock of the Buyer have
been validly issued and are fully paid and nonassessable. Upon issuance in
accordance with the terms of this Agreement, the Buyer Shares will be validly
issued, fully paid and nonassessable. Except as disclosed on Schedule 5.6,
as of the Closing Date, there will be no outstanding securities convertible
into or exchangeable for any shares of capital stock of the Buyer, or any
rights to subscribe for or to purchase, or any options for the purchase of,
or any agreements providing for the issuance of, or any calls or commitments
relating to the issuance of, any capital stock of the Buyer.
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ACCURACY OF INFORMATION IN EXCHANGE ACT REPORTS.
Each periodic report filed with the Securities and Exchange
Commission by Buyer pursuant to either of Section 13 or Section 15 of the
Exchange Act, as of the date such report was filed and as amended, did not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. Since November 30, 1997, there
has been no change in or event affecting the Buyer which has had or is
reasonably expected to have a material adverse effect on the business,
financial condition or results of operations of the Buyer and its
subsidiaries, taken as a whole.
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COVENANTS WITH RESPECT TO CONDUCT OF THE SELLERS
PRIOR TO CLOSING
ACCESS.
The Sellers shall authorize and permit, Buyer and its
representatives (which term shall be deemed to include its independent
accountants and counsel) to have access during normal business hours, upon
reasonable notice and in such manner as will not unreasonably interfere with
the conduct of the Business, to all of their properties, books, records,
operating instructions and procedures, Tax Returns and all other information
with respect to the Business as Buyer may from time to time request, and to
make copies of such books, records and other documents and after first
securing the Sellers' prior consent, which may not be unreasonably withheld,
to discuss the Business with such other Persons, including, without
limitation, their respective directors, officers, employees, accountants,
counsel, suppliers, customers, and creditors, as Buyer considers necessary or
appropriate for the purposes of familiarizing itself with the Business,
obtaining any necessary Approvals of or Permits for the transactions
contemplated by this Agreement and conducting an evaluation of the
organization and Business of the Sellers. Without limiting the generality of
the foregoing, Buyer shall be entitled, at Buyer's expense, to conduct or
cause to be conducted on any real property owned or leased by either of the
Sellers after first securing Sellers' prior written consent, which may not be
unreasonably withheld, and, in the case of leased property, the written
consent of the lessor, Phase I environmental studies.
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MATERIAL ADVERSE CHANGES; REPORTS; FINANCIAL STATEMENTS.
Prior to the Closing, the Sellers will promptly notify Buyer
of any event of which the Sellers obtain knowledge which has had or might
reasonably be expected to have a material adverse effect on the Business or
the Purchased Assets or which if known as of the date hereof would have been
required to be disclosed to Buyer. Prior to the Closing, the Buyer will
promptly notify the Sellers of any event of which the Buyer obtains knowledge
which has had or might reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations of the
Buyer and its subsidiaries, taken as a whole, or which if known as of the
date hereof would have been required to be disclosed to the Sellers hereunder
or disclosed in any subsequent periodic report or other filing with the
Securities and Exchange Commission.
Between the date hereof and the Closing Date, the Sellers
will furnish to Buyer (i) any report by the Sellers submitted to their
respective Boards of Directors and the working papers related thereto and
other operating or financial reports (including any projections and budgets)
prepared for management of the Business and the working papers related
thereto, (ii) as soon as available, copies of all portions of all reports,
renewals, filings, certificates, statements and other documents filed with
any Governmental Entity, (iii) monthly and quarterly unaudited balance
sheets, statements of operations and cash flow and changes in shareholder's
equity for the Sellers, and (iv) such other reports as Buyer may reasonably
request relating to the Sellers. Each of the financial statements delivered
pursuant to this Sec tion 6.2(b) shall be prepared in accordance with GAAP
consistently applied during the periods covered (except as disclosed
therein), except that such financial statements may omit footnote disclosures
required by GAAP to the extent the content thereof would not materially
differ from those disclosures reported in the most recent audited period and
year-end adjustments to the extent not material. Each of the financial
statements delivered pursuant to this Section 6.2(b) shall be accompanied by
a certificate of the chief financial officer of the Sellers to the effect
that such financial statements present fairly the financial condition and
results of operations of the Sellers for the periods covered and reflect all
adjustments (which consist only of normal recurring adjustments not material
in amount) necessary for a fair presentation.
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CONDUCT OF BUSINESS.
During the period from the date of this Agreement to the earlier of
(i) the Closing Date, and (ii) the date of any termination of this Agreement
under Article IX hereof, the Sellers agree with and for the benefit of Buyer
that except as otherwise contemplated by this Agreement, without the prior
written consent of Buyer, which shall not be unreasonably withheld, the
Sellers shall not:
conduct the Business in any manner except in the ordinary
course substantially as now conducted; or
except as required by their terms, amend, terminate or
renegotiate any Material Contract or default (or take or omit to take any
action that, with or without the giving of notice or passage of time,
would constitute a default) in any of their obligations under any Material
Contract or enter into any new Material Contract or take any action that
would jeopardize the continuance of their material supplier or customer
relationships; or
terminate, amend or fail to renew any existing insurance
coverage; or
terminate or fail to renew or preserve any Permits; or
engage in any transaction exceeding $100,000 or otherwise out
of the usual and ordinary course of business; or
purchase inventory outside the ordinary course of business, or
extend return or other post-sale support rights of customers outside of
the ordinary course of business, or enter into an agreement to do any of
the foregoing; or
grant any general or uniform increase in the rates of pay or
benefits to officers, directors or employees (or a class thereof) or any
increase in salary or benefits of any officer, director, employee or agent
or pay any special bonus to any person, or enter into any new employment
of any Person with a salary in excess of $60,000 per year, collective
bargaining or severance agreement; or
adopt or amend in any respect any employee pension,
profit-sharing, retirement, bonus, deferred compensation, insurance,
incentive compensation, severance, thrift, vacation or other plan,
agreement, trust fund or arrangement for the benefit of their employees
(whether or not legally binding) other than amendments of existing benefit
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plans effected after consultation with Buyer that are necessary to conform
to legal requirements or to consummate the transactions contemplated by
this Agreement; or
sell, transfer, mortgage, encumber or otherwise dispose of any
assets, except (i) for dispositions of property (other than the Purchased
Assets) not material in amount, or (ii) sales of Inventory in the ordinary
course of business; or
declare, issue, make or pay any dividend or other distribution
of any asset which is included within one or more of the categories of
Purchased Assets; or
make any material investment, by purchase, contributions to
capital, property transfers, or otherwise, in any other Person; or
dispose of or permit to lapse any rights to the use of any
Intangible Property or dispose of or disclose any Intangible Property that
is not a matter of public knowledge; or
introduce any new method of management or operation in respect
of the Business; or
take, or cause to be taken, any action that would cause any of
the representations or warranties of the Sellers in this Agreement to be
untrue, incorrect, incomplete or misleading; or
solicit or encourage, or authorize any officer, director or
employee of, or any investment banker, attorney, accountant or other
representative of the Sellers or any Affiliate of the Sellers, to solicit
or encourage (including by way of furnishing nonpublic information), any
inquiries or the making of any proposal that may reasonably be expected to
lead to any proposal for the partial or total acquisition of the Sellers
or their assets (collectively "Inquiry or Proposal") (if the Sellers or
any officer, director, shareholder or employee of the Sellers, or
investment banker, attorney, accountant or other representative of the
Sellers or any Affiliate of any of them, receives an Inquiry or Proposal,
then the Sellers shall promptly notify Buyer by telephone and telecopy of
such fact and shall transmit to Buyer a copy of any such written Inquiry
or Proposal); or
commence any proceeding to merge, consolidate or liquidate or
dissolve; or
agree to or make any commitment to take any actions prohibited
by this Section 6.3.
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NOTIFICATION OF CERTAIN MATTERS.
From the date hereof to the Closing Date, the Sellers shall
give prompt notice to Buyer, and Buyer shall give prompt notice to the
Sellers, of (i) the occurrence, or failure to occur, of any event that would
be likely to cause any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect, and (ii) any failure of
Buyer or the Sellers, as the case may be, to comply with or satisfy, in any
material respect, any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement.
No such notification shall affect the representations or
warranties of the Parties or the conditions to their respective obligations
hereunder.
PERMITS AND APPROVALS.
The Sellers agree to use commercially reasonable efforts to
obtain, and will promptly prepare all registrations, filings and
applications, requests and notices preliminary to all, Permits and Approvals
that are necessary, or which are requested in writing by Buyer, to consummate
the transactions contemplated by this Agreement.
To the extent that the Approval of a third party with
respect to any Contract is required in connection with the transactions
contemplated by this Agreement, the Sellers agree to use commercially
reasonable efforts to obtain such Approval prior to the Closing Date. In the
event that any such Approval is not obtained prior to the Closing Date (but
without limitation on Buyer's rights under Section 8.2), the Sellers shall
cooperate with Buyer in an effort to obtain for Buyer the benefits of each
such Contract, consistent with the provisions of Section 3.5 hereof.
PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE.
During the period beginning on the date hereof and ending on the
Closing Date, (a) the Sellers will use reasonable commercial efforts to
preserve the Business and to preserve the goodwill of customers, suppliers
and others having business relations with the Sellers and (b) the Sellers
will cooperate to keep available to Buyer, the services of the officers and
employees of the Sellers that Buyer may wish to retain following the Closing.
Nothing in this Section shall obligate Buyer or the Sellers to retain or
offer employment to any officer or employee of the Sellers after the Closing.
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PAYMENTS TO CREDITORS.
Sellers shall timely pay in accordance with their terms (a) all
accounts payable and other amounts owed or accruing through the period ending
on the Closing Date to all suppliers, vendors and other commercial or trade
creditors of the Business, and (b) all commissions and other amounts owed or
accruing through the period ending on the Closing Date to any manufacturer's
representatives, dealers or other salespersons.
PASSAGE OF TITLE AND RISK OF LOSS.
Legal title, equitable title, and risk of loss with respect to the
property and rights to be transferred hereunder shall not pass to Buyer until
the Purchased Assets, property or right is transferred at the Closing.
ADDITIONAL CONTINUING COVENANTS
EMPLOYMENT MATTERS.
EMPLOYEES. Sellers shall be solely responsible for and
shall promptly pay all accrued vacation, sick pay and COBRA coverage and all
severance and related obligations to employees of Sellers, including any
obligations or liabilities of Sellers under any Employee Benefit Plan,
arising on or prior to the Closing or as a result of the transactions
contemplated by this Agreement. Buyer does not assume, and shall not be
deemed to assume, any liability or obligation of Sellers relating to
employment matters involving current or former employees of Sellers except to
the extent expressly provided on Schedule 2.2(b) attached hereto.
WARN. Sellers represent and warrant that for purposes of
the Worker Adjustment and Retraining Notification Act ("WARN") and with
respect to employees performing services for the Business no single site of
employment of the Business has, or during the past 90 days has had, 50 or
more employees.
NO THIRD PARTY BENEFICIARIES. Notwithstanding any possible
inferences to the contrary, neither Sellers nor Buyer intends for this
Section 7.1 to create any rights or
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obligations except as between Sellers and Buyer, and no past, present or
future employees of Sellers or Buyer shall be treated as third party
beneficiaries of this Section 7.1.
EXPENSES AND TAXES.
All costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the Party incurring
such expense. Any sales, use or other transfer taxes applicable to the
conveyance and transfer from Sellers to Buyer of the Purchased Assets and any
other transfer or documentary taxes or any filing or recording fees
applicable to such conveyance and transfer shall be paid by Sellers.
PAYMENT OF COSTS ASSOCIATED WITH LEASE ASSIGNMENTS.
Sellers are responsible for the payment of all fees, if any,
required pursuant to the Leases for the assignment thereof to Buyer and agree
to pay such fees directly to the landlords under such Leases, or, if Buyer
advances such fees, Sellers will reimburse Buyer for such fees promptly upon
invoice therefor. Further, promptly after the Closing and if so requested by
Buyer, Sellers shall reimburse Buyer for the legal fees incurred by Buyer in
connection with procuring all necessary landlord consents and estoppel
certificates relating to the Leases.
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REGISTRATION RIGHTS.
Following the issuance of the Buyer shares, the Sellers receiving the
Buyer shares shall have the registration rights set forth in Exhibit H attached
hereto (the "Registration Rights Exhibit").
NOMINATION OF WJC TO BOARD OF DIRECTORS.
Buyer agrees that for so long as WJC remains an employee of Buyer
following the Closing, Buyer shall cause WJC to be nominated for election to
the Board of Director's of Buyer and shall cause WJC to be identified as a
Board nominee in any proxy materials distributed to Buyer's shareholders.
DISCHARGE OF COMPANY LIABILITIES.
Promptly following the Closing, Sellers shall, from the
proceeds of the Closing Cash Payments and all other available cash and cash
equivalents of Sellers, satisfy and discharge the following liabilities and
obligations:
all accounts payable and liabilities of Sellers accrued or
accruing as of the Closing Date other than Assumed Liabilities and (other
than liabilities to any Affiliate of Sellers or to Robert O. Cone or to
Cone Bio-Products);
all capitalized lease obligations of Sellers accrued or
accruing as of the Closing Date (except to the extent included in the
Assumed Liabilities);
all loans, bonds and notes payable, and any other
obligations of Sellers for borrowed money (other than to any Affiliate of
Sellers or to Robert O. Cone or Cone Bio-Products); and
all other liabilities and obligations of Sellers identified
on Schedule 7.6.
Prior to the satisfaction and discharge of all liabilities in
accordance with subparagraph (a) above, Sellers shall not make any payments or
distributions (by way of dividends, redemptions or repurchases of securities,
debt repayment, or otherwise) to any Affiliate or stockholder of Sellers.
INTENTIONALLY OMITTED.
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PRORATION OF RECURRING EXPENSES.
Except to the extent such items have been expressly assumed or
allocated to one of the Parties hereunder, all obligations for utilities,
payments due under the Assumed Contracts and other recurring expenses of the
Business shall be prorated between Sellers and the Buyer as of the Closing
Date. Each Party hereto agrees to pay promptly upon demand by the other Party
(accompanied by a reasonably itemized statement of the claim and basis therefor
and supporting documentation from such other party) its proportionate share of
the obligations so prorated.
REAL PROPERTY TRANSFER DOCUMENTATION.
Sellers and the Buyer contemplate that, concurrent with or promptly
following the Closing, CTI will acquire fee simple title to the Property
described on Schedule 7.9 attached hereto (referred to herein as the "Owned
Property"). Upon transfer of such title to CTI, the lease between CTI and each
of William J. Cone and Robert O. Cone relating to such Owned Property will be
terminated. CTI hereby grants to Buyer, effective as of the Closing Date, a
ninety-day rent and royalty free license to occupy and use such Owned Property
(together with all improvements and fixtures thereon, and all rights,
privileges, licenses, tenements, easements and appurtenances relating thereto)
in the manner in which the Owned Property was used prior to the Closing.
Within ten days after the Closing Date, Sellers, at their sole expense, shall
provide Buyer with a preliminary title report for an owner's policy of title
insurance for the Owned Property. Within 60 days following the Closing Date,
Buyer shall notify Sellers if Buyer has, for any reason stemming from any
title, Encumbrance, environmental or Hazardous Substance issue, elected to
reject the Owned Property. If Buyer rejects the Owned Property, Buyer and
Sellers shall enter into a twelve month lease (which lease shall commence upon
the receipt by Sellers from Buyer of notice of rejection) with rent payable at
a rate equal to rents of comparable properties. Upon the earlier to occur of
the sixtieth day after the Closing Date or Sellers'
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receipt of notice from Buyer requesting conveyance of the Owned Property,
Sellers shall, for no additional consideration, convey to Buyer by grant
deed, or other necessary or desirable conveyance document, fee simple title
to the Owned Property, subject only to such liens, Encumbrances, easements
and rights of others as may be of record as of the Closing Date and approved
by Buyer. The transfer of such Owned Property shall be effected through an
escrow service, title company or as otherwise may be the custom and practice
for the transfer of similar properties in the applicable jurisdiction. Other
than as indicated above, Sellers shall pay all expenses related to the
transfer and conveyance to Buyer of such Owned Property, including, but not
limited to, recording fees, documentary, transfer, mortgage and intangible
taxes, escrow and title insurance fees and costs and all other similar fees
and expenses.
MAINTENANCE OF BOOKS AND RECORDS.
Sellers and Buyer shall each preserve all material records possessed
by such party relating to the Business or the Purchased Assets prior to the
Closing Date for a period of at least five years following the fiscal year to
which the records relate. After the Closing Date, where there is a legitimate
purpose, each such party shall provide the other parties and their
representatives with access, upon prior reasonable written request specifying
the need therefor, during regular business hours, to the books of account and
records of such party, but, in each case, only to the extent relating to the
Purchased Assets or the Business prior to the Closing Date, and the other
parties and their representatives shall have the right to make reasonable
copies of such books and records at their own expense.
PAYMENTS RECEIVED.
The Sellers and the Buyer agree that after the Closing they will hold
and will promptly transfer and deliver to the other, from time to time as and
when received by them, any cash, checks with appropriate endorsements (using
their best efforts not to convert such checks into cash), or other property it
may receive on or after the Closing which properly belongs to the other party.
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CONDITIONS OF PURCHASE
GENERAL CONDITIONS.
The obligations of the Parties to effect the Closing shall be subject
to the following conditions, except to the extent waived in writing by the
Parties:
NO ORDERS; LEGAL PROCEEDINGS. No Law or Order shall have been
enacted, entered, issued, promulgated or enforced by any Governmental Entity,
nor shall any Action have been instituted and remain pending or have been
threatened and remain so by any Governmental Entity at what would otherwise be
the Closing Date, which prohibits or restricts or would (if successful)
prohibit or restrict the transactions contemplated by this Agreement or (with
respect to obligations of Buyer only) which would impair to any material extent
the value of the Purchased Assets or the ability of the Buyer to conduct the
Business as presently conducted following the Closing Date. No Governmental
Entity shall have notified any Party to this Agreement that consummation of the
transactions contemplated by this Agreement would constitute a violation of any
Laws of any jurisdiction or that it intends to commence proceedings to restrain
or prohibit such transactions or force divestiture or rescission, unless such
Governmental Entity shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing Date.
EMPLOYMENT OF WJC. WJC will be appointed to the Board of
Directors of the Buyer and shall have entered into an employment agreement
substantially in the form attached hereto as Exhibit I.
EMPLOYMENT OF KC. KC shall have entered into an employment
agreement substantially in the form attached hereto as Exhibit J.
CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of Buyer to effect the Closing shall be subject to
the following conditions, except to the extent waived in writing by Buyer:
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REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE SELLERS.
The representations and warranties of the Sellers herein contained shall be
true and correct in all material respects as of the Closing Date with the same
effect as though made at such time (but without giving effect to any
qualification as to materiality contained therein); the Sellers shall have in
all material respects performed all obligations and complied with all covenants
and conditions required by this Agreement to be performed or complied with by
them at or prior to the Closing Date, and the Sellers shall have delivered to
Buyer certificates in form and substance satisfactory to Buyer, dated the
Closing Date, to such effect. The Sellers' certificates shall be signed by
their chief executive officers and chief financial officers.
NO MATERIAL ADVERSE CHANGE. There shall not have been any
material adverse change in or affecting the Business or the Purchased Assets
subsequent to the date hereof.
OPINION OF COUNSEL. Buyer shall receive at the Closing from
Jenkens & Gilchrist, counsel to the Sellers, an opinion dated the Closing Date,
in form and substance as set forth in Exhibit E.
APPROVALS AND PERMITS. The Sellers shall have obtained and
provided to Buyer all required Permits and Approvals listed on Schedule 4.2 and
referred to in Section 6.5, each in form and substance satisfactory to Buyer.
INTELLECTUAL PROPERTY RIGHTS. All Intellectual Property
Rights which are used in the Business and which are held by Persons other than
the Sellers, either through direct or indirect ownership, by license or
otherwise, shall have been assigned to the Sellers for no consideration on or
prior to the Closing Date. After the Closing, Sellers will cooperate with
Buyer to record all such assignments (as listed on Schedule 8.2(e) hereto) with
the United States Patent and Trademark Office.
STANDARD OPERATING PROCEDURES. The Buyer shall have received
true and correct copies of Sellers' standard operating procedures accepted by
the FDA and required by its customers.
ASSETS. The Purchased Assets shall be free and clear of
liens, charges or other Encumbrances (other than liens identified on Schedule
8.2(g) (the "Permitted Liens")), or the Sellers shall have entered into
suitable escrow arrangements with the Buyer in order to satisfy such liens,
charges or Encumbrances.
AUTHORIZATION DOCUMENTS. The Buyer shall have received a copy
of the resolutions of the Boards of Directors of each of the Sellers approving
the Acquisition, certified by their respective corporate secretaries.
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CONDITIONS TO OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers to effect the Closing shall be subject
to the following conditions, except to the extent waived in writing by the
Sellers:
REPRESENTATIONS AND WARRANTIES AND COVENANTS OF BUYER. The
representations and warranties of Buyer herein contained shall be true in all
material respects at the Closing Date with the same effect as though made at
such time (but without giving effect to any qualification as to materiality
contained therein); Buyer shall have in all material respects performed all
obligations and complied with all covenants and conditions required by this
Agreement to be performed or complied with by Buyer at or prior to the Closing
Date, and Buyer shall have delivered to the Sellers a certificate in form and
substance satisfactory to the Sellers, dated the Closing Date to such effect.
The Buyer's Certificate shall be signed by its Chief Executive Officer and
Chief Financial Officer.
DELIVERY OF BUYER SHARES. Buyer shall have issued
certificates representing the Buyer Shares to be held as provided in Section
2.3.
AUTHORIZATION DOCUMENTS. The Sellers shall have received a
copy of the resolutions of the Board of Directors of Buyer approving the
Acquisition, certified by the secretary of Buyer.
NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the business, financial condition or results of
operations of the Buyer subsequent to the date of this Agreement.
OPINION OF COUNSEL. Sellers shall receive at the Closing from
O'Melveny & Myers LLP, counsel to the Buyer, an opinion dated the Closing Date,
substantially in the form attached hereto as Exhibit G.
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TERMINATION OF OBLIGATIONS; SURVIVAL
TERMINATION OF AGREEMENT.
Anything herein to the contrary notwithstanding, this Agreement and
the transactions contemplated by this Agreement shall terminate if the
Closing does not occur on or before the close of business on February 17,
1998, unless extended by mutual consent in writing of Buyer, the Sellers, and
otherwise may be terminated at any time before the Closing as follows and in
no other manner:
MUTUAL CONSENT. By mutual consent in writing of Buyer and
the Sellers.
CERTAIN CONDITIONS NOT MET BY EARLIER DATE. By Buyer by
written notice to the Sellers if any conditions set forth in Section 8.2
shall not have been met by February 15, 1998.
CERTAIN CONDITIONS NOT MET BY EARLIER DATE. By Sellers by
written notice to Buyer if any of the conditions set forth in Section 8.3
shall not have been met by February 15, 1998.
MATERIAL BREACH. By Buyer or the Sellers if there has been
a material misrepresentation or other material breach by the other Party (in
the case of Buyer, by the Sellers and in the case of the Sellers, by Buyer)
in its representations, warranties and covenants set forth herein; provided,
however, that if such breach is susceptible to cure, the breaching Party
shall have ten business days after receipt of notice from the other Party of
its intention to terminate this Agreement if such breach continues in which
to cure such breach.
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EFFECT OF TERMINATION.
In the event that this Agreement shall be terminated pursuant to
any of subparagraphs (b), (c) or (d) of Section 9.1, all further obligations
of the Parties under this Agreement shall terminate without further liability
of any Party to another; provided that the obligations of the Parties
contained in Article XI (Arbitration) and Sections 12.4 (Governing Law), 12.8
(Publicity), 12.9 (Confidentiality), 12.11 (Notices), 12.12 (Expenses) and
12.14 (Attorney's Fees) shall survive any such termination. A termination
under any of subparagraphs (b), (c) or (d) of Section 9.1 shall not relieve
any Party of any liability for a breach of, or for any misrepresentation
under this Agreement, or be deemed to constitute a waiver of any available
remedy (including specific performance if available) for any such breach or
misrepresentation.
INDEMNIFICATION
INDEMNIFICATION OF BUYER.
The Sellers covenant and agree to indemnify, defend and hold
harmless Buyer and its directors, officers, employees, affiliates, agents,
representatives, successors and assigns (collectively, the "Buyer Indemnified
Persons"), from and against any and all Losses of Buyer or the Buyer
Indemnified Persons, directly or indirectly, as a result of, or based upon or
arising from:
any inaccuracy in or breach or nonperformance of any of the
representations, warranties, covenants or agreements made by the Sellers in
or pursuant to this Agreement and any related agreements;
the failure of the Sellers to perform or observe fully any
covenant, provision or agreement to be performed or observed by them pursuant
to this Agreement and any related agreements;
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any actual or threatened claim, suit, action or proceeding
arising out of or resulting from the ownership by Sellers of the Purchased
Assets or the conduct by the Sellers of their respective businesses or
operations on or before the Closing Date, provided that such Loss is not a
result of or based upon or does not arise in connection with any neglect,
disregard or intentional misconduct on the part of Buyer or any Buyer
Indemnified Persons;
the (i) generation, use, transportation, treatment, storage,
release, disposal or presence of any Hazardous Substance in connection with
the Business or at any facility used in connection with the operation of the
Business, on or prior to the Closing; and (ii) the violation by Sellers,
prior to the Closing, of any Law relating to the generation, use,
transportation, treatment, storage, release, disposal or presence of
Hazardous Substances or the protection of the environment; or
any of the Excluded Liabilities and any other liability or
obligation of Sellers or any of their respective Affiliates not expressly
assumed by Buyer pursuant to Section 2.2(b) hereof.
The Sellers agree to reimburse Buyer, or any other Buyer Indemnified Person,
as the case may be, promptly upon demand for any unreimbursed payment made or
Loss suffered by Buyer or the Buyer Indemnified Person, as the case may be,
at any time after the Closing Date in respect of any Loss to which the
foregoing indemnity relates.
INDEMNIFICATION OF THE SELLERS.
Buyer covenants and agrees to indemnify, defend and hold harmless
the Sellers and their respective directors, officers, employees, affiliates,
agents, representatives, successor and assigns (collectively, the "Seller
Indemnified Persons") from and against any and all Losses of the Sellers and
the Seller Indemnified Parties, directly or indirectly, as a result of, or
based upon or arising from:
any inaccuracy in or breach or nonperformance of any of the
representations, warranties, covenants or agreements made by Buyer in or
pursuant to this Agreement or in any related agreements;
the failure of Buyer to perform or observe fully any
covenant, provision or agreement to be performed or observed by it pursuant
to this Agreement or any related agreement;
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any actual or threatened claim, suit, action or proceeding
arising out of or resulting from the ownership by the Buyer of the Purchased
Assets or the conduct by the Buyer of the Business or Buyer's operations
after the Closing Date, provided that such Loss is not a result of or based
upon or does not arise in connection with any neglect, disregard or
intentional misconduct on the part of the Sellers or any Seller Indemnified
Persons; or
any of the Assumed Liabilities.
Buyer agrees to reimburse the Sellers or the Seller Indemnified Parties as
the case may be, promptly upon demand for any unreimbursed payment made or
Loss suffered by the Sellers or the Seller Indemnified Parties, as the case
may be, at any time after the Closing Date in respect of any Loss to which
the foregoing indemnity relates.
PROCEDURE.
NOTICE. Any Party seeking indemnification with respect to
any Loss shall give prompt written notice to the Party required to provide
indemnity hereunder (the "Indemnifying Party").
DEFENSE. In the event any person or entity not a Party to
this Agreement shall make a demand or claim or file or threaten to file or
continue any lawsuit, which demand, claim or lawsuit may result in liability
to an Indemnified Party in respect of matters embraced by the indemnity under
this Agreement, or in the event that a potential loss, damage or expense
comes to the attention of any Party in respect of matters embraced by the
indemnity under this Agreement, then the Party receiving notice or aware of
such event shall promptly notify the other Party or Parties of the demand,
claim or lawsuit (the "Notice"). Except as provided in the next sentence,
within ten (10) days after Notice by the Indemnified Party to an Indemnifying
Party of such demand, claim or lawsuit, the Indemnifying Party shall have the
option, at its sole cost and expense, to retain counsel for the Indemnified
Party, to defend any such demand, claim or lawsuit, provided that counsel who
will conduct the defense of such demand, claim or lawsuit will be approved by
the Indemnified Party whose approval will not unreasonably be withheld. The
Indemnified Party shall have the right, at its own expense, to participate in
the defense of any suit, action or proceeding brought against it with respect
to which indemnification may be sought hereunder; provided, however, if (a)
the named parties to any such proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them, or (b) the
employment of counsel by such Indemnified Party has been authorized in
writing by the Indemnifying Party, or (c) the Indemnifying Party has not in
fact employed counsel to assume the defense of such
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action within a reasonable time; then, the Indemnified Party shall have the
right to retain its own counsel at the sole cost and expense of the
Indemnifying Party, which costs and expenses shall be paid by the
Indemnifying Party on a current basis. No Indemnifying Party, in the defense
of any such demand, claim or lawsuit, will consent to entry of any judgment
or enter into any settlement without the consent of the Indemnified Party.
In the event that the Indemnifying Party shall fail to respond within ten
(10) days after receipt of the Notice, the Indemnified Party may retain
counsel and conduct the defense of such demand, claim or lawsuit, as it may
in its sole discretion deem proper, at the sole cost and expense of the
Indemnifying Party, which costs and expenses shall be paid by the
Indemnifying Party on a current basis. Except as explicitly provided in this
Section 10.3(b), failure to provide Notice shall not limit the rights of such
Party to indemnification.
CERTAIN LIMITATIONS. Notwithstanding Section 10.3(b), in
the event that any demand, claim or lawsuit for which indemnification is
payable hereunder relates with respect to any Party to a criminal
investigation, quasi criminal investigation, governmental or regulatory
claim, civil claim involving allegations of criminal conduct or a matter in
which the licensure of such Party could be jeopardized, such Indemnified
Party shall have the sole right to retain counsel to represent it in such
matter and the Indemnifying Party shall pay the reasonable fees and expenses
of such counsel on a current basis, and the Indemnified Party shall have the
right to conduct and control the defense, compromise or settlement of any
such Indemnifiable Claim if the Indemnified Party chooses to do so, on behalf
of and for the account and risk of the Indemnifying Party who shall be bound
by the result so obtained.
WAIVER OF SUBROGATION AND OTHER RIGHTS. Each Indemnified
Party shall not be required to proceed against any particular Indemnifying
Party for indemnification or otherwise in respect of any Losses before
enforcing its rights hereunder against any other Indemnifying Party, and each
Party expressly waives all rights it may have, now or in the future, under
any statute, at common law, or at law or in equity, or otherwise, to compel
the Indemnified Party to proceed against any Indemnifying Party in respect of
any Losses before proceeding against, or as a condition to proceeding
against, any other Indemnifying Party.
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SURVIVAL.
This Article X shall survive any termination of this Agreement
pursuant to any of paragraphs (b), (c) or (d) of Section 9.1 hereof. This
indemnification further shall survive the Closing and shall remain in effect
until the third anniversary of the Closing Date; PROVIDED, HOWEVER, that (a)
the indemnification provided hereunder with respect to any Taxes of Seller
(Sections 2.2(a)(iv) and 4.4) and with respect to all employee benefit matters
(Sections 2.2(a)(vii) and 4.14) shall survive for the applicable statute of
limitations, (b) the indemnification provided hereunder with respect to
environmental matters and Hazardous Substances (Sections 2.2(a), 4.20 and
10.1(d)) shall survive until the seventh anniversary of the Closing Date, and
(c) the indemnification provided hereunder with respect to title to the
Purchased Assets (Section 4.7(a)) shall survive the Closing indefinitely. Any
matter as to which a claim has been asserted by notice to the other Party that
is pending or unresolved at the end of any applicable limitation period shall
continue to be covered by this Article X notwithstanding any applicable statute
of limitations (which the Parties hereby waive) until such matter is finally
terminated or otherwise resolved by the Parties or by a court of competent
jurisdiction and any amounts payable hereunder are finally determined and paid.
NOTICE.
The Sellers and the Buyer agree promptly to notify the other Party of
any liabilities, claims or misrepresentations, breaches or other matters
covered by this Article X upon discovery or receipt of notice thereof, whether
before or after Closing.
NOT EXCLUSIVE REMEDY.
This Article X shall not be deemed to preclude or otherwise limit in
any way the exercise of any other rights or pursuit of other remedies for the
breach of this Agreement or with respect to any misrepresentation.
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AGGREGATE DOLLAR LIMITATION.
The aggregate dollar amount of all payments the Sellers shall
be obligated to make pursuant to this Article X shall not exceed the amount of
the Purchase Price; provided, however, notwithstanding anything to the contrary
herein, the Sellers' indemnification obligations with respect to Tax matters
and ERISA matters shall be unlimited as to dollar amount. In addition, Buyer
and the Buyer Indemnified Persons shall not be entitled to indemnification
under this Article X unless and until the aggregate of all claims made by Buyer
for indemnity pursuant to this Article X exceed the sum of $50,000; PROVIDED,
HOWEVER that if at anytime the $50,000 threshold is satisfied, Buyer and the
Buyer Indemnified Persons shall be entitled to indemnification for the full
amount of such Losses, not just the amount in excess of $50,000.
The aggregate dollar amount of all payments Buyer shall be
obligated to make pursuant to this Article X shall not exceed $1 million.
ARBITRATION
ARBITRATION.
Except as otherwise provided in this Agreement, any controversy or
claim arising out of or relating to this Agreement or the breach hereof shall
be settled by arbitration in the County of Los Angeles, State of California.
JUDICIAL ARBITRATION AND MEDIATION SERVICES, THE
SELLERS.
The arbitration shall be administered by Judicial Arbitration and
Mediation Services ("JAMS") in its Los Angeles office.
61
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ARBITRATION PANEL.
The arbitration shall be conducted before a panel of three
arbitrators selected as follows. Each party hereto shall appoint one
arbitrator from the JAMS panel of retired judges, after which, and within ten
days of the appointment of such arbitrators, these two arbitrators shall
appoint a third arbitrator from the JAMS panel of retired judges. If within
ten days the two arbitrators appointed by the parties hereto cannot agree upon
a third arbitrator, such third arbitrator shall be appointed by JAMS in
accordance with its rules.
PROVISIONAL REMEDIES.
Each of the Parties reserves the right to file with a court of
competent jurisdiction an application for temporary or preliminary injunctive
relief, writ of attachment, writ of possession, temporary protective order
and/or appointment of a receiver on the grounds that the arbitration award to
which the applicant may be entitled may be rendered ineffectual in the absence
of such relief.
ENFORCEMENT OF JUDGMENT.
Judgment upon the award rendered by the arbitration panel may be
entered in any court having jurisdiction thereof.
DISCOVERY.
The Parties may obtain discovery in aid of the arbitration to the
fullest extent permitted under law, including California Code of Civil
Procedure Section 1283.05. All discovery disputes shall be resolved by the
arbitration panel.
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CONSOLIDATION.
Any arbitration hereunder may be consolidated by JAMS with the
arbitration of any other dispute arising out of or relating to the same subject
matter when the arbitration panel determines that there is a common issue of
law or fact creating the possibility of conflicting rulings by more than one
arbitration panel. Any disputes over which arbitration panel shall hear any
consolidated matter shall be resolved by JAMS.
POWER AND AUTHORITY OF ARBITRATOR.
The arbitration panel shall not have any power to alter, amend,
modify or change any of the terms of this Agreement nor to grant any remedy
which is either prohibited by the terms
of this Agreement or not available in a court of law. The arbitration panel
shall not be authorized to award punitive damages against any Party.
LAW TO BE APPLIED.
All questions in respect of procedure to be followed in conducting
the arbitration as well as the enforceability of this agreement to arbitrate
which may be resolved by state law shall be resolved according to the law of
the State of California. Any action brought to enforce the provisions of this
Section shall be brought in the Los Angeles County Superior Court.
COSTS.
The costs of the arbitration, including any JAMS administration fee,
and arbitrator's fee, and costs of the use of facilities during the hearings,
shall be borne equally by the Parties. Costs and attorneys' fees shall be
awarded to the prevailing party as contemplated by Section 12.14 hereof.
63
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GENERAL
AMENDMENTS; WAIVERS.
This Agreement and any schedule or exhibit attached hereto may be
amended only by agreement in writing of all Parties. No waiver of any
provision nor consent to any exception to the terms of this Agreement or any
agreement contemplated hereby shall be effective unless in writing and signed
by the party to be bound and then only to the specific purpose, extent and
instance so provided.
SCHEDULES; EXHIBITS; INTEGRATION.
Each schedule and exhibit delivered pursuant to the terms of this
Agreement shall be in writing and shall constitute a part of this Agreement,
although schedules need not be attached to each copy of this Agreement. This
Agreement, together with such schedules and exhibits, constitutes the entire
agreement among the Parties pertaining to the subject matter hereof and
supersedes all prior agreements and understandings of the Parties in connection
therewith, including, but not limited to, any letter or letters of intent
between Buyer, the Sellers.
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BEST EFFORTS; FURTHER ASSURANCES.
STANDARD. Each Party will use its best efforts to cause all
conditions to its obligations to be timely satisfied and to perform and fulfill
all obligations on its part to be performed and fulfilled under this Agreement,
to the end that the transactions contemplated by this Agreement shall be
effected substantially in accordance with its terms as soon as reasonably
practicable. Sellers shall take or shall cause to be taken such other
reasonable actions as Buyer may require more effectively to transfer, convey
and assign to, and vest in, Buyer, and put Buyer in possession of, the
Purchased Assets as contemplated by this Agreement. In the event that any
Purchased Assets cannot be fully and effectively transferred to Buyer without
the consent of a third party or parties, Sellers shall thereafter be obligated
to use its best efforts to assure Buyer the benefits of such contract,
commitment, other arrangement or other Purchased Asset. The Parties shall
cooperate with each other in such actions and in securing requisite Approvals.
Each Party shall execute and deliver both before and after the Closing such
further certificates, agreements and other documents and take such other
actions as the other Party may reasonably request to consummate or implement
the transactions contemplated hereby or to evidence such events or matters.
LIMITATION. As used in this Agreement, the term "best
efforts" shall not mean efforts which require the performing party to do any
act that is commercially unreasonable under the circumstances, to make any
capital contribution or to expend any funds other than reasonable out-of-pocket
expenses incurred in satisfying its obligations hereunder, including, but not
limited to, the fees, expenses and disbursements of its accountants, actuaries,
counsel and other professionals.
GOVERNING LAW.
This Agreement, the legal relations between the Parties and
any Action, whether contractual or non-contractual, instituted by any Party
with respect to matters arising under or growing out of or in connection with
or in respect of this Agreement, including, but not limited to, the
negotiation, execution, interpretation, coverage, scope, performance, breach,
termination, validity, or enforceability of this Agreement, shall be governed
by and construed in accordance with the laws of the State of California
applicable to contracts made and performed in such State and without regard to
conflicts of law doctrines, except to the extent that certain matters are
preempted by federal law or are governed as a matter of controlling law by the
law of the jurisdiction of incorporation of the respective Parties.
Each Party hereby irrevocably submits to and accepts for
itself and its properties, generally and unconditionally, the exclusive
jurisdiction of and service of process pursuant to the laws of the State of
California and the rules of its courts, waives any defense of forum non
conveniens and agrees to be bound by any judgment rendered thereby arising
under or
65
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out of in respect of or in connection with this Agreement or any related
document or obligation. Each Party further irrevocably designates and
appoints the individual identified in or pursuant to Section 11.11 hereof to
receive notices on its behalf, as its agent to receive on its behalf service
of all process in any such Action before any body, such service being hereby
acknowledged to be effective and binding service in every respect. A copy of
any such process so served shall be mailed by registered mail to each Party
at its address provided in Section 12.11; PROVIDED that, unless otherwise
provided by applicable law, any failure to mail such copy shall not affect
the validity of the service of such process. If any agent so appointed
refuses to accept service, the designating party hereby agrees that service
of process sufficient for personal jurisdiction in any action against it in
the applicable jurisdiction may be made by registered or certified mail,
return receipt requested, to its address provided in Section 11.11. Each
Party hereby acknowledges that such service shall be effective and binding in
every respect. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of any Party to bring
any action or pro ceeding against the other Party in any other jurisdiction.
ASSIGNMENT.
Neither this Agreement nor any rights or obligations under it is
assignable by any Party hereto without the prior written consent of the other
Party, which shall not be unreasonably withheld; PROVIDED, HOWEVER, that at the
Buyer's sole option, Buyer may assign all of its rights and privileges under
this Agreement to SeraCare Technology, Inc., a Nevada corporation, or to any
Affiliate of Buyer or to any post-Closing purchaser of all or substantially all
of the Purchased Assets.
HEADINGS.
The descriptive headings of the Articles, Sections and subsections of
this Agreement are for convenience only and do not constitute a part of this
Agreement.
66
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COUNTERPARTS.
This Agreement and any amendment hereto or any other agreement (or
document) delivered pursuant hereto may be executed in one or more counterparts
and by different Parties in separate counterparts. All of such counterparts
shall constitute one and the same agreement (or other document) and shall
become effective (unless otherwise provided therein) when one or more
counterparts have been signed by each Party and delivered to the other Party.
Facsimile signatures shall constitute original signatures for all purposes of
this Agreement.
PUBLICITY AND REPORTS.
The Sellers and Buyer shall coordinate all publicity relating to the
transactions contemplated by this Agreement and no Party shall issue any press
release, publicity statement or other public notice relating to this Agreement,
or the transactions contemplated by this Agreement, without obtaining the prior
consent of the Sellers and Buyer except to the extent that a particular action
is required by applicable law.
67
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CONFIDENTIALITY.
All information disclosed by any Party (or its representatives)
whether before or after the date hereof, in connection with the transactions
contemplated by, or the discussions and negotiations preceding, this Agreement
to any other Party (or its representatives) shall be kept confidential by such
other party and its representatives and shall not be used by any Persons other
than as contemplated by this Agreement, except to the extent that such
information (a) was known by the recipient when received, (b) it is or
hereafter becomes lawfully obtainable from other sources, (c) is necessary or
appropriate to disclose to a Governmental Entity having jurisdiction over the
Parties, (d) as may otherwise be required by law or (e) to the extent such duty
as to confidentiality is waived in writing by the other Party. If this
Agreement is terminated, each Party shall use all reasonable efforts to return
upon written request from the other Party all documents (and reproductions
thereof) received by it or its representatives from such other Party (and, in
the case of reproductions, all such reproductions made by the receiving Party),
unless the recipients provide assurances reasonably satisfactory to the
requesting Party that such documents have been destroyed.
PARTIES IN INTEREST.
This Agreement shall be binding upon and inure to the benefit of each
Party and their respective successors and permitted assigns, and nothing in
this Agreement, express or implied, is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement (except for the Buyer and Seller Indemnified Persons under Article X
hereof). Nothing in this Agreement is intended to relieve or discharge the
obligation of any third person to any Party to this Agreement.
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NOTICES.
Any notice or other communication hereunder must be given in writing
and (a) delivered in person, (b) transmitted by telex, telefax or
telecommunications mechanism provided that any notice so given is also mailed
as provided in clause (c) or (c) mailed by certified or registered mail,
postage prepaid), receipt requested as follows:
IF TO BUYER, ADDRESSED TO:
SeraCare, Inc.
1925 Century Park East, Suite 1970
Los Angeles, California 90067
Facsimile: (310) 772-7770
Attn: Mr. Barry Plost
WITH A COPY TO:
O'Melveny & Myers LLP
610 Newport Center Drive, Suite 1700
Newport Beach, California 92660-6429
Facsimile: (714) 669-6994
Attn: David A. Krinsky, Esq.
IF TO THE SELLERS, ADDRESSED TO:
Consolidated Technologies, Inc.
2170 Woodward Street
Austin, Texas 78744
Facsimile: (512) 445-4105
Attn: President
WITH A COPY TO:
Jenkens & Gilchrist, a Professional Corporation
600 Congress Avenue, Suite 2200
Austin, Texas 78701
Facsimile: (512) 404-3520
Attention: J. Rowland Cook, Esq.
Carol Bellon, Esq.
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or to such other address or to such other person as either Party shall have
last designated by such notice to the other Party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 11.11 and an appropriate answerback is received, (ii) if given by mail,
three days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when actually delivered at such address.
EXPENSES.
The Sellers and Buyer shall each pay their own expenses incident to
the negotiation, preparation and performance of this Agreement and the
transactions contemplated hereby, including, but not limited to, the fees,
expenses and disbursements of their respective investment bankers, accountants
and counsel.
REMEDIES; WAIVER.
Except to the extent this Section 12.13 is inconsistent with any
other provision in this Agreement or applicable law, all rights and remedies
existing under this Agreement and any related agreements or documents are
cumulative to and not exclusive of, any rights or remedies otherwise available.
No failure on the part of any Party to exercise or delay in exercising any
right hereunder shall be deemed a waiver thereof, nor shall any single or
partial exercise preclude any further or other exercise of such or any other
right.
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ATTORNEY'S FEES.
In the event of any Action by any Party arising under or out of, in
connection with or in respect of, this Agreement, the prevailing Party shall be
entitled to reasonable attorneys' fees, costs and expenses incurred in such
Action; PROVIDED, HOWEVER, that no Party shall be considered a prevailing party
unless such Party has recovered more or paid less as a result of an
arbitrator's or a final judicial order than the amount offered or demanded in
writing by an opposing Party during the course of any settlement discussions.
Attorneys' fees incurred in enforcing any judgement in respect of this
Agreement are recoverable as a separate item. The Parties intend that the
preceding sentence be severable from the other provisions of this Agreement,
survive any judgment and, to the maximum extent permitted by law, not be deemed
merged into such judgment.
KNOWLEDGE CONVENTION.
Whenever any statement herein or in any schedule, exhibit,
certificate or other document delivered to any Party pursuant to this Agreement
is made "to its knowledge" or "to its best knowledge" or words of similar
intent or effect of any Party or its representative, such person shall make
such statement only after conducting a reasonable investigation of the subject
matter thereof, and each statement shall be deemed to include a representation
that such investigation has been conducted.
REPRESENTATION BY COUNSEL; INTERPRETATION.
The Sellers and Buyer each acknowledge that each Party to this
Agreement has been represented by counsel in connection with this Agreement and
the transactions contemplated by this Agreement. Accordingly, any rule of Law,
including, but not limited to, Section 1654 of the California Civil Code, or
any legal decision that would require interpretation of any claimed ambiguities
in this Agreement against the Party that drafted it has no application and is
expressly waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intent of Buyer and the Sellers.
71
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SPECIFIC PERFORMANCE.
The Sellers and Buyer each acknowledge that, in view of the
uniqueness of the Business and the transactions contemplated by this Agreement,
each Party would not have an adequate remedy at law for money damages in the
event that this Agreement has not been performed in accordance with its terms,
and therefore agrees that the other Party shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which it may
be entitled, at law or in equity.
SEVERABILITY.
If any provision of this Agreement is determined to be invalid,
illegal or unenforceable by any Governmental Entity, the remaining provisions
of this Agreement shall remain in full force and effect provided that the
economic and legal substance of the transactions contemplated is not affected
in any manner materially adverse to any Party. In the event of any such
determination, the Parties agree to negotiate in good faith to modify this
Agreement to fulfill as closely as possible the original intents and purposes
hereof. To the extent permitted by Law, the Parties hereby to the same extent
waive any provision of Law that renders any provision hereof prohibited or
unenforceable in any respect.
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IN WITNESS WHEREOF, each of the Parties hereto has executed or caused
this Agreement to be executed by its duly authorized officers as of the day and
year first above written.
"BUYER"
SERACARE, INC.,
a Delaware corporation
By: /s/ Barry D. Plost
-----------------------------------------------------
Barry D. Plost
Chairman of the Board, President and
Chief Executive Officer
"SELLERS"
CONSOLIDATED TECHNOLOGIES, INC.,
a Texas corporation
By: /s/ William J. Cone
------------------------------------------------------
Name: William J. Cone
----------------------------------------------------
Title: President
---------------------------------------------------
CONCO ASSOCIATES, INC.,
a Texas corporation
By: /s/ William J. Cone
------------------------------------------------------
Name: William J. Cone
----------------------------------------------------
Title: President
---------------------------------------------------
S-1
<PAGE>
LIST OF OMITTED SCHEDULES AND EXHIBITS*
SCHEDULES
SCHEDULE 1.1 Products
SCHEDULE 2.1(a) Purchased Assets
SCHEDULE 2.2(b) Assumed Liabilities
SCHEDULE 2.3 Purchase Price Allocation
SCHEDULE 2.4 Sellers Liabilities
SCHEDULE 4.1 Jurisdictions in which Sellers is Required to be Qualified to
Do Business as a Foreign Person; Directors and Executive
Officers
SCHEDULE 4.2 Permits and Approvals
SCHEDULE 4.3 Capitalization
SCHEDULE 4.3(a) Audited Financial Statements
SCHEDULE 4.3(b) Unaudited Interim Financial Statements
SCHEDULE 4.3(c) Auditors' Letters
SCHEDULE 4.3(d) Material Adverse Changes
SCHEDULE 4.3(e) Liabilities
SCHEDULE 4.4 Tax Returns
SCHEDULE 4.5 Material Contracts
SCHEDULE 4.5(b) Assumed Contracts
SCHEDULE 4.7(a) Real and Personal Property
SCHEDULE 4.8 Intangible Property
SCHEDULE 4.9 Orders, Actions and Labor Matters
SCHEDULE 4.10 Labor Relations
SCHEDULE 4.11 Insurance
SCHEDULE 4.12 Permits and Licenses
SCHEDULE 4.13 Law Compliance
SCHEDULE 4.13(a) Licenses Related to the Business
SCHEDULE 4.14(a)(i) Employee Benefit Plans, and Collective Bargaining and
Employee Agreements
SCHEDULE 4.14(a)(vii) Employees, Consultants and Agents Entitled to
Severance, Parachute or Other Payments or Benefits
SCHEDULE 4.15 Certain Interests
_______________________________
* Registrant agrees to furnish supplementally a copy of any of the
omitted Schedules and Exhibits listed above to the Commission upon
request.
<PAGE>
SCHEDULE 4.19 Customers and Suppliers
SCHEDULE 4.20 Environmental Compliance
SCHEDULE 5.6 Buyer's Stock
SCHEDULE 7.6 Liabilities and Obligations of Sellers
SCHEDULE 7.9 Real Property Owned by Sellers
SCHEDULE 8.2(e) Assignment of Intellectual Property Rights
SCHEDULE 8.2(g) Permitted Liens
S-3
<PAGE>
EXHIBITS
Exhibit A Percentage Interest in the Sellers
Exhibit B Bill of Sale
Exhibit C Assignment and Assumption of Lease
Exhibit D Assignment and Assumption Agreement
Exhibit E Form of Opinion of Counsel of the Sellers
Exhibit F Non-Competition Agreement
Exhibit G Opinion of Counsel of the Buyer
Exhibit H Registration Rights
Exhibit I Employment Agreement of William J. Cone
Exhibit J Employment Agreement of Kerry Cone
<PAGE>
EXHIBIT 4.1
- --------------------------------------------------------------------------------
SERACARE, INC.
$16,000,000
12% Senior Subordinated Debentures due 2005
and
Warrants to Purchase Shares of Common Stock
-------------------------------
SECURITIES PURCHASE AGREEMENT
-------------------------------
Dated as of February 13, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
1. AUTHORIZATION OF ISSUE OF SECURITIES. . . . . . . . . . . . . . . . . . .1
1A. Senior Subordinated Debentures. . . . . . . . . . . . . . . . . . .1
1B. Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2. PURCHASE AND SALE OF SECURITIES . . . . . . . . . . . . . . . . . . . . .2
2A. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . .2
2B. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3. CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . .3
3A. Opinion of Counsel to the Company . . . . . . . . . . . . . . . . .3
3B. Representations and Warranties. . . . . . . . . . . . . . . . . . .3
3C. Articles of Incorporation and By-laws . . . . . . . . . . . . . . .4
3D. Purchase Permitted by Applicable Laws . . . . . . . . . . . . . . .4
3E. Securityholders Agreement . . . . . . . . . . . . . . . . . . . . .4
3F. Registration Rights Agreement . . . . . . . . . . . . . . . . . . .4
3G. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
3H. Compliance with Securities Laws . . . . . . . . . . . . . . . . . .5
3I. No Adverse, Action or Decision. . . . . . . . . . . . . . . . . . .5
3J. Approval and Consents . . . . . . . . . . . . . . . . . . . . . . .5
3K. Material Changes. . . . . . . . . . . . . . . . . . . . . . . . . .5
3L. Board Nominees. . . . . . . . . . . . . . . . . . . . . . . . . . .5
3M. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . .5
3N. Investor Due Diligence. . . . . . . . . . . . . . . . . . . . . . .6
4. PAYMENTS AND PREPAYMENTS OF THE SENIOR SUBORDINATED NOTES . . . . . . . .6
4A. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
4B. Mandatory Payments and Prepayments of the Senior Subordinated
Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
4C. Prepayments of the Senior Subordinated Debentures upon a Change
of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
4D. Optional Prepayments of the Senior Subordinated Debentures. . . . .5
4E. Notice of Prepayments . . . . . . . . . . . . . . . . . . . . . . .7
4F. Mandatory Payments and Partial Prepayments Pro Rata . . . . . . . .8
4G. Default Debentures. . . . . . . . . . . . . . . . . . . . . . . . .8
4H. Prepayments of Default Debentures . . . . . . . . . . . . . . . . .8
(i)
<PAGE>
5. OPTIONAL REPURCHASE OF THE WARRANTS . . . . . . . . . . . . . . . . . . .9
5A. Option of Holders to Put Warrants upon a Change of Control . . . .9
5B. Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . .9
5C. Exercise of the Option. . . . . . . . . . . . . . . . . . . . . . .10
5D. Optional Redemption of the Warrants . . . . . . . . . . . . . . . .11
5E. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . .11
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . .11
6A. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .12
6B. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . .15
6C. Books and Records; Inspection of Property . . . . . . . . . . . . .15
6D. Covenant to Secure Senior Subordinated Debentures Equally . . . . .15
6E. INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . .15
6F. Stock to be Reserved. . . . . . . . . . . . . . . . . . . . . . . .15
6G. Compliance With Laws, etc. . . . . . . . . . . . . . . . . . . . .16
6H. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
6I. Corporate Existence; Maintenance of Properties. . . . . . . . . . .17
6J. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
6K. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . .18
6L. Filing of Reports Under the Exchange Act. . . . . . . . . . . . . .18
6M. Securities Act Registration Statements. . . . . . . . . . . . . . .18
6N. Notices of Certain Events . . . . . . . . . . . . . . . . . . . . .20
6O. Board Nominees. . . . . . . . . . . . . . . . . . . . . . . . . . .20
6P. Listing of Common Stock . . . . . . . . . . . . . . . . . . . . . .21
6Q. Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . . .21
6R. Guarantee By Subsidiary . . . . . . . . . . . . . . . . . . . . . .23
6S. Issuance of Warrants with Interest Debentures. . . . . . . . . . .23
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
7A. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . .24
7B. Restrictions on Indebtedness and Repayment of Indebtedness. . . . .24
7C. Restrictions on Liens . . . . . . . . . . . . . . . . . . . . . . .25
7D. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . .26
7E. Loans, Advances and Investments . . . . . . . . . . . . . . . . . .26
7F. Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
7G. Transactions With Affiliates. . . . . . . . . . . . . . . . . . . .28
7H. Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
7I. Disposition of Substantial Assets . . . . . . . . . . . . . . . . .28
7J. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . .29
7K. No Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . .29
(ii)
<PAGE>
7L. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . .29
7M. Offering of Securities. . . . . . . . . . . . . . . . . . . . . . .29
7N. Issuance of Securities. . . . . . . . . . . . . . . . . . . . . . .29
7O. Issuance of Securities. . . . . . . . . . . . . . . . . . . . . . .30
8. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
8A. Subordinated Debt Subordinate to Senior Debt. . . . . . . . . . . .30
8B. Suspension of Right to Receive Payments of Subordinated Debt. . . .30
8B(1). Failure to Pay Principal of or Interest on Senior Debt . .31
8B(2). Bankruptcy or Insolvency. . . . . . . . . . . . . . . . . .32
8C. Rights of Holders of Senior Debt Not to Be Impaired . . . . . . . .32
8D. Company's Obligation Unconditional. . . . . . . . . . . . . . . . .33
8E. Payments Held in Trust. . . . . . . . . . . . . . . . . . . . . . .33
8F. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
8G. Reliance by Holders on Final Order or Decree. . . . . . . . . . . .34
8H. Legend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
8I. Senior Debt Not Affected. . . . . . . . . . . . . . . . . . . . . .35
8J. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . .35
9. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
9A. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
9B. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . .39
10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . . . .40
10A. Organization, Qualification and Authority. . . . . . . . . . . . .40
10B. Financial Statements . . . . . . . . . . . . . . . . . . . . . . .41
10C. Capital Stock and Related Matters. . . . . . . . . . . . . . . . .41
10D. Actions Pending. . . . . . . . . . . . . . . . . . . . . . . . . .42
10E. Outstanding Debt; Defaults . . . . . . . . . . . . . . . . . . . .42
10F. Title to Properties. . . . . . . . . . . . . . . . . . . . . . . .43
10G. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
10H. Conflicting Agreements . . . . . . . . . . . . . . . . . . . . . .43
10I. Offering of Securities . . . . . . . . . . . . . . . . . . . . . .44
10J. Broker's or Finder's Commissions . . . . . . . . . . . . . . . . .44
10K. Regulation G, etc. . . . . . . . . . . . . . . . . . . . . . . . .45
10L. Environmental Matters. . . . . . . . . . . . . . . . . . . . . . .45
10M. Possession of Franchises, Licenses, etc. . . . . . . . . . . . . .46
10N. Patents, etc. . . . . . . . . . . . . . . . . . . . . . . . . . .46
10N. Possession of Franchises, Licenses, etc. . . . . . . . . . . . . .46
10O. Holding Company and Investment Company Status. . . . . . . . . . .47
10P. Governmental Consents. . . . . . . . . . . . . . . . . . . . . . .47
(iii)
<PAGE>
10Q. Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . .47
10R. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
10S. Related Party Transactions . . . . . . . . . . . . . . . . . . . .48
10T. Registration Rights. . . . . . . . . . . . . . . . . . . . . . . .48
10U. Absence of Foreign or Enemy Status . . . . . . . . . . . . . . . .48
10V. Agreements with Affiliates . . . . . . . . . . . . . . . . . . . .48
10W. Consummation of Related Transactions . . . . . . . . . . . . . . .48
10X. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . .49
11. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR . . . . . . . . . . . . .49
12. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
13. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
13A. Home Office Payment. . . . . . . . . . . . . . . . . . . . . . . .63
13B. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . .63
13C. Consent to Amendments. . . . . . . . . . . . . . . . . . . . . . .64
13D. Form, Registration, Transfer and Exchange of Senior
Subordinated Debentures; Lost Senior Subordinated Debenture. . . .65
13E. Provisions Applicable if any of the Securities are Sold. . . . . .66
13F. Restrictive Legends. . . . . . . . . . . . . . . . . . . . . . . .66
13G. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . . . .67
13H. Survival of Representations and Warranties . . . . . . . . . . . .67
13I. Successors and Assign. . . . . . . . . . . . . . . . . . . . . . .67
13J. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
13K. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . .68
13L. GOVERNING LAW; CONSENT TO JURISDICTION . . . . . . . . . . . . . .68
13M. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
13N. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . .69
13O. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .69
13P. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
13Q. Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . .70
13R. WAIVER OF TRIAL BY JURY. . . . . . . . . . . . . . . . . . . . . .70
13S. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .70
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A Form of Senior Subordinated Debenture
Exhibit B Form of Guarantee
Exhibit C Form of Warrant
(iv)
<PAGE>
Exhibit D Form of Opinion of Counsel to the Company
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Securityholders Agreement
Exhibit G Projected Pre-Tax Earnings for Fiscal Years 1999 and 2000
</TABLE>
(v)
<PAGE>
SERACARE, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of
February 13, 1998
To the Investors named on the signature pages hereto:
The undersigned, SeraCare, Inc., a Delaware corporation (the
"COMPANY"), each Subsidiary of the Company that becomes a "Subsidiary
Guarantor" after the date hereof (individually, a "GUARANTOR" and,
collectively, the "GUARANTORS"), and each of the investors named on the
signature pages hereto (the "INVESTORS"), hereby agree as follows:
2. AUTHORIZATION OF ISSUE OF SECURITIES.
1A. SENIOR SUBORDINATED DEBENTURES. The Company will authorize the
issuance, sale and delivery to the Investors of its senior subordinated
debentures ("SENIOR SUBORDINATED DEBENTURES" and individually called a "SENIOR
SUBORDINATED DEBENTURE") in the aggregate principal amount of $16,000,000, to
be dated the date of issue thereof, to mature (subject to Section 4 hereof) on
the seventh anniversary of such date of issue and to bear interest on the
unpaid principal thereof from the date thereof at the rate of 12% per annum
until the principal thereof shall become due and payable. Such Senior
Subordinated Debentures shall be substantially in the form of Exhibit A
attached hereto. Interest will be payable quarterly in arrears in cash on the
last Business Day of March, June, September and December, in each year,
commencing on March 31, 1998; PROVIDED, HOWEVER, that the Company may, at its
option, issue interest debentures ("INTEREST DEBENTURES" and individually
called an "INTEREST DEBENTURE") in lieu of a cash payment of any or all
interest due during any such period; PROVIDED FURTHER that such option to issue
Interest Debentures in lieu of a cash payment may be exercised with respect to
no more than two quarterly payments in the aggregate and that such option
cannot be exercised for consecutive payments. Such Interest Debentures shall
be substantially in the form of Exhibit A attached hereto. For purposes of
this Agreement, all references to the Senior Subordinated Debentures shall be
deemed to include any and all Interest Debentures. The Senior Subordinated
Debentures will be unconditionally guaranteed, on a subordinated basis, by each
Person that is or
<PAGE>
becomes a Subsidiary of the Company at any time on or after the date hereof,
pursuant to a guarantee substantially in the form of Exhibit B attached
hereto (the "GUARANTEE"). The Senior Subordinated Debentures shall bear a
legend on their face, indicating that the Senior Subordinated Debentures have
been issued with original issue discount and the name and address of the
Company's representative who, upon the request of a holder, can supply
information about such original issue discount.
1B. WARRANTS. The Company will also authorize the issuance,
sale and delivery to the Investors of warrants to purchase an aggregate of
2,100,572 shares of its Common Stock representing an aggregate of 16% of the
Fully Diluted Outstanding Shares (the "WARRANTS" and individually called a
"WARRANT"), such Warrants to be substantially in the form of Exhibit C
attached hereto. The number of shares of Common Stock subject to the
Warrants shall be subject to adjustment from time to time as provided in
Section 4 of the Warrants. The Senior Subordinated Debentures and the
Warrants shall be referred to herein as the "SECURITIES".
3. PURCHASE AND SALE OF SECURITIES.
2A. PURCHASE AND SALE. The Company hereby agrees to sell to the
Investors and, subject to the terms and conditions herein set forth, the
Investors severally agree to purchase from the Company, the Securities set
forth opposite the name of each of the Investors on the signature pages hereof.
The parties hereby agree that the aggregate purchase price for the Securities
(exclusive of any exercise prices) is $16,000,000.
2B. CLOSING. The purchase and delivery of the Securities to be
purchased by the Investors shall take place at a closing (the "CLOSING") at the
offices of O'Melveny & Myers LLP, 400 South Hope Street, Los Angeles,
California 90071, at 11:00 a.m., local time, on February 13, 1998 (or at such
other time and place or on such other Business Day thereafter as the parties
hereto shall agree) (herein called the "CLOSING DATE"). On the Closing Date,
the Company will deliver the Securities to be purchased by the Investors
payable to or registered in the names of the Investors and/or the Investors'
nominees or other designees specified on the signature pages hereof in the
amounts set forth opposite the name of the Investors on the signature pages
hereof, against receipt of the purchase price therefor by wire transfer to the
account of: SeraCare, Inc., Union Bank of
2
<PAGE>
California, 2001 Wilshire Boulevard, Santa Monica, CA 90403 Account No.
1311040388, ABA Routing No. 122000496, Notification: Seracare, Inc. If at
the Closing, the Company shall, in breach of this Agreement, fail to tender
to the Investors any of the Securities to be purchased by it or if any of the
conditions specified in Section 3 hereof shall not have been satisfied or
waived by the Investors, the Investors shall, at their election, be relieved
of all further obligations under this Agreement without thereby waiving any
other rights it may have by reason of such failure or such non-fulfillment.
Notwithstanding anything to the contrary herein, the obligation of the
Company to deliver any Securities to any Investor at the Closing shall be
conditioned on (i) its concurrent receipt of the purchase price for all of
the Securities from the Investors, (ii) the accuracy of the Investors'
representations set forth in Section 11 hereof, (iii) the execution and
delivery by the Investors of the Securityholders Agreement and (iv) the
satisfaction of the conditions set forth in Section 3D, 3H, 3J and 3K hereof.
4. CONDITIONS OF CLOSING. THE INVESTORS' OBLIGATION TO PURCHASE AND PAY
FOR THE SECURITIES TO BE PURCHASED BY THEM HEREUNDER IS SUBJECT TO THE
SATISFACTION, ON OR BEFORE THE CLOSING DATE, OF THE FOLLOWING CONDITIONS:
3A. OPINION OF COUNSEL TO THE COMPANY. The Investors shall have
received from O'Melveny & Myers LLP, counsel to the Company, a legal opinion
addressed to the Investors and dated the Closing Date, substantially in the
form of Exhibit D attached hereto.
3B. REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties contained in Section 10 hereof and those otherwise made in
writing by the Company or any Guarantor and contained in any certificate or
other written instrument delivered to the Investors pursuant to this
Agreement shall be true and correct in all material respects on and as of the
Closing Date, without giving effect to any qualification as to materiality
contained therein and except to the extent of changes caused by the
transactions herein contemplated; all of the covenants and obligations of the
Company hereunder to be performed or observed on or prior to the Closing
shall have been duly performed or observed; there shall exist on the Closing
Date and after giving effect to the transactions contemplated hereby no
Default or Event of Default; and the Company and any Guarantor
3
<PAGE>
shall have delivered to the Investors an Officer's Certificate, dated the
Closing Date, to the foregoing effects.
3C. ARTICLES OF INCORPORATION AND BY-LAWS. The Investors shall
have received certificates, dated the Closing Date, of the Secretary of the
Company and any Guarantor attaching (i) true and complete copies of the
Articles or Certificate of Incorporation of the Company and any Guarantor as
filed with the appropriate state officials of its jurisdiction of
incorporation with all amendments thereto, (ii) true and complete copies of
the By-laws of the Company and any Guarantor in effect as of such date, (iii)
certificates of good standing of the appropriate officials of the
jurisdiction of incorporation of the Company and any Guarantor and of each
state in which each of the Company and any Guarantor is qualified to do
business as a foreign corporation, (iv) resolutions of the Board of Directors
of the Company authorizing (a) the execution, delivery and performance of the
Related Documents, (b) the issuance and delivery of the Securities, (c) the
issuance and delivery of the Warrants and the reservation for issuance of a
sufficient number of shares of Common Stock into which the Warrants may be
exercised to permit such exercise, (d) resolutions of the Board of Directors
of any Guarantor authorizing the execution, delivery and performance of the
Related Documents to which it is a party, and (e) certificates as to the
incumbency of the officers of the Company and any Guarantor executing this
Agreement or any other Related Document.
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the Securities shall not be prohibited by any applicable law or
governmental regulation.
3E. SECURITYHOLDERS AGREEMENT. The Investors shall have received a
fully executed counterpart of the Securityholders Agreement and such
Securityholders Agreement shall be in full force and effect.
3F. REGISTRATION RIGHTS AGREEMENT. The Investors shall have
received a fully executed counterpart of the Registration Rights Agreement and
such Registration Rights Agreement shall be in full force and effect.
3G. GUARANTEE. The Investors shall have received a fully executed
counterpart of the Guarantee from each Subsidiary
4
<PAGE>
as of the Closing Date and such Guarantee shall be in full force and effect.
3H. COMPLIANCE WITH SECURITIES LAWS. The offering and sale of the
Securities under this Agreement shall have complied with all applicable
requirements of federal and state securities laws.
3I. NO ADVERSE, ACTION OR DECISION. There shall be no action,
suit, investigation or proceeding, pending or threatened against or affecting
the Company or any Guarantor or any of their respective properties or rights,
or any of their respective affiliates, associates, officers or directors,
before any court, arbitrator or administrative or governmental body which
seeks to restrain, enjoin, prevent the consummation of or otherwise
materially adversely affect the transactions contemplated by any of the
Related Documents.
3J. APPROVAL AND CONSENTS. The Company and any Guarantor shall
have duly received all authorizations, consents, approvals, licenses, permits
and certificates by or of all federal, state and local governmental
authorities and all other persons identified on Schedule 10H necessary for
the issuance of the Securities and the consummation of the transactions
contemplated hereby and by the Related Documents, and all thereof shall be in
full force and effect at the time of the Closing.
3K. MATERIAL CHANGES. Since November 30, 1997 there shall not have
been any changes or developments in the business of the Company, nor shall
there have been any material contingencies or other liabilities, in each case
which have not been disclosed to the Investors and which have or could
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect.
3L. BOARD NOMINEES. The Board of Directors of the Company shall be
constituted as contemplated by Section 3.1 of the Securityholders Agreement and
the nominee designated by the Investors shall have been appointed to the Board
of Directors effective upon the Closing.
3M. USE OF PROCEEDS. The Investors shall have received evidence in
form and substance reasonably satisfactory to it with respect to the use of
proceeds by the Company in accordance with Section 6B, including consummation
of the Acquisitions.
5
<PAGE>
3N. INVESTORS DUE DILIGENCE. The Investors shall have completed
their due diligence of the Company.
5. PAYMENTS AND PREPAYMENTS OF THE SENIOR SUBORDINATED DEBENTURES .
4A. GENERAL. The Senior Subordinated Debentures shall be
subject to mandatory payments as specified in Sections 4B and 4C and to the
optional prepayments under the circumstances set forth in Section 4D.
4B. MANDATORY PAYMENTS AND PREPAYMENTS OF THE SENIOR
SUBORDINATED DEBENTURES. (a) On the fifth anniversary of the Closing Date,
one-third of the principal amount of the Senior Subordinated Debentures then
outstanding, together with all accrued and unpaid interest thereon to and
including such date, shall become immediately due and payable and shall be
paid by the Company to the holders of the Senior Subordinated Debentures in
accordance with Section 4F hereof. On the sixth anniversary of the Closing
Date, one-half of the principal amount of the Senior Subordinated Debentures
then outstanding, together with all accrued and unpaid interest thereon to
and including such date, shall become immediately due and payable by the
Company and shall be paid by the Company to the holders of the Senior
Subordinated Debentures in accordance with Section 4F hereof. On the seventh
anniversary of the Closing Date, the principal amount of all Senior
Subordinated Debentures then outstanding, together with all accrued and
unpaid interest thereon to and including such date, shall become immediately
due and payable and shall be paid by the Company to the holders of the Senior
Subordinated Debentures.
(b) Three (3) Business Days after the Company's closing of a
Qualifying Public Offering, the principal amount of the Senior Subordinated
Debentures then outstanding, together with all accrued and unpaid interest
thereon to and including such date, shall become due and payable and shall be
paid by the Company to the holders of the Senior Subordinated Debentures. No
later than 30 days prior to date of the filing with the Commission of a
registration statement relating to any Public Offering by the Company of its
equity securities (or, if such time period is not practicable, as soon as
possible after the Company's determination that it will be making a Public
Offering), the Company shall provide written notice to the holders of Senior
Subordinated Debentures that a Public Offering will be made and will set
forth, to the best of its knowledge on the date of such notice, estimates of
the proceeds to the Company from such Public Offering.
6
<PAGE>
4C. PREPAYMENTS OF THE SENIOR SUBORDINATED DEBENTURES UPON A
CHANGE OF CONTROL. Upon a Change of Control, the principal amount of the
Senior Subordinated Debentures outstanding, together with all accrued and
unpaid interest thereon to the Repayment Date (as defined below), shall
become due and payable on the Repayment Date and shall be paid by the Company
to the holders of the Senior Subordinated Debentures. Upon the occurrence of
a Change of Control Event, the notice furnished to each holder of Senior
Subordinated Debentures under clause (iv) of Section 6N (the "CHANGE OF
CONTROL NOTICE") shall (i) refer specifically to this Section 4C, (ii) state
that the Company will prepay the principal amount of all of the Senior
Subordinated Debentures outstanding held by each holder of Senior
Subordinated Debentures, together with all accrued and unpaid interest to the
date of prepayment and (iii) indicate that the Company will prepay the Senior
Subordinated Debentures as provided in clause (ii) above simultaneously with
such Change of Control or, in the event that the Company does not have
advance notice of a Change of Control, as promptly as practicable after such
Change of Control but in any event no later than fifteen (15) days after such
Change of Control, (the "REPAYMENT DATE"). If a proposed Change of Control
shall not occur, (i) the Company shall have no obligation under this Section
4C to prepay any Senior Subordinated Debentures notwithstanding the fact that
the notice required pursuant to Section 6N had previously been delivered in
connection with such proposed Change of Control and (ii) the obligations of
the Company under this Section 4C shall not be affected with respect to any
subsequent Change of Control.
4D. OPTIONAL PREPAYMENTS OF THE SENIOR SUBORDINATED DEBENTURES.
The Senior Subordinated Debentures shall be subject to prepayment, in whole
or in part, at the option of the Company at any time and from time to time at
a price equal to (x) the outstanding principal amount of the Senior
Subordinated Debentures to be prepaid PLUS (y) all accrued and unpaid
interest thereon up to and including the date of prepayment.
4E. NOTICE OF PREPAYMENTS. In the event of prepayment pursuant
to Section 4D, written notice of such prepayment shall be given by the
Company by first-class, certified mail, return receipt requested, postage
prepaid to the holders of the Senior Subordinated Debentures at their
respective addresses as the same appear on the records of the Company, not
less than 30 days prior to the prepayment date, specifying the prepayment
date, the principal amount of the Senior Subordinated Debentures to be
7
<PAGE>
prepaid on such date and that such prepayment is to be made pursuant to
Section 4D. Notice of prepayment having been given as aforesaid, the
principal amount of the Senior Subordinated Debentures specified in such
notice, together with interest thereon to the prepayment date, shall become
due and payable on such prepayment date.
4F. MANDATORY PAYMENTS AND PARTIAL PREPAYMENTS PRO RATA. If
there is more than one holder of the Senior Subordinated Debentures, the
aggregate principal amount of each partial prepayment of the Senior
Subordinated Debentures shall be allocated among the holders of the Senior
Subordinated Debentures at the time outstanding in proportion to the unpaid
principal amounts of the Senior Subordinated Debentures respectively held by
each such holder. For purposes of allocation pursuant to this Section 4F
only, each Senior Subordinated Debenture (to the extent possible) shall be
rounded to the nearest $1,000.
4G. DEFAULT DEBENTURES. If at any time the Company fails, for
any reason, to pay interest on the Senior Subordinated Debentures in full in
cash then at any time after thirty days following the date such interest was
due (as set forth in paragraph 1A), a majority of the holders of Securities
may, at their option, by written instrument filed with the Company, rescind
and annul any declaration of acceleration made pursuant to paragraph 9A and
direct the Company to issue default debentures ("DEFAULT DEBENTURES" and
individually called a "DEFAULT DEBENTURE") with a principal amount thereunder
equal to the dollar amount of such interest that was due and at the interest
rate per annum equal to the lower of (a) 14% and (b) the maximum rate, if
any, permitted by applicable law, compounded quarterly, together with
additional Warrants to purchase shares of Common Stock to the extent provided
in paragraph 6S hereof, in lieu of such cash deficiency. Upon issuance of a
Default Debenture, neither the Company nor any of the Guarantors shall have
any obligation to pay the interest which was due but not paid and on which
such Default Debenture is based. Such Default Debentures shall be
substantially in the form of Exhibit A attached hereto. For purposes of this
Agreement, except as otherwise provided in this Agreement, all references to
the Senior Subordinated Debentures shall be deemed to include any and all
Default Debentures.
4H. PREPAYMENTS OF DEFAULT DEBENTURES. Without limiting any of
the Company's obligations contained in this
8
<PAGE>
Agreement (including, without limitation, pursuant to paragraphs 4B, 4C and
4D hereof), prior to making any cash payment on or with respect to the Senior
Subordinated Debentures other than the Default Debentures (whether as payment
of interest and/or principal) the Company shall prepay in full all then
outstanding Default Debentures (including all accrued and unpaid interest
thereon up to and including the date of such prepayment).
6. OPTIONAL PUT AND REPURCHASE OF THE WARRANTS.
5A. OPTION OF HOLDERS TO PUT WARRANTS UPON A CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, any holder of Warrants shall have
the right upon written notice as hereinafter provided in Section 5C to
require the Company to purchase at the Option Closing (as hereinafter
defined), and the Company agrees to so purchase out of funds legally
available therefor, all or any part of the Warrants. The purchase price for
the Warrants shall be paid by certified check at the Option Closing or by
wire transfer of immediately available funds denominated in U.S. dollars to
one or more accounts designated by the holders of the Warrants to the Company
at least two days prior to the Option Closing in an amount equal to the Fair
Market Value (as calculated in accordance with Section 5B below) at the time
of the Change of Control Notice of the Common Stock into which the Warrants
are exercisable, LESS the exercise price of such Warrants.
5B. FAIR MARKET VALUE. The term "Fair Market Value" means the
value (which shall not take into effect any minority discounts) of the Common
Stock as determined by the price per share of such Common Stock which the
Company could obtain from a willing buyer (not a current employee, officer,
consultant or director or any Affiliate of any such Person) for such shares
sold by the Company, as determined in good faith by the Board of Directors of
the Company; PROVIDED, HOWEVER that if (i) the Investors' nominee on the
Board of Directors of the Company has not affirmatively voted in favor of
such determination made by the Board of Directors of the Company, or (ii)
there is no such nominee, the Investors may refer the questions of valuation
(which shall not take into effect any minority discounts) for final
settlement to a nationally recognized investment banking firm designated by
the Investors and reasonably acceptable to the Company; and PROVIDED,
FURTHER, that if the parties cannot agree on such a firm, each party shall
choose a nationally recognized investment banking firm, which shall choose a
third firm, which
9
<PAGE>
shall be nationally recognized, and that third firm shall determine the Fair
Market Value, which determination shall be final and binding. The cost
relating to retaining any investment banking firm(s) pursuant to this Section
5B shall be borne by the Company.
5C. EXERCISE OF THE OPTION. Upon the occurrence of a Change of
Control Event, the Change of Control Notice furnished to each holder of
Warrants shall (i) refer specifically to this Section 5C, (ii) state that the
Company may be required to purchase all the Warrants, (iii) contain the
Company's calculation of the purchase price for the Warrants to be purchased
(including a detail of the Fair Market Value of the Common Stock at the time
of the Change of Control Notice) (iv) indicate that the Company will purchase
the Warrants as provided in clause (ii) above at the Option Closing upon
written notice of the exercise of an option by a holder of Warrants, (v)
indicate that a closing (the "OPTION CLOSING") for such purchase and sale
shall take place on a date specified in the notice, which date shall be a
date occurring not earlier that 60 days nor more than 90 days after the date
on which the notice is delivered, (vi) indicate where the Option Closing
shall take place and (vii) be delivered by certified mail return receipt
requested. A holder of Warrants shall furnish written notice to the Company
of the exercise of an option pursuant to this Section 5C within at least 30
days prior to the Option Closing. At the Option Closing, the Company shall
pay the purchase price for the securities being purchased determined as
described above against delivery of the securities being purchased. No
waiver by a holder of a Warrant of its right under this Section 5C to require
the purchase of any or all of the Warrants held by such holder in respect of
a Change of Control shall affect the rights of such holder under this Section
5C in respect of any subsequent Change of Control. If a proposed Change of
Control shall not occur, (i) the holders of Warrants shall rescind their
exercise of any Option and shall have no right to require the Company to
purchase the Warrants with respect to such proposed Change of Control, (ii)
the Company shall have no obligation under this Section 5C to purchase
Warrants notwithstanding the fact that the notice required pursuant to
Section 6N had previously been delivered in connection with such proposed
Change of Control, and (iii) the obligations of the Company under this
Section 5C shall not be affected with respect to any subsequent Change of
Control.
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5D. OPTIONAL REDEMPTION OF THE WARRANTS. (a) Subject to the
rights of holders of the Warrants to exercise such Warrants and the rights of
holders of the Warrants to put such Warrants pursuant to Section 5A hereof,
the Warrants shall be subject to redemption at the Company's option, in whole
but not in part, at any time on or after a Qualifying Public Offering of
Common Stock; PROVIDED, HOWEVER, that the Company shall not have the right to
redeem the Warrants in any event pursuant to this Section 5D as long as any
Senior Subordinated Debentures are outstanding.
(b) The redemption price for the Warrants shall be payable
immediately upon redemption, by certified bank cashier's check, and shall be
$1.00 per Warrant
5E. NOTICE OF REDEMPTION. The Company shall give each holder of
the Warrants written notice of the redemption pursuant to Section 5D not less
than 60 days prior to the redemption date, specifying such redemption date,
that all of the outstanding Warrants are to be redeemed on such date and that
such redemption is to be made pursuant to Section 5D. Notice of redemption
having been given as aforesaid, the redemption amount due in respect of all
of the Warrants and as calculated in Section 5D(b), shall become due and
payable on such redemption date unless the holder of such Warrants (i) shall
have put such warrants, in whole or in part, pursuant to Section 5A or (ii)
unless the filing by the Company of a registration statement under the
Securities Act relating to the Common Stock obtainable upon exercise of the
Warrants shall have been requested by a holder thereof (either before or
after receipt of such notice) pursuant to the Registration Rights Agreement,
in which case the redemption shall be effected 30 days after the declaration
of effectiveness of such registration statement by the Commission. Should
the Warrants not be redeemed on such redemption date due to the Company's
failure to perform its obligations under this Section 5E, such redemption may
be effected only after compliance with the provisions of this Section 5 from
and after such redemption date.
7. AFFIRMATIVE COVENANTS. THE PROVISIONS OF THIS SECTION 6 ARE FOR THE
BENEFIT OF THE INVESTORS SO LONG AS THEY HOLD ANY OF THE SECURITIES AND, TO THE
EXTENT SET FORTH HEREIN, FOR THE BENEFIT OF EACH OTHER HOLDER OF THE
SECURITIES; PROVIDED, HOWEVER, THAT, UNLESS OTHERWISE PROVIDED HEREIN, UPON THE
LATER TO OCCUR OF (X) THE CONSUMMATION OF A QUALIFYING PUBLIC
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OFFERING AND (Y) REPAYMENT IN FULL OF ANY AND ALL AMOUNTS (INCLUDING, WITHOUT
LIMITATION, PRINCIPAL AND INTEREST) DUE UNDER THE SENIOR SUBORDINATED
DEBENTURES OUTSTANDING, THE COMPANY SHALL NO LONGER BE BOUND BY THE COVENANTS
SET FORTH IN SECTIONS 6A (OTHER THAN 6A(III), (V) AND (VI)), 6B, 6C, 6D, 6E,
6G, 6H, 6I, 6J, 6N, 6Q AND 6R.
6A. FINANCIAL STATEMENTS. The Company will deliver to the
holders of Securities:
(i) as soon as practicable and in any event within 45 days after
the end of each month in each fiscal year commencing with the month of
February, 1998, unaudited management reports of the Company setting
forth the financial, operational and other performance data of the
Company in reasonable detail and reasonably satisfactory to the
Investors, which shall include at least a consolidated statement of
operations and a consolidated balance sheet for or as at the end of such
month, in each case setting forth, in comparative form, comparable
information from the same month in the preceding fiscal year and
management's budget, all as such reports are then prepared by the
management of the Company in the conduct of its business;
(ii) as soon as practicable and in any event within 45 days after
the end of each quarterly period in each fiscal year (except for the
fourth quarter), statements of income and cash flow of the Company for
such quarterly period and for the period from the beginning of the
current fiscal year to the end of such quarterly period and a balance
sheet of the Company as at the end of the most recent year and at the
end of such quarterly period, setting forth in each case in comparative
form figures for the corresponding period in the preceding fiscal year,
all in reasonable detail and reasonably satisfactory in scope to the
holders of Securities, and prepared in accordance with GAAP (except for
footnote disclosure) on a basis consistent with past practice and
certified by the chief financial officer or chief executive officer of
the Company as fairly presenting the financial condition of the Company,
subject to the changes resulting from audit and year-end adjustments;
(iii) as soon as practicable and in any event within 120 days
after the end of each fiscal year, statements of income, changes in
stockholders' equity and cash flow of the
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Company for such year, and a balance sheet of the Company as at
the end of such year, setting forth in each case in comparative form
corresponding figures from the preceding annual audit, all in reasonable
detail and reasonably satisfactory in scope to the holders of
Securities, and in each case audited by BDO Seidman LLP or such other
independent public accountants of recognized national standing selected
by the Company and reasonably satisfactory to the holder of Securities,
whose report in each case shall state that such financial statements
present fairly the results of operations and cash flows of the Company,
in accordance with GAAP on a basis consistent with prior years and that
the examination by such accountants has been made in accordance with
generally accepted auditing standards then in effect in the United
States;
(iv) as soon as practicable and in any event by the end of each
fiscal year beginning with fiscal year 1999, a budget for the Company,
as approved by the Board of Directors of the Company, for the following
fiscal year setting forth in comparative form corresponding figures from
the preceding fiscal year, in reasonable detail and certified as to its
good-faith preparation by the chief financial officer or chief executive
officer of the Company;
(v) promptly upon transmission thereof, copies of all financial
statements, information circulars, proxy statements and reports as the
Company shall send to its stockholders and that are material to the
business of the Company, and copies of all registration statements and
prospectuses and all reports which it files with the Commission (or any
governmental body or agency succeeding to the functions of the
Commission) or with any securities exchange on which any of its
securities are listed or with NASDAQ, and copies of all press releases
and other statements made available generally by the Company to the
public concerning material developments in the business of the Company;
(vi) promptly upon receipt thereof, a copy of each other report
submitted to the Company by independent accountants in connection with
any annual, interim or special audit made by them of the books of the
Company; and
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(vii) with reasonable promptness, such other financial and/or
operating data as the holders of Securities may reasonably request.
Together with each delivery of the financial statements required by clauses
(ii) and (iii) above, the Company will deliver to each holder of Securities
an Officer's Certificate (a) demonstrating (with computations in reasonable
detail) compliance by the Company with the provisions of Section 7A, (b)
stating that the Company is in compliance with the provisions of Sections 7B,
7C, 7D and 7E and (c) stating that there exists no Default or Event of
Default or, if any Default or Event of Default exists, specifying the nature
thereof, the period of existence thereof and what action the Company proposes
to take with respect thereto. Together with each delivery of financial
statements required by clause (iii) above, the Company will deliver to each
holder of Securities a certificate of the accountants referred to in such
clause (iii) stating that, in making the audit necessary to the certification
of such financial statements, they have obtained no knowledge of any Default
or Event of Default or, if, to their knowledge any such Default or Event of
Default exists, specifying the nature and period of existence thereof;
PROVIDED, HOWEVER, that such accountants shall not be liable to anyone by
reason of their failure to obtain knowledge of any such Default or Event of
Default which would not be disclosed in the course of an audit conducted in
accordance with generally accepted auditing standards then in effect in the
United States. Each holder of Securities is hereby authorized to deliver a
copy of any financial statement or certificate delivered pursuant to this
Section 6A to any regulatory body having jurisdiction over such holder that
requests or requires delivery of such information.
Each holder of Securities hereby acknowledges that it is aware, and
that it will advise its representatives who are provided with the information
furnished pursuant to this Section 6A and Section 6C that certain information
furnished by the Company pursuant to this Section 6A and Section 6C may
constitute material nonpublic information and that the United States
securities laws prohibit any person in possession of material nonpublic
information concerning an issuer from purchasing or selling securities of
such issuer or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is
likely to purchase or sell such securities.
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6B. USE OF PROCEEDS. The proceeds of the sale of the Securities
(net of all expenses associated with the issuance thereof) shall be used for
(i) the acquisitions of Consolidated Technologies, Inc., Cone Biotech, Inc. and
The Western States Group, Inc. (the "ACQUISITIONS"), (ii) general corporate
purposes, (iii) refinancing of certain indebtedness in an amount not to exceed
$500,000 and (iv) repayment of certain indebtedness of the Company, Binary
Associates, Inc. and Avre, Inc. to Drummond Financial Corporation in an amount
not to exceed $250,000.
6C. BOOKS AND RECORDS; INSPECTION OF PROPERTY. The Company will
keep, and will cause each of its Subsidiaries to keep, proper books of record
and account in which full, true and correct entries in conformity in all
material respects with GAAP shall be made of all material dealings and
transactions in relation to its business and activities. The Company will,
upon reasonable advance notice, permit any Person representing the holders of
Securities and designated in writing by such holder, at such holder's expense,
to visit and inspect any of the properties of the Company or any of its
Subsidiaries during normal business hours in a manner which does not unduly
interrupt the normal course of business, to examine the corporate, financial
and operating records of the Company or any of its Subsidiaries and make copies
thereof or extracts therefrom and to discuss the affairs, finances and accounts
of any of such corporations with the directors, officers and independent
accountants of the Company and its Subsidiaries, all at such reasonable times
and only to the extent such holders may reasonably request.
6D. COVENANT TO SECURE SENIOR SUBORDINATED DEBENTURES EQUALLY. If
the Company or any Guarantor shall create or assume any Lien upon any of its
property or assets, whether now owned or hereafter acquired, other than Liens
permitted by the provisions of Section 7C hereof, it will make or cause to be
made effective provisions whereby the Senior Subordinated Debentures will be
secured by such Lien senior to any and all other Indebtedness (other than
Senior Debt) thereby secured as long as any such other Indebtedness shall be so
secured.
6E. [INTENTIONALLY OMITTED]
6F. STOCK TO BE RESERVED. The Company covenants that all shares of
Common Stock that may be issued upon the exercise
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of the Warrants will, upon issuance and following the Company's receipt of the
exercise price, be validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof. The Company
further covenants that during the period within which the Warrants may be
exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of Common Stock to permit the exercise of all of
the outstanding Warrants.
6G. COMPLIANCE WITH LAWS, ETC. The Company will, and will cause
each of its Subsidiaries to, comply with the requirements of all applicable
laws, rules, regulations and orders of any Governmental Authority, and obtain
and maintain in good standing all licenses, permits and approvals from any and
all governments, governmental commissions, boards or agencies of jurisdictions
in which they carry on business required in respect of the operations of the
Company and its Subsidiaries, except for those with which the failure to comply
or maintain would not have a Material Adverse Effect.
6H. ERISA. (a) As of the date hereof, neither the Company nor any
of its Subsidiaries has any Pension Plans.
(b) If, at any time after the Closing Date, the Company or any of
its Subsidiaries should adopt a Pension Plan, promptly (and in any event within
30 days) after the Company or any Subsidiary knows or has reason to know that a
Reportable Event with respect to such Pension Plan has occurred, that Pension
Plan is or may be terminated, reorganized, partitioned or declared insolvent
under Title IV of ERISA or that the Company or any of its Subsidiaries will or
may incur any liability under Section 4062, 4063, 4064, 4201 or 4204 of ERISA
or promptly upon becoming aware of the occurrence of any (i) event requiring
the Company or any of its Subsidiaries to provide security to a Pension Plan
under Section 401(a)(29) of the Code, (ii) "prohibited transaction", as such
term is defined in Section 4975 of the Code or in Section 406 of ERISA, in
connection with any employee benefit plan maintained or contributed to by the
Company or any of its Subsidiaries or any trust created thereunder for which a
statutory or administrative exemption is not available, (iii) notice of intent
to terminate a Pension Plan or Pension Plans having been filed under Title IV
of ERISA by the Company or any of its Subsidiaries or any ERISA Affiliate, any
Pension Plan administrator or any combination of the foregoing,
(iv) institution of proceedings by the PBGC to terminate or to cause a trustee
to be appointed to administer any Pension Plan, (v) partial or complete
withdrawal by the Company or any of its Subsidiaries or any ERISA Affiliate
from any Multiemployer Pension Plan, (vi) institution of proceedings by a
fiduciary of any Multiemployer Pension Plan against the Company or any of its
Subsidiaries to enforce Section 515 of ERISA and such proceeding shall not have
been dismissed within 30 days thereafter, (vii) failure of the Company or any
of its Subsidiaries or any ERISA Affiliate to make a required installment under
Section 412(m) of the Code or any other payment required under Section 412 of
the Code or to
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pay any amount which it shall have become liable to pay to the PBGC or to a
Pension Plan under Title IV of ERISA on or before the due date, (viii)
application by the Company or any of its Subsidiaries or any ERISA Affiliate
for a waiver of the minimum funding standard under Section 412 of the Code or
Section 302 of ERISA, or (ix) "reorganization" (as defined in Section 418 of
the Code or Title IV of ERISA) of any Multiemployer Pension Plan, the Company
will deliver to each holder of Securities, a certificate of the chief financial
officer of the Company setting forth information as to such occurrence and what
action, if any, the Company is required or proposes to take with respect
thereto. The Company shall also deliver to each holder of Securities any
notices concerning such occurrences which are (a) required to be filed by the
Company or the plan administrator of any such Pension Plan controlled by the
Company with the PBGC, or (b) received by the Company or any of its
Subsidiaries from any plan administrator of a Multiemployer Pension Plan not
under their control. The Company shall furnish to each holder of Securities a
copy of each annual report (Form 5500 Series, excluding Schedule SSA) of any
Pension Plan received or prepared by it or any of its Subsidiaries. Each annual
report and any notice required to be delivered hereunder shall be delivered no
later than 30 days after the later of the date such report or notice is filed
with the Internal Revenue Service or the PBGC or the date such report or notice
is received by the Company or any of its Subsidiaries, as the case may be.
6I. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. The Company (i)
will do or cause to be done all things reasonably necessary to preserve and
keep in full force and effect its corporate existence, rights and franchises
and the corporate existence, rights and franchises of its Subsidiaries (except
as specifically permitted by Sections 7H and 7I hereof), (ii) will cause its
material properties and the material properties of its Subsidiaries to be
maintained and kept in reasonable condition, repair and working order (ordinary
wear and tear excepted) and will cause to be made all necessary repairs and
replacements, thereto, and (iii) will, and will cause each of its Subsidiaries
to, qualify and remain qualified to conduct business in each jurisdiction where
the nature of the business of or ownership of property by the Company or such
Subsidiary may require such qualification except where the failure to so
qualify does not cause a Material Adverse Effect.
6J. INSURANCE. The Company will maintain and will cause each of its
Subsidiaries to maintain with financially sound and reputable insurance
companies, funds or underwriters, insurance for itself and its Subsidiaries of
the kinds, covering the risks and in the relative proportionate amounts usually
carried by companies conducting business activities similar to those of the
Company and its Subsidiaries. From and after a Public Offering of its equity
securities, the Company will use its best efforts to obtain and maintain
directors and officers liability insurance similar to the insurance usually
carried by
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companies conducting business activities similar to those of the Company and
its Subsidiaries.
6K. FURTHER ASSURANCES. The Company and each Guarantor, on the one
hand, shall cooperate with the holders of Securities, on the other hand, and
the holders of Securities, on the one hand, shall cooperate with the Company
and each Guarantor, on the other hand, and execute such further instruments and
documents as the other parties shall reasonably request to carry out to the
satisfaction of such parties to the transactions contemplated by this
Agreement.
6L. FILING OF REPORTS UNDER THE EXCHANGE ACT. The Company shall,
and shall cause each of its Subsidiaries to, give prompt notice to the holders
of Securities of the filing of any registration statement (an "EXCHANGE ACT
REGISTRATION STATEMENT") pursuant to the Exchange Act relating to any class of
securities of the Company or such Subsidiaries and the effectiveness of such
Exchange Act Registration Statement and, with respect to equity securities, the
number of shares of such class of equity security outstanding as reported in
such Exchange Act Registration Statement. If and for so long as the Company or
any of its Subsidiaries has a class of equity securities required to be
registered under the Exchange Act, the Company and the applicable Subsidiaries
shall (i) comply in all material respects with the reporting requirements of
the Exchange Act, and (ii) comply in all material respects with all other
public information reporting requirements of the Commission that are a
condition to the availability of an exemption from the Securities Act (under
Rule 144 thereof, as amended from time to time, or successor rule thereto or
otherwise) for the sale of shares of Common Stock by any Investors. The
Company shall, and shall cause each of its Subsidiaries to, cooperate with the
holders of Securities in supplying such information as may be reasonably
necessary for such holders of Securities 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 (under
Rule 144 thereunder or otherwise) for the sale of shares of Common Stock by the
holders of Securities.
6M. SECURITIES ACT REGISTRATION STATEMENTS. The Company covenants
that it shall not, and shall cause each of its Subsidiaries not to, file any
registration statement under the Securities Act covering any securities unless
it has first given to each of the holders of Securities 20 days written notice
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thereof. The Company further covenants that at any time that any of the
holders of Securities may reasonably be deemed to be a "controlling person" of
the Company or any of its Subsidiaries under the Securities Act, such holders
of Securities shall have the right to participate in the preparation of such
registration statement (regardless of whether or not the holders of Securities
will be a selling security holder in connection with such registration
statement) and to request the insertion therein of material furnished to the
Company in writing which in such Investors' reasonable judgment should be
included. In connection with any registration statement referred to in this
Section 6M, the Company will indemnify each holder of Securities, their
respective partners, officers and directors and each person, if any, who
controls such holders of Securities within the meaning of Section 15 of the
Securities Act (collectively, the "INVESTOR PARTIES"), against all losses,
claims, damages, liabilities and expenses caused by any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus or any preliminary prospectus or any amendment thereof
or supplement thereto or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by any untrue statement or alleged
untrue statement or omission or alleged omission contained in written
information furnished to the Company by such Investor Parties expressly for use
in such registration statement. If, in connection with any such registration
statement, such Investor Parties shall furnish written information to the
Company expressly for use in the registration statement, such Investor Parties
will indemnify the Company, its directors, each of its officers who signs such
registration statement and each person, if any, who controls the Company within
the meaning of the Securities Act against all losses, claims, damages,
liabilities and expenses caused by any untrue statement or alleged untrue
statement of a material fact or any omission or alleged omission of a material
fact required to be stated in the registration statement or prospectus or any
preliminary prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or alleged untrue statement or such omission or
alleged omission is contained in information so furnished in writing by such
holders of Securities for use therein. The provisions of this Section 6M
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are in addition to, and not in limitation of, the provisions of the
Registration Rights Agreement.
6N. NOTICES OF CERTAIN EVENTS. The Company shall promptly give
notice to each holder of Securities (i) of the occurrence of any Default or
Event of Default, (ii) of any default or event of default under any contractual
obligation of the Company or any Guarantor if such default or event of default,
individually or in the aggregate, relates to a contractual obligation equal to
or in excess of $100,000, (iii) of any pending or, to the knowledge of the
Company, threatened litigation, investigation or proceeding to which the
Company or any Subsidiary is a party or, to the knowledge of the Company, is
threatened to be a party which, if such pending or threatened litigation,
investigation or proceeding were adversely determined, would create a liability
of the Company or any Subsidiary equal to or in excess of $100,000 that is not
fully covered by insurance held by the Company or its Subsidiaries, or (iv) of
a Change of Control Event. Any notice delivered pursuant to this Section 6N
shall be accompanied by an Officer's Certificate specifying the details of the
occurrence referred to therein and stating what action the Company or the
Guarantor proposes to take with respect thereto. In addition to the foregoing,
in the case contemplated by clause (iv) of the first sentence of this Section
6N, the Company will also comply with the provisions of Sections 4C, 5B and 5C
hereof.
6O. BOARD NOMINEES. As long as (x) any Senior Subordinated
Debentures are outstanding, (y) the Investors hold any combination of (i)
Warrants exercisable into or (ii) shares obtained upon exercise of Warrants
representing at least 25% of the shares of Common Stock issuable upon exercise
of the Warrants as of the date hereof (or, if an adjustment pursuant to Section
4 of the Warrants shall occur, then at least 25% of the shares of Common Stock
issuable upon exercise of the Warrants, after giving effect to any such
adjustment) or (z) holders of Securities hold Warrants as of the date hereof
exercisable into at least 25% of the shares of Common Stock issuable upon
exercise of the Warrants as of the date hereof (or, if an adjustment pursuant
to Section 4 of the Warrants shall occur, then at least 25% of the shares of
Common Stock issuable upon exercise of the Warrants, after giving effect to any
such adjustment), the holders of a majority of the then-outstanding Securities
will have the right to designate one member to the Board of Directors of the
Company. Any director designated by such holders of Securities shall receive
(A) all
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materials distributed to the Board of Directors of the Company whether provided
to directors in advance of, during or after, any meeting of the Board of
Directors, regardless of whether such director shall be in attendance at any
such meeting, (B) the same compensation and indemnification benefits other
outside members of the Board of Directors of the Company shall receive in his
or her capacity as a director and (C) reimbursement of the reasonable
out-of-pocket expenses of such director incurred in attending the meetings of
the Board of Directors of the Company.
6P. LISTING OF COMMON STOCK. The Company covenants and agrees for
the benefit of the holders of Securities that it will, at its expense, use its
best efforts to cause the shares of Common Stock issuable from time to time
upon exercise of the Warrants to be approved for listing on any exchange or
quotation or market system on which the Common Stock may otherwise be listed,
subject to notice of issuance, and will provide prompt notice to each such
exchange of the issuance thereof from time to time.
6Q. ENVIRONMENTAL LAWS. (i) The Company will, and will cause each
of its Subsidiaries to, comply with and use its reasonable best efforts to
ensure compliance by all tenants and subtenants and with respect to all of its
assets with, all licenses, permits and other authorizations required under and
all other requirements of all applicable laws, regulations, orders, notices and
other requirements of Governmental Authorities or governmental requirements
relating to public health and safety, pollution or to the protection of the
indoor or outdoor environment (the "ENVIRONMENTAL LAWS") and obtain and comply
with and maintain, and use its reasonable best efforts to ensure that all
tenants and subtenants obtain and comply with and maintain, any and all
licenses, approvals, registrations or permits required by Environmental Laws,
except to the extent that failure to so comply or to obtain and comply with and
maintain such licenses, approvals, registrations and permits does not have, and
could not reasonably be expected to result in, a Material Adverse Effect.
(ii) The Company will, and will cause each of its Subsidiaries
to, conduct and complete all investigations, studies, sampling and testing,
and all remedial, removal and other actions, required under Environmental
Laws and promptly comply with all lawful orders and directives of all
Governmental Authorities and
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all governmental requirements with respect to Environmental Laws, except to
the extent that the same are being contested in good faith by appropriate
proceedings or the pendency of such proceedings would not have a Material
Adverse Effect.
(iii) The Company will, and will cause each of its Subsidiaries
to, notify the holders of the Securities of any of the following that is
reasonably likely to have a Material Adverse Effect:
any claim with respect to any Environmental Law that the Company
or any of its Subsidiaries receives, including one to take or pay for any
remedial, removal, response or cleanup or other action with respect to any
hazardous substance, hazardous waste, contaminant, pollutant, regulated waste,
special waste or medical waste or toxic substance or similar terms (as such
terms are defined in any applicable Environmental Law) (collectively,
"HAZARDOUS SUBSTANCES") contained on or generated from any property owned or
leased by the Company;
(b) any written notice of any alleged violation of any Environmental
Law; and
(c) any commencement of or receipt of written intent to commence any
judicial or administrative proceeding or investigation alleging a violation or
potential violation of any requirement of any Environmental Law by the Company
or any of its Subsidiaries.
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(iv) Without limiting the generality of Section 13B, the
Company will indemnify the Investors and each holder from time to time of
the Securities and each of their respective directors, officers,
employees, agents, partners and Affiliates (each such person being called
an "INDEMNITEE" and collectively, the "INDEMNITEES") against, and hold
each Indemnitee harmless from, any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses (including, without
limitation, reasonable counsel fees, charges and disbursements, including,
without limitation, attorneys' and consultants' fees, investigation and
laboratory fees, Response Costs (as such term is defined in CERCLA), court
costs and litigation expenses) of whatever kind or nature arising out of,
or in any way relating to, the violation of, noncompliance with or
liability under any Environmental Laws applicable to the operations of the
Company, any orders, requirements or demands of Governmental Authorities
and/or governmental requirements related thereto, except to the extent
that any of the foregoing are found by a final and nonappealable decision
of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Indemnitee seeking indemnification
therefor. The obligation of the Company under this Section 6Q shall
survive the payment of the Senior Subordinated Debentures and the exercise
of the Warrants.
(v) Neither the Company's nor any of its Subsidiaries' plants
and facilities will use, manage, treat, store or dispose of any Hazardous
Substances in violation of any Environmental Laws, except to the extent
such violation will not cause a Material Adverse Effect.
6R. GUARANTEE BY GUARANTOR. The Company covenants that it will
cause any Subsidiary to execute and deliver to the holders of Securities such
appropriate documents, including this Agreement and the Guarantee, upon
becoming a Subsidiary of the Company to become a Guarantor under this
Agreement and the Guarantee.
6S. ISSUANCE OF WARRANTS WITH INTEREST DEBENTURES. The Company
agrees to issue, together with any Interest Debentures and Default
Debentures, additional Warrants to purchase that number of shares of Common
Stock equal to 131 shares per $1,000 principal amount of Interest Debentures
(as
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adjusted for stock splits, recombinations, dividends and other similar
events). All such shares shall be registered in the name of the recipient of
the Interest Debentures or Default Debentures, as the case may be, or its
designee and will, upon issuance, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
8. NEGATIVE COVENANTS. THE PROVISIONS OF THIS SECTION 7 ARE FOR THE BENEFIT
OF THE INVESTORS SO LONG AS IT HOLDS ANY OF THE SECURITIES AND FOR THE
BENEFIT OF ANY OTHER HOLDER OF SECURITIES; PROVIDED, HOWEVER, THAT UPON
REPAYMENT IN FULL OF ANY AND ALL AMOUNTS (INCLUDING, WITHOUT LIMITATION,
PRINCIPAL AND INTEREST) DUE UNDER THE SENIOR SUBORDINATED DEBENTURES, THE
COMPANY SHALL NO LONGER BE BOUND BY THE COVENANTS CONTAINED IN SECTIONS 7A
THROUGH 7F AND 7H THROUGH 7O.
7A. FINANCIAL COVENANTS.
The Company and its Subsidiaries, on a consolidated basis, shall
maintain the following covenants:
(i) FUNDED DEBT RATIO. As of the date hereof, the Company shall
have and thereafter maintain, for each quarterly period, a ratio of (i)
Funded Debt to (ii) EBITDA of at least 2.50:1.00.
(ii) FIXED CHARGE COVERAGE RATIO. As of the date hereof, the
Company shall have and thereafter maintain, for each quarterly period, a
Fixed Charge Coverage Ratio of at least 2.20:1.00.
(iii) CERTIFICATE OF COMPLIANCE. The Company, as of the date
hereof, and within forty-five (45) days after the end of each fiscal
quarter will provide to the holders of Securities a Certificate of
Compliance in the same form as provided to the Bank, signed by a
financial officer of the Company (i) calculating or stating the
financial covenants set out in this Section 7A, (ii) certifying that no
Events of Default have occurred, and (iii) that the Company is in
compliance with the covenants set out in this section.
7B. RESTRICTIONS ON INDEBTEDNESS AND REPAYMENT OF INDEBTEDNESS. So
long as any of the Senior Subordinated
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Debentures remain outstanding, the Company covenants that it will not incur,
create, assume or suffer to exist any Indebtedness or permit any of its
Subsidiaries to do any of the foregoing, other than the following:
(i) Senior Debt from time to time in an amount not to exceed the
product obtained by multiplying the amount of the Company's consolidated
EBITDA for the preceding twelve calendar months by two;
(ii) Indebtedness represented by the Senior Subordinated
Debentures and this Agreement;
(iii) Indebtedness of the Company which by its terms is
subordinated (to the same extent as the Senior Subordinated Debentures
are subordinated to any Senior Debt) to the Senior Subordinated
Debentures;
(iv) Indebtedness secured by Liens permitted pursuant to Section
7C; and
(v) Indebtedness which is non-recourse to the Company or any
Guarantor, incurred in connection with the acquisition of (A) assets of
another Person by the Company or a Guarantor or (B) stock by the
Company, but only if such Person becomes a wholly-owned Subsidiary of
the Company, after the date hereof and secured solely by the stock or
assets so acquired.
In addition, the Company covenants that it will not, and will not
permit any of its Subsidiaries to, prepay any Indebtedness junior to the
Senior Subordinated Debentures.
7C. RESTRICTIONS ON LIENS. The Company covenants that it will not,
and will not permit any of its Subsidiaries to, create, assume or suffer to
exist any Lien upon any of its property or assets, whether now owned or
hereafter acquired, except:
(i) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings and for which adequate reserves
have been established in accordance with GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other
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similar Persons and other Liens imposed by law incurred in the ordinary
course of business for sums not yet delinquent or being contested in
good faith, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor;
(iii) Liens made to secure Senior Debt;
(iv) Liens incurred through Purchase Money Security Interests in
amounts which, at the time incurred, do not exceed the fair market value
of the asset securing such Liens;
(v) Liens securing Indebtedness permitted under Section 7B(v)
above; provided, however, that in accordance with Section 6D hereof, the
Senior Subordinated Debentures will be secured by a Senior Lien on the
assets or stock so acquired by the Company to the extent of any
investment made therein by the Company; and
(vi) Liens or deposits made to secure payment of workers'
compensation, or in connection with the participation in any fund in
connection with workers' compensation, unemployment insurance, pensions
or other social security programs.
7D. RESTRICTED PAYMENTS. Other than in respect of the Company's
presently outstanding Series A Warrants, Series A Preferred Stock and Series
B Preferred Stock or as otherwise permitted or contemplated in this
Agreement, the Company covenants that it will not make, and will not permit
any Subsidiary to make, any Restricted Payments. Notwithstanding the
foregoing, the Company shall not be permitted to make any payments with
respect to such Series A Warrants or Series A Preferred Stock if any Default
or Event of Default shall have occurred and then be continuing.
7E. LOANS, ADVANCES AND INVESTMENTS. The Company covenants that it
will not, and will not permit any Subsidiary to, make or permit to remain
outstanding any loan or advance to, or guarantee, endorse or otherwise be or
become contingently liable, directly or indirectly, in connection with the
obligations, stock or dividends of, or own, purchase or acquire any stock,
obligations or securities of, or make any Investment in, any Person except
that the Company or any of its Subsidiaries may:
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(i) own, purchase or acquire Permitted Investments;
(ii) endorse negotiable instruments for collection in the ordinary
course of business, make or permit to remain outstanding travel, moving
and other like advances to officers, employees and consultants in the
ordinary course of business or make or permit to remain outstanding
lease, utility and other similar deposits in the ordinary course of
business;
(iii) make an Investment in a Person not otherwise permitted
pursuant to this Section 7E, provided the amount of such Investment
(including the amount of any guarantee, endorsement or other liability
with respect thereto) shall not exceed $25,000 individually or $50,000
in the aggregate;
(iv) make an Investment in a Person that becomes a wholly-owned
Subsidiary as a result of such Investment or in assets of a Person that
become assets of the Company or any wholly-owned Subsidiary; provided
that: (a) such Investments relate to the acquisition of companies
engaged in the business of whole blood or plasma collection, processing
and marketing, selling of blood and blood byproducts and any related
business or activities; (b) the Company shall deliver to the holders of
Securities pro forma financial statements reflecting the Investment and
related calculations demonstrating compliance with all covenants
contained herein, relating to financial and accounting matters, together
with a description in reasonable detail of the nature and reasons for
the proposed transaction; (c) immediately after giving effect to such
transaction, no Default or Event of Default shall exist and be
continuing; and (d) such Investments do not exceed $10,000,000 in
purchase price for the Company in any one fiscal year (provided that the
purchase price paid and to be paid by the Company in connection with the
Acquisitions shall not be counted towards the $10,000,000 limit in any
fiscal year), and
(v) make or permit to remain outstanding loans or advances to any
wholly owned subsidiary (hereafter created).
7F. LEASES. The Company covenants that it will not enter into, or
permit any of its Subsidiaries to enter into, any leases of real or personal
property (except in the normal course
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of business) as lessee or sublessee, with initial terms (excluding options to
renew or extend any term, whether or not exercised) of more than 12 years.
7G. TRANSACTIONS WITH AFFILIATES. The Company covenants that it
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into or permit to exist any transactions (including,
without limitation, the purchase, sale, lease or exchange of any property or
the rendering of any service), with any holder of 5% or more of any class of
equity securities of the Company or with any Affiliate of the Company or of
any such holder on terms that are less favorable to such Subsidiary or the
Company than those that would be obtainable at the time in an arms-length
transaction from any Person who is not such a holder or Affiliate.
7H. MERGER. The Company covenants that it will not, and will not
permit any of its Subsidiaries to, enter into any merger or consolidation
(which does not constitute a Change of Control) or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution) except that the
Company may enter into a merger in connection with an investment permitted by
Section 7E, and except that any Subsidiary may be merged, consolidated,
dissolved or liquidated into the Company.
7I. DISPOSITION OF SUBSTANTIAL ASSETS. The Company covenants that
it will not, and will not permit any of its Subsidiaries to, sell, dispose of
or otherwise convey (by merger, consolidation, sale of stock or otherwise)
(collectively, a "TRANSFER"), in any single or related series of sales,
dispositions or conveyances, any assets of the Company except: (i) if such
Transfer is made in the ordinary course of business consistent with past
practice; (ii) if the net proceeds of such Transfer are applied to the
repayment or prepayment of the Senior Debt or the Senior Subordinated
Debentures pursuant to Section 4D; (iii) if the net proceeds of such Transfer
are reinvested in the business of the Company or are otherwise invested
pursuant to Section 7E(iv); or (iv) if in the aggregate all of the Transfers
made since the Closing Date and not otherwise permitted by clause (i), (ii)
or (iii) above amounts to less than $200,000. Notwithstanding this Section
7I, no assets of the Company or its Subsidiaries shall be sold, disposed of
or otherwise conveyed (i) at less than fair market value (determined in good
faith by the Board of Directors of the Company) nor (ii) if any Default or
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Event of Default shall have occurred and then be continuing or shall result
from such sale or disposition.
7J. CONDUCT OF BUSINESS. The Company covenants that it will not,
and will not permit any of its Subsidiaries to, engage in any material
respect in any business other than the business engaged in by the Company and
its Subsidiaries on the date hereof and any other business or activity
relating to the collection, processing and marketing of blood, plasma and
related products and byproducts.
7K. NO AMENDMENTS. The Company covenants that it will not, and
will not permit any of its Subsidiaries to, amend (i) its Articles of
Incorporation or By-laws in a manner which impairs the rights, privileges or
preferences of the Securities, (ii) the Related Documents in any manner that
impairs any right or privilege of the holders of the Senior Subordinated
Debentures (including, without limitation, enlarging the rights or privileges
of any other Persons at the expense of the holders of the Senior Subordinated
Debentures), or (iii) any Senior Debt Agreement in any manner that impairs
any right of the Senior Subordinated Debentures, including without
limitation, the right to payments of principal and interest when due in
accordance with Section 4B.
7L. REGISTRATION RIGHTS. The Company covenants that it will not
hereafter enter into any agreement with respect to its securities any
provision of which conflicts with or is as favorable as the rights granted to
the holders of Securities in the Registration Rights Agreement.
7M. OFFERING OF SECURITIES. The Company will not take any action
which would subject the issuance or sale of any of the Securities to the
provisions of Section 5 of the Securities Act or violate the provisions of
any securities or Blue Sky Law of any applicable jurisdiction.
7N. ISSUANCE OF SECURITIES. So long as the Debentures are
outstanding: (a) The Company covenants that it will not issue, sell or
otherwise dispose of or part with any shares of capital stock, Indebtedness
or other securities of the Company which, in each case, by their terms are
senior to the Senior Subordinated Debentures, other than, subject to Section
7B(i), Senior Debt, and (b) except to the extent provided in Section 7B(v),
the Company covenants that it will not issue, sell or
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otherwise dispose of or part with any shares of capital stock, Indebtedness
or other Securities of the Company, which by their terms are PARI PASSU to
the Senior Subordinated Debentures.
7O. SALE OF STOCK AND DEBT OF SUBSIDIARIES. So long as the
Debentures are outstanding, the Company covenants that it will not, and will
not permit any of its Subsidiaries to, sell or otherwise dispose of, or part
with control of, any shares of stock or Indebtedness of any Subsidiary,
except to the Company or another wholly-owned Subsidiary and except to the
extent provided in Section 7B(v).
9. SUBORDINATION.
8A. SUBORDINATED DEBT SUBORDINATE TO SENIOR DEBT. The Senior
Subordinated Debentures and the Guarantee shall be junior and subordinate to
all Senior Debt to the extent and in the manner provided in this Section 8
and each holder of a Senior Subordinated Debenture and the Guarantee, by its
acceptance thereof, agrees to be bound by the provisions of this Section 8.
The Company and each holder of Subordinated Debt agree that the payment of
the principal of, and interest on, and all other amounts owing in respect of
the Subordinated Debt is and shall be expressly subordinated, to the extent
and in the manner hereinafter set forth, to the prior payment in full of all
Senior Debt. The Senior Subordinated Debentures shall not be junior or
subordinate to any Indebtedness of the Company other than the Senior Debt.
For purposes hereof, all Indebtedness evidenced by the Senior Subordinated
Debentures, including any refinancing, extension or modification thereof, and
the Company's obligation to pay the redemption price in respect any and all
other obligations of the Company owing to any of the holders of Subordinated
Debt howsoever created or arising shall constitute "SUBORDINATED DEBT".
The Senior Creditor is the holder of the Senior Debt, a third party
beneficiary of Section 8 of this Agreement, and is entitled to rely on the
terms and provisions hereof, limited however, to the provisions of this
Section 8, and to enforce the terms and provisions of this Section 8 in
respect of the Senior Debt and the Subordinated Debt against the Company and
the holders of any of the Subordinated Debt.
8B. SUSPENSION OF RIGHT TO RECEIVE PAYMENTS OF SUBORDINATED DEBT.
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8B(1). FAILURE TO PAY PRINCIPAL OF OR INTEREST ON SENIOR DEBT.
(a) Upon (i) the maturity of Senior Debt by lapse of time, acceleration or
otherwise, (ii) any failure by the Company to make any payment of principal
or interest when due with respect to Senior Debt or (iii) any default in the
payment by the Company of any interest or other amounts due with respect to
Subordinated Debt, all principal of the Senior Debt and all interest thereon
and other amounts due in connection therewith, shall first be paid in full,
or such payment duly provided for in cash or in a manner satisfactory to the
holders of such Senior Debt, before any payment or distribution of any kind
or character, whether in cash, property or securities, shall be paid or
delivered with respect to Subordinated Debt. Any payment or distribution of
any kind or character, whether in cash, property or securities, which may be
payable or deliverable with respect to the Subordinated Debt shall be paid or
delivered directly to the holders of Senior Debt, ratably, for application in
payment thereof, unless and until all Senior Debt shall have been paid in
full and in cash.
(b) Upon the occurrence of any event of default under any Senior
Debt which would, with the giving of notice or the passage of time, or both,
permit the holders of such Senior Debt to accelerate the maturity thereof
upon written notice thereof given to the Company and to the Investors by the
holder of such Senior Debt or their representatives (a "DEFAULT NOTICE"),
then, unless and until such event of default with respect to Senior Debt
shall have been cured or waived in writing by the holders of such Senior
Debt, no payment shall be made by the Company with respect to the principal
of or interest or other amounts due with respect to Subordinated Debt;
PROVIDED, HOWEVER, this section shall not prevent the making of any payment
for longer than 180 days after the giving of a Default Notice unless a
default shall be declared by the holder of the Senior Debt, in which event no
payment of Subordinated Debt shall be made by the Company with respect to the
principal of or interest or other amounts due, in which event the provisions
of Section 8B(1)(a) shall control. Amounts of the Subordinated Debt which
become due during any period during which Senior Debt in respect of which a
Default Notice has been given will be deferred and payable only after all
Senior Debt shall have been paid in full.
(c) Upon the occurrence of (i) any default as set out in
Section 8B(1)(a), or (ii) the giving of any Default Notice as set out in
Section 8B(1)(b), the Company shall not make any payments, and the holders of
the Subordinated Debt shall not receive, ask, demand, sue for any payment or
take any action to enforce, take or receive, directly or indirectly, in cash
or other property, by sale, setoff or in any other manner whatsoever, or
otherwise exercise remedies against the Company with respect to the principal
of, interest on, premium on, or otherwise owing in respect of, the
Subordinated Debt or this Agreement, unless and until such default with
respect to Senior Debt has been cured or waived in writing by the holder of
the Senior Debt or this Agreement.
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8B(2). BANKRUPTCY OR INSOLVENCY. In the event of (a) any
insolvency, bankruptcy, liquidation, reorganization or other similar
proceedings, or any receivership proceedings in connection therewith,
relative to the Company (b) any proceedings for voluntary liquidation,
dissolution or other winding-up of the Company, whether or not involving
insolvency or bankruptcy proceedings (collectively, the foregoing being
"PROCEEDINGS", or individually, a "PROCEEDING"), then all Senior Debt,
including the principal thereof, premium, if any, and interest, including
post-petition interest due thereon, shall first be paid in full, or such
payment shall have been duly provided for, before any further payment is made
with respect to Subordinated Debt. In any Proceedings, any payment or
distribution of any kind or character, whether in cash, property or
securities, which may be payable or deliverable with respect to Subordinated
Debt shall be paid or delivered directly to the holders of Senior Debt,
ratably, for application in payment thereof, unless and until all Senior Debt
shall have been paid in full. In any Proceeding, the holders of Subordinated
Debt shall not have any right to setoff against the Subordinated Debt any
Indebtedness owed by any of the holders of Subordinated Debt to the Company
(including, without limitation, any right of setoff under Section553 of the
Bankruptcy Code). Anything in this Section 8 to the contrary
notwithstanding, no payment or delivery shall be made to holders of Senior
Debt of securities that are issued and delivered to holders of Subordinated
Debt pursuant to liquidation or dissolution of the Company or in a
Proceeding, or upon any merger, consolidation, sale, lease, transfer or other
disposal not prohibited by the provisions of this Agreement, by the Company,
as reorganized, or by the corporation succeeding to the Company or acquiring
its property and assets, if (i) such securities are subordinate and junior at
least to the extent provided in this Section 8 to the payment of all Senior
Debt then outstanding and to the payment of any securities that are issued in
exchange or substitution for any Senior Debt then outstanding and (ii) such
securities mature no earlier than six (6) months after the scheduled maturity
of the Indebtedness under the Bank Debt Agreement.
8C. RIGHTS OF HOLDERS OF SENIOR DEBT NOT TO BE IMPAIRED. No
right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time be in any way prejudiced
or impaired by any act or failure to act by any such holder, or by any
noncompliance by the Company with the terms and provisions and covenants
herein contained,
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regardless of any knowledge thereof any such holder may have or otherwise be
charged with. The provisions of this Section 8 are intended to be for the
benefit of, and shall be enforceable directly by, any one or more of the
holders from time to time of the Senior Debt. Each of the holders of the
Subordinated Debt waives notice of or proof of reliance on this Agreement and
(except as set out in Section 8B(1)(b)) protest, demand for payment and
notice of default by the holders of Senior Debt.
8D. COMPANY'S OBLIGATION UNCONDITIONAL. The provisions of this
Section 8 are solely for the purpose of defining the relative rights of the
holders of Senior Debt, on the one hand, and the holders of Subordinated
Debt, on the other hand, against the Company and its property. Nothing
herein shall impair, as between the Company and the holders of Subordinated
Debt, the obligation of the Company, which is unconditional and absolute, to
pay to the holders thereof the full amount of Subordinated Debt in accordance
with the terms thereof and the provisions hereof and, except as expressly
provided in Section 8B, nothing herein shall prevent the holder of any
Subordinated Debt from exercising all remedies otherwise permitted by
applicable law or hereunder upon Default hereunder or under any Subordinated
Debt (including, without limitation, the right to demand and sue for payment
and performance hereof of the Subordinated Debt and to accelerate the
maturity hereof as provided in Section 9 hereof), subject to the rights under
this Section 8 of holders of Senior Debt to receive cash, property or
securities otherwise payable or deliverable to the holders of Subordinated
Debt. The failure to make any payment with respect to Subordinated Debt by
reason of any provision of this Section 8 shall not be construed as
preventing the occurrence of an Event of Default under Section 9.
8E. PAYMENTS HELD IN TRUST. If the holder of any Subordinated
Debt shall receive any payment or delivery of cash, property or securities in
respect of such Subordinated Debt which such holder is not entitled to
receive under the provisions of this Section 8, such holder will hold any
amount so received in trust for the holders of Senior Debt and will forthwith
turn over to the holders of Senior Debt such payment or delivery in the form
received to be applied in payment or prepayment of Senior Debt; PROVIDED,
HOWEVER, that no holder of Subordinated Debt shall be obligated to determine
whether a payment received by it was appropriately made by the Company.
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8F. SUBROGATION. Upon the payment in full of all Senior Debt
and termination of any Senior Debt Agreement, the holders of Subordinated
Debt shall be subrogated to the rights of the holders of Senior Debt to
receive payments or distributions of assets of the Company applicable to
Senior Debt, until all Subordinated Debt shall have been paid in full. For
the purpose of subrogation, no payments to the holders of Senior Debt of any
cash, property or securities that the holders of Subordinated Debt would be
entitled to receive and retain but for the provisions of this Section 8, and
no payment over pursuant to the provisions of this Section 8 to holders of
Senior Debt by holders of Subordinated Debt, shall, as between the Company
and its creditors (other than the holders of Senior Debt), on the one hand,
and the holders of Subordinated Debt, on the other, be deemed to be a payment
by the Company with respect to the Senior Debt.
8G. RELIANCE BY HOLDERS ON FINAL ORDER OR DECREE. In the event
that delivery of any securities to any holders of Subordinated Debt is
authorized by a final non-appealable order or decree giving effect to the
subordination of the Indebtedness represented by Subordinated Debt to Senior
Debt, and made by a court of competent jurisdiction in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceedings under any applicable law, securities
deliverable with respect to the Indebtedness represented by Subordinated Debt
may be made by the Company, as reorganized, or by the corporation succeeding
to the Company or acquiring its properties and assets, to the holders of
Subordinated Debt, if (i) such securities are subordinate and junior at least
to the extent provided in this Section 8 to the payment of all Senior Debt
then outstanding and to the payment of any securities that are issued in
exchange or substitution for any Senior Debt then outstanding and (ii) such
securities mature no earlier than the scheduled maturity of the Indebtedness
under the Bank Debt Agreement.
8H. LEGEND. The Senior Subordinated Debentures shall be
conspicuously legended indicating that their payment is subordinated to
Senior Debt pursuant to the terms of this Agreement with the following legend
(or substantially equivalent legend):
"THE INDEBTEDNESS EVIDENCED BY THIS SENIOR SUBORDINATED DEBENTURE IS
SUBORDINATED TO THE SENIOR DEBT, AS DEFINED IN SECTION 8 OF
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THAT CERTAIN SECURITIES PURCHASE AGREEMENT DATED FEBRUARY 13, 1998, WHICH
SENIOR DEBT IS HELD BY __________________________, PURSUANT TO, AND TO THE
EXTENT PROVIDED IN SECTION 8 OF THE SECURITIES PURCHASE AGREEMENT (AS
AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME PURSUANT TO THE
TERMS THEREOF), AMONG SERACARE, INC. AND THE INVESTORS NAMED ON THE SIGNATURE
PAGES THEREOF."
8I. SENIOR DEBT NOT AFFECTED. All rights and interests of the
Senior Creditor hereunder, and all agreements and obligations of the Company,
the Guarantor and the holders of Subordinated Debt under this Agreement,
shall remain in full force and effect irrespective of, (i) any lack of
validity or enforceability of all or any portion of this Agreement, (ii) any
change in the amount of interest rate accruing on, time, manner or place of
payment of, or in any other term of, all or any of the Senior Debt, or any
other amendment or waiver of any consent to departure from any of loan
documents, including, without limitation, changes in the terms of
disbursement of the loan proceeds under the Bank Debt Agreement or repayment
thereof, modifications, extensions or renewals of payment dates, changes in
interest rate or the advancement of additional funds by the Senior Creditor
in the Senior Creditor's discretion, (iii) any exchange, release or
non-perfection of any collateral or any release or amendment or waiver of or
consent to departure from any guaranty for all or any of the Senior Debt, or
(iv) any other circumstance in respect of this Agreement which might
otherwise constitute a defense available to, or a discharge of, the Company
in respect of the Senior Debt or the holders of Subordinated Debt.
8J. REINSTATEMENT. The provisions of this Section 8 shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Senior Debt is rescinded or must otherwise be
returned by the Senior Creditor upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, all as though such payment had
not been made.
10. EVENTS OF DEFAULT.
9A. GENERAL. So long as any Senior Subordinated Debentures
remain outstanding, if any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
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(i) the Company or any Guarantor defaults in the payment of any
principal of or interest on any Senior Subordinated Debentures when the
same shall become due, either by the terms thereof or otherwise as
herein provided (including without limitation the Guarantee) and, in the
case of interest payments, such default shall continue for a period of
three (3) Business Days after such date;
(ii) the Company or any Guarantor defaults in the payment when due,
either by the terms thereof or otherwise as herein provided (including
without limitation the Guarantee), of any other amounts on any Senior
Subordinated Debentures and such default shall continue unremedied for
five or more Business Days;
(iii) the Company or any Guarantor (x) defaults in any payment of
principal of or interest on any Indebtedness in an amount exceeding
$250,000 and such default shall continue beyond any applicable grace
period or (y) fails to perform or observe any other agreement, term or
condition contained in any agreement under which any such obligation is
created (or if any other event thereunder or under any such agreement
shall occur and be continuing), and in the case of (y) above, the effect
of such default, failure or other event is to cause, or, with respect to
any Indebtedness, to permit the holder or holders of such obligation (or
a trustee on behalf of such holder or holders) to cause an obligation of
more than $250,000 to become due prior to any stated maturity;
(iv) any representation or warranty made by the Company or any
Guarantor herein or in any certificate or instrument furnished to the
holders of Securities in connection with or pursuant to this Agreement
or any other Related Agreement shall be false in any material respect on
the date as of which made and, if susceptible to cure, such inaccuracy
shall not have been remedied within 30 days after it first becomes known
to any officer of the Company;
(v) the Company or any Guarantor defaults in the performance or
observance of any of the agreements contained in Section 6 or 7 or in
the performance or observance of any other material agreement, term or
condition contained herein or in the Related Documents and any such
default shall not
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have been remedied within 30 days after such default shall first become
known to any officer of the Company;
(vi) the Company or any Guarantor makes an assignment for the
benefit of creditors generally or is not paying its debts as such debts
become due;
(vii) any decree or order for relief in respect of the Company or
any Guarantor is entered under any Bankruptcy Law of any jurisdiction;
(viii) the Company or any Guarantor petitions or applies to any
tribunal for, or consents to, the appointment of, or taking possession
by, a trustee, receiver, custodian, liquidator or similar official of
the Company or any Guarantor, of any substantial part of the assets of
the Company or any Guarantor, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a
Subsidiary) relating to the Company or any Guarantor under the
Bankruptcy Law of any other jurisdiction, and such is not dismissed for
90 days;
(ix) any such petition or application of the type specified by
clause (viii) above is filed, or any such proceedings are commenced,
against the Company or any Guarantor and the Company or any Guarantor by
any act indicates its approval thereof, consent thereto or acquiescence
therein, or an order, judgment or decree is entered appointing any such
trustee, receiver, custodian, liquidator or similar official, or
approving the petition in any such proceedings, and such order, judgment
or decree remains unstayed and in effect for more than 60 days;
(x) any order, judgment or decree is entered in any proceedings
against the Company or any Guarantor decreeing the dissolution of the
Company or any Guarantor and such order, judgment or decree remains
unstayed and in effect for more than 60 days;
(xi) any order, judgment or decree is entered in any proceedings
against the Company or any Guarantor decreeing a split-up of the Company
or any Guarantor which requires the divestiture of substantial assets of
the Company, and such order, judgment or decree remains unstayed and in
effect for more than 60 days; or
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(xii) a final judgment in an amount in excess of $250,000 is
rendered against the Company or any Guarantor and, within 45 days after
entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within 60 days after expiration of any such
stay, such judgment is not discharged.
(xiii) (a) the Company or any Guarantor or any ERISA Affiliate
fails to meet its obligations under the minimum funding standard
provided for in Section 412 of the Code for any plan year or in the case
of a single employer-plan a waiver of such standard is sought or granted
under Section 412(d) of the Code, or (b) any Pension Plan subject to
Title IV of ERISA is, has been or is likely to be terminated or the
subject of termination proceedings under ERISA (except for a "standard
termination" under Section 4041 of ERISA), or (c) the Company or any
Guarantor or an ERISA Affiliate has incurred or is likely to incur a
liability under Section 4062, 4063, 4064, 4201 or 4204 of ERISA, and
there results from any such event or events listed in (a)-(c) above a
liability or a material risk of incurring a liability to the PBGC, any
Multiemployer Pension Plan or any Pension Plan which, if incurred, would
have a Material Adverse Effect, or the Company or any Guarantor engaged
in a prohibited transaction that would result in a liability, penalty or
tax under ERISA or Section 4975 of the Code, as the case may be, which
would have a Material Adverse Effect.
then (a) upon the occurrence of any Event of Default described in (1) the
foregoing clause (v), solely as such clause relates to a breach of clause
(i), (ii) or (iii) or the Officer's Certificate delivery requirements of
paragraph 6A, or (2) any of the foregoing, clauses (vi), (vii), (viii), (ix)
or (x), the unpaid principal amount of and accrued interest on the Senior
Subordinated Debentures outstanding shall automatically become immediately
due and payable, without presentment, demand, protest or other requirements
of any kind, all of which are hereby expressly waived by the Company, and (b)
upon the occurrence and during the continuation of any other Event of
Default, the holders of a majority of the aggregate unpaid principal amount
of the Senior Subordinated Debentures may, at their option and in addition to
any right, power or remedy permitted by law or equity, by notice in writing
to the Company, declare all of the Senior Subordinated Debentures to be, and
all of the Senior
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Subordinated Debentures shall thereupon be and become, forthwith due and payable
together with interest accrued thereon.
At any time after any declaration of acceleration is made as provided
above, the holders of at least a majority of the aggregate unpaid principal
amount of the Senior Subordinated Debentures may, by written instrument filed
with the Company, rescind and annul such declaration and the consequences
thereof, PROVIDED, HOWEVER, that at the time any such declaration is annulled
and rescinded:
(i) no judgment or decree shall have been entered for the payment of
any monies due pursuant to the Senior Subordinated Debentures and the other
Related Documents;
(ii) all arrears of interest upon all the Senior Subordinated
Debentures and all other sums payable under the Senior Subordinated
Debentures and the other Related Documents (except any principal,
interest or premium on the Senior Subordinated Debentures which has
become due and payable solely by reason of such declaration under this
Section 9A) shall have been duly paid or waived;
(iii) the Company shall not have paid any amounts to holders of
Securities which have become due solely by reason of such declaration,
other than on a pro rata basis; and
(iv) each and every other Event of Default shall have been waived
or otherwise made good or cured;
and PROVIDED, FURTHER, that no such rescission and annulment shall extend to or
after any subsequent Default or Event of Default or impair any right consequent
thereon.
9B. OTHER REMEDIES. If any Event of Default shall occur and be
continuing, the holder of any Security may proceed to protect and enforce its
rights under this Agreement and such Security by exercising such remedies as
are available to such holder in respect thereof under applicable law, either by
suit in equity or by action at law, or both, whether for specific performance
of any covenant or other agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No remedy conferred in this
Agreement upon the Investors or any other holder of any Security is intended to
be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other
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remedy conferred herein or now or hereafter existing at law or in equity or
by statute or otherwise.
11. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTORS.
THE COMPANY AND EACH GUARANTOR REPRESENT AND WARRANT TO THE HOLDERS OF
SECURITIES THAT:
10A. ORGANIZATION, QUALIFICATION AND AUTHORITY. The Company and
each of its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
and, except as disclosed in Schedule 10A, is duly qualified to do business as
a foreign corporation and in good standing in each jurisdiction in which the
character of its properties or the nature of its business makes such
qualification necessary, except where the failure to so qualify would not
have a Material Adverse Effect. The Company and each of its Subsidiaries has
the corporate power to own its properties and to carry on its business as now
being conducted. The Company has all requisite corporate power and authority
to enter into each of the Related Documents and the Acquisition Documents to
issue and sell the Securities hereunder, and to issue the shares of Common
Stock upon exercise of the Warrants, and has the requisite corporate power
and authority to carry out the transactions contemplated hereby and thereby
to be performed by it, and the execution, delivery and performance hereof and
thereof have been duly authorized by all necessary corporate action. Each
Guarantor has all requisite corporate power and authority to enter into each
of the Related Documents to which it is a party and has the requisite
corporate power and authority to carry out the transactions contemplated
hereby and thereby to be performed by it, and the execution, delivery and
performance hereof and thereof have been duly authorized by all necessary
corporate action. This Agreement constitutes, and each other agreement
(including the Related Documents and the Acquisition Documents) or instrument
(including the Securities) executed and delivered by the Company and each
Guarantor pursuant hereto or thereto or in connection herewith or therewith
will constitute, legal, valid and binding obligations of the Company and each
Guarantor enforceable against the Company and each Guarantor in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium or other
similar laws or by the application of principles of equity.
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10B. FINANCIAL STATEMENTS. The Company has furnished the
Investors with (a) a consolidated audited balance sheet of the Company and
its Subsidiaries as of February 28, 1997, together with the related
statements of income, changes in stockholders' equity and cash flow for the
period then ended and (b) an unaudited balance sheet of the Company and its
Subsidiaries as of November 30, 1997, together with an unaudited statement of
income for the nine-month period then ended (collectively, the "INTERIM
FINANCIALS"). Except as disclosed on Schedule 10B, such financial statements
(including any related schedules and notes) have been prepared in accordance
with GAAP consistently applied throughout the period or periods in question
and show all material liabilities, direct or contingent, as of the dates
specified, required to be shown in accordance with GAAP consistently applied
throughout the period or periods in question and fairly present, in all
material respects, the consolidated financial condition of the Company and
its Subsidiaries as of the dates indicated therein, except for normal audit
adjustments in the case of the Interim Financials. Except as disclosed on
Schedule 10B, there has been no material adverse change in the business,
financial condition, assets, or results of operations of the Company and its
Subsidiaries on a consolidated basis since November 30, 1997.
10C. CAPITAL STOCK AND RELATED MATTERS. As of the Closing Date,
and after giving effect to the transactions contemplated hereby and pursuant
to the Related Documents, (i) the authorized capital stock of the Company
will consist of a total of 50,000,000 shares as follows: (a) 2,100,572
shares of Common Stock, par value $.001 per share, of which 6,741,413 shares
are issued and outstanding, 2,042,986 shares of which are reserved for
issuance upon the exercise of the Warrants, and 6,387,160 shares of which are
reserved for issuance to holders of Warrants and options; (b) 25,000,000
shares of Preferred Stock, par value $.001 per share, of which 3,600 shares
have been designated Series A Preferred Stock (2,000 shares of which are
issued and outstanding and of which 15,000 shares have been designated Series
B Preferred Stock (15,000 shares of which are issued and outstanding); (ii)
all issued and outstanding shares shall have been duly and validly issued,
fully paid and non-assessable; (iii) no shares of capital stock of the
Company will be owned or held by or for the account of the Company or any of
its Subsidiaries; (iv) except as set forth on Schedule 10C, neither the
Company nor any of the Guarantors will have outstanding any securities
convertible into or exchangeable for
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any shares of capital stock or any rights (either preemptive or other) to
subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any other character relating to the issuance
of, any capital stock, or any stock or securities convertible into or
exchangeable for any capital stock; (v) except as set forth on Schedule 10C,
neither the Company nor any of the Guarantors will be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or warrants or options to purchase
shares of its capital stock; (vi) except as set forth on Schedule 10C,
neither the Company nor any of the Guarantors is a party to any agreement
(other than this Agreement, the Securityholders Agreement and the
Registration Rights Agreement) restricting the transfer of any shares of its
capital stock; and (vii) except as set forth on Schedule 10C and except for
the Common Stock of the Company, neither the Company nor any of the
Guarantors will have filed or be required to file, pursuant to Section 12 of
the Exchange Act, a registration statement relating to any class of debt or
equity securities as of the date hereof.
10D. ACTIONS PENDING. Except as set forth on Schedule 10D, there
is no action, suit, investigation or proceeding pending or, to the knowledge
of the Company, threatened against the Company or any Subsidiary or any of
their properties or rights, by or before any court, arbitrator or
administrative or governmental body, which if adversely decided, could
reasonably be expected to have a Material Adverse Effect.
10E. OUTSTANDING DEBT; DEFAULTS. Neither the Company nor any
Subsidiary thereof (i) has any outstanding Indebtedness, except as permitted
by Section 7B, or as disclosed on Schedule 10E and there exist no material
defaults under the provisions of any instrument evidencing such Indebtedness
or of any agreement relating thereto, (ii) is in default under its Articles
of Incorporation (as amended to date) or By-laws, (iii) is in violation of or
in default under or with respect to any indenture, mortgage, lease or any
other contract or agreement to which it is a party or by which it or any of
its property is bound or affected in any respect which could reasonably be
expected to have a Material Adverse Effect, (iv) has any material debts,
liabilities, obligations (whether absolute, accrued, contingent or otherwise)
other than (A) liabilities appearing on the financial statements, (B)
liabilities incurred in the
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ordinary course of business and (C) liabilities under contracts to which the
Company is a party and which are listed on Schedule 10E hereto or which have
an obligation thereunder of less than $10,000 and which were entered into in
the ordinary course of business or (D) liabilities described on the other
schedules hereto or (v) is in default with respect to any order, writ,
injunction or decree of any court or any Federal, state, municipal or other
domestic or foreign governmental department, commission, board, bureau,
agency or instrumentality, and to the Company's knowledge there exists no
condition, event or act which constitutes, or which after notice, lapse of
time, or both, would constitute, such a violation or default under any of the
foregoing.
10F. TITLE TO PROPERTIES. Except as set forth on Schedule 10F,
each of the Company and its Subsidiaries has (i) good and marketable legal
title to its real property (other than real properties which it leases from
others), subject to no Lien of any kind except Liens permitted by Section 7C
and such as do not otherwise impair the value of such property or interfere
with the Company's use thereof, and (ii) good title to all of its other
properties and assets (other than properties and assets which it leases from
others), subject to no Lien of any kind except Liens permitted by Section 7C.
Each of the Company and its Subsidiaries enjoys peaceful and undisturbed
possession under all leases necessary in any material respect for the
operation of its properties and assets and all such leases are valid and
subsisting and in full force and effect.
10G. TAXES. Except as set forth on Schedule 10G, each of the
Company and its Subsidiaries has filed or is in the process of filing all
Federal, state and other income tax returns which are required to be filed,
and has paid or will pay all taxes as shown on said returns and on all
assessments received by it to the extent that such taxes have become due, or
except such as any of the foregoing are being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP; and no tax lien has been filed and no claim is being
asserted with respect to any tax or other similar charge.
10H. CONFLICTING AGREEMENTS. Neither the execution or delivery of
the Related Documents or the Acquisition Documents, nor the offering, issuance
and sale of the Securities or the shares of Common Stock issuable upon the
exercise of the
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Warrants, nor fulfillment of or compliance with the terms and provisions
hereof and thereof, will conflict with, or result in a material breach of the
terms, conditions or provisions of, or constitute a material default under,
or result in any material violation of, or result in the creation of any
material Lien upon any of the properties or assets of the Company or any of
its Subsidiaries pursuant to (i) the Articles of Incorporation or By-laws of
the Company or any of its Subsidiaries, or (ii) except as disclosed on
Schedule 10H, any award of any arbitrator or any agreement (including any
agreement with stockholders), instrument, order, judgment, decree, statute,
law, rule or regulation to which the Company or any of its Subsidiaries is
subject. Except as set forth on Schedule 10H, neither the Company nor any of
its Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing Indebtedness of the Company or any of
its Subsidiaries, any agreement relating thereto or any other contract or
agreement (including its Articles of Incorporation and By-laws) which limits
the amount of, or otherwise imposes restrictions on the incurring of,
Indebtedness of the type to be evidenced by the Senior Subordinated
Debentures, or contains dividend or redemption limitations on any capital
stock of the Company or any of its Subsidiaries, except for the Related
Documents.
10I. OFFERING OF SECURITIES. Assuming the accuracy of the
Investor representations in Section 11, (a) the offer, sale and issuance of
the Securities pursuant to this Agreement and the issuance of the Common
Stock upon exercise of the Warrants, do not require registration of such
securities under the Securities Act or registration or qualification under
any applicable state "blue sky" or securities laws (or if so required, has
been so registered or qualified), and (b) neither the Company nor any of its
Subsidiaries has taken any action which would subject the issuance or sale of
any of the Securities or the Common Stock to the provisions of Section 5 of
the Securities Act or violate the provisions of any securities or Blue Sky
law of any applicable jurisdiction.
10J. BROKER'S OR FINDER'S COMMISSIONS. Except for Sutro & Co.,
which shall receive $640,000, no broker's or finder's fee or commission will
be payable by the Company or any of its Subsidiaries with respect to the
issuance and sale of the Securities or the transactions contemplated hereby
or under the Related Documents. The fee of $640,000 will be paid by the
Company.
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10K. REGULATION G, ETC. Neither the Company nor any of its
Subsidiaries owns or has any present intention of acquiring, any "margin
stock" as defined in Regulation G (12 CFR Part 207) of the Board of Governors
of the Federal Reserve System (herein called a "MARGIN STOCK"). None of the
proceeds resulting from the sale of the Securities will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin stock or for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry margin stock or for any other purpose which
might constitute this transaction a "purpose credit" within the meaning of
Regulation G. Neither the Company nor any of its Subsidiaries nor any agent
acting on their behalf has taken or will take any action which might cause
this Agreement or the Securities to violate Regulation G, Regulation T,
Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the Exchange Act, in each case as in effect now
or as the same may hereafter be in effect.
10L. ENVIRONMENTAL MATTERS. Except as shown on Schedule 10L, the
Company and each of its Subsidiaries is in compliance with all applicable
Environmental Laws and has obtained and is and will be in compliance with all
licenses, permits, registrations (or any extensions thereof) and other
authorizations required under all Environmental Laws, with the exceptions of
instances that, in the aggregate, could not reasonably be expected to result
in any Material Adverse Effect.
(i) Except as shown on Schedule 10L, neither the Company nor any
of its Subsidiaries has received written notice of any failure to comply
with, nor has any such notice been issued that has not been fully
satisfied so as to bring the subject property into full compliance with,
all Environmental Laws.
(ii) Except as shown on Schedule 10L, and to the Company's
knowledge, neither the Company nor any of its Subsidiaries is in
material noncompliance with, material breach of or material default
under any applicable writ, order, judgment, injunction or decree where
such noncompliance, breach or default would materially and adversely
affect the ability of the Company or any of its Subsidiaries to operate
any real property owned or leased by them as currently operated in
connection with the Company's or any Subsidiary's business or otherwise
result in any
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Material Adverse Effect, and no event has occurred and is continuing
that, with the passage of time or the giving of notice or both, would
constitute such noncompliance, breach or default thereunder.
(iii) Except as shown on Schedule 10L, no Hazardous Substance has
been Released (as such term is defined in CERCLA) (and no written
notification of such Release has been filed) at, on or under any
property owned or leased by the Company or any of its Subsidiaries,
during the period of the Company's or any Subsidiary's ownership or
lease of such property, or, to the knowledge of the Company, at any time
previous to such ownership or lease, under conditions that require
remedial action or would otherwise give rise to liability under
applicable Environmental Laws; the Company and each of its Subsidiaries
has contracted for the transportation of all Hazardous Substances solely
with nationally recognized and licensed waste disposal services that, to
the Company's knowledge, after due inquiry, transports such Hazardous
Substances in compliance with applicable laws and no property now or
previously owned by the Company or any of its Subsidiaries has, directly
or indirectly, transported or arranged for the transportation of any
Hazardous Substances except in the manner set forth herein. Neither the
Company nor any of its Subsidiaries is aware of any event, condition or
circumstance involving environmental pollution or contamination, or
employee safety or health relating to the uses or handling of, or
exposure to, Hazardous Substances, that could result in a Material
Adverse Effect.
10M. POSSESSION OF FRANCHISES, LICENSES, ETC. Except as
disclosed on Schedule 10M, the Company and each of its Subsidiaries possesses
all franchises, certificates, licenses, permits and other authorizations from
governmental or regulatory authorities, that are necessary for the ownership,
maintenance and operation of its properties and assets, except where the
failure to possess such could not reasonably be expected to have a Material
Adverse Effect, and the Company and each of its Subsidiaries is not in
violation of any thereof in any material respect.
10N. PATENTS, ETC. Except as disclosed on Schedule 10N, the Company
and each of its Subsidiaries owns or has the right to use all patents,
trademarks, service marks, trade names,
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copyrights, industrial designs, licenses and other rights which are necessary
for the operation of its business substantially as presently conducted,
except where any failure could not reasonably be expected to have a Material
Adverse Effect. To the Company's knowledge, no product, process, method,
substance, part or other material presently sold by or employed by the
Company or any of its Subsidiaries in connection with its business infringes
any patent, trademark, service mark, trade name, copyright, industrial
design, license or other right owned by any other Person. No claim or
litigation is pending or, to the Company's knowledge, threatened against or
affecting the Company or any of its Subsidiaries contesting their right to
sell or use any such product, process, method, substance, part or other
material which would prevent, inhibit or render obsolete the production or
sale of any products of the Company or any of its Subsidiaries or otherwise
have a Material Adverse Effect.
10O. INVESTMENT COMPANY STATUS. Neither the Company nor any
Guarantor is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended, or an "investment adviser" within the meaning of the
Investment Advisers Act of 1940, as amended.
10P. GOVERNMENTAL CONSENTS. No consent, approval or other action
by or any notice to or filing with any court or administrative or
governmental body is required in connection with the execution, delivery and
performance of this Agreement, the other Related Documents, the offer, issue,
sale or delivery of the Securities being purchased hereunder, the issuance of
the shares of Common Stock upon exercise of the Warrants or fulfillment of or
compliance with the terms and provisions hereof or the Securities being
purchased hereunder, except for such filings or consents all of which have
been heretofore made or obtained.
10Q. INSURANCE COVERAGE. The business and properties of the
Company and each of its Subsidiaries are insured for the benefit of the
Company and each of its Subsidiaries in amounts deemed adequate by the
Company's management against risks usually insured against by Persons
operating businesses similar to those of the Company and each of its
Subsidiaries in the localities where such properties are located.
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10R. DISCLOSURE. This Agreement and the other Related Documents,
and the other certificates and written instruments furnished to the Investors
by or on behalf of the Company or the Guarantors pursuant hereto, do not
contain any untrue statement of a material fact or omit to state a material
fact or omit to state a material fact necessary in order to make the
statements contained herein and therein not misleading.
10S. RELATED PARTY TRANSACTIONS. Except as described on Schedule
10S, no current director or officer (nor anyone who was a director or officer
of the Company in the last fiscal year) and, to the Company's knowledge, no
current stockholder of the Company, nor any "Associate" (as defined in Rule
405 promulgated under the Securities Act) of any such Person, is presently,
directly or indirectly through his affiliation with any other Person, a party
to any transaction with the Company or Subsidiary providing for the
furnishing of services by or to, or rental of real or personal property from
or to, or otherwise requiring cash payments to or by any such Person. Except
as described on Schedule 10S, in addition, there is no current relationship
or transaction, or presently contemplated relationship or transaction,
involving the Company or Subsidiary which is required to be disclosed under
Item 404 of Regulation S-K promulgated under the Securities Act.
10T. REGISTRATION RIGHTS. Except as contemplated by the
Registration Rights Agreement or as specified on Schedule 10T, no Person has
the right to cause the Company or any of its Subsidiaries to effect the
registration under the Securities Act of any shares of Common Stock or any
other securities (including debt securities) of the Company or any of its
Subsidiaries.
10U. INTENTIONALLY OMITTED.
10V. AGREEMENTS WITH AFFILIATES. Except as set forth on Schedule
10V, neither the Company nor any Guarantor is a party to any contract or
agreement with, or any other commitment to, an Affiliate of the Company or
the Guarantor.
10W. CONSUMMATION OF RELATED TRANSACTIONS. The Company has
provided the Investors with a fully executed copy of each of the documents
related to the Acquisitions and the transactions contemplated by each such
document or agreement has been consummated without any material modification
or waiver of any term thereof.
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10X. CONDUCT OF BUSINESS. To the Company's knowledge after
reasonable investigation (i) all documents that the Company is presently
required to maintain, store or handle in connection with conducting its
business are maintained, stored or handled substantially in the manner agreed
to between the Company and its respective clients or substantially in
conformity with standards regarding such matters that prevail in the
Company's industry, and (ii) the Company performs all aspects and operations
of its business at or above the prevailing standards for the Company's
industry.
12. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each of the Investors represents and warrants to the Company and each of the
Guarantors that it is acquiring the Securities to be purchased by it
hereunder for its own account for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof in violation
of the Securities Act; provided, however, that nothing herein contained shall
prevent the Investors from selling or transferring any Securities in any
transaction that, in the opinion of their counsel, which shall be reasonably
acceptable to the Company (Willkie Farr & Gallagher and other counsel of
national or regional standing being deemed for the purposes herein to be
acceptable to the Company), is exempt from the registration provisions of the
Securities Act and applicable state securities laws. In addition, each
Investor represents and warrants that it has full power and authority to
enter into and perform its obligations under this Agreement and that this
Agreement has been duly authorized, executed and delivered by a Person
authorized to do so. In addition, each Investor represents and warrants that
it is an "accredited investor" as defined in Rule 501 of the General Rules
and Regulations under the Securities Act.
Each of the Investors further represents and warrants to the
Company and each of the Guarantors as follows:
(a) The execution and delivery of this Agreement by such Investor
does not, and the performance of this Agreement by such Investor will not,
(a) require any consent, approval, authorization, declaration, order or
permit of, or filing, registration or qualification with or notice to, any
governmental authority or regulatory authority, except as may be required
under federal or state securities laws, (b) conflict with or violate the
charter or conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to such Investor, or (c) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
such Investor, or any contract, instrument or agreement to which such
Investor is a party or by which any of its property is bound;
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(b) such Investor understands that there is not a public market
for the Securities, and that the Securities have not been and will not
be registered under the Securities Act by reason of a specific exemption
from the registration provision, the availability of which depends upon,
among other things, the bona fide nature of the investment intent and
the accuracy of such Investor's representations and warranties set forth
in this Section 11; and
(c) Such Investor is domiciled in the state indicted on the
signature page to this Agreement signed by or on behalf of such Investor.
13. DEFINITIONS. For the purpose of this Agreement, and in addition to
terms defined elsewhere in this Agreement, the following terms shall have the
following meanings. In addition, all terms of an accounting character not
specifically defined herein shall have the meanings assigned thereto by
accounting principles generally accepted in the United States of America.
"ACCEPTABLE CONTROLLING PERSON" shall mean, individually or
collectively, Barry D. Plost, Brad C. Rabe, and Jerry L. Burdick, but in any
event such individuals shall only be Acceptable Controlling Persons for so
long as such individuals are executive officers or members of the Board of
Directors of the Company, as the case may be.
"ACQUISITIONS" shall have the meaning set forth in Section 6B.
"ACQUISITION DOCUMENTS" shall mean the principal transaction
documents in connection with the Acquisitions.
"AFFILIATE" shall mean, with respect to any Person, a Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to
control a corporation if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract
or otherwise. The Investors shall not be deemed to be an Affiliate of the
Company solely by reason of their investment in the Securities.
"BANK DEBT" shall mean Indebtedness incurred pursuant to the Bank
Debt Agreement or any renewals, extensions, amendments or modifications
thereof.
"BANK DEBT AGREEMENT" shall mean the loan agreement and all
ancillary documents proposed to be entered into by and among
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the Company and the lender of the Senior Debt, as the same may be amended
from time to time in accordance with its terms.
"BANKRUPTCY LAW" shall mean any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law, whether now or hereafter in effect.
"BUSINESS DAY" shall mean any day which is not a Saturday, Sunday or
day on which banks are authorized by law to close in the State of New York.
"CAPITAL LEASE" shall mean any lease of any Property (whether real,
personal, or mixed) that, in conformity with GAAP, is accounted for as a
capital lease on the balance sheet of the lessee.
"CAPITALIZED LEASE OBLIGATIONS" of any Person means all obligations
of such Person, as lessee, under leases which are, in accordance with GAAP,
recorded as Capital Leases.
"CASH INTEREST EXPENSE" shall mean, for any period, total Interest
Expense to the extent paid in cash (including the interest component of
Capitalized Lease Obligations) of the Company for such period all as determined
in conformity with GAAP.
"CASH TAX EXPENSE" shall mean, for any period, total Tax Expense paid
in cash of the Company for such period all as determined in conformity with
GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Sections
9601 ET SEQ.), and any regulations promulgated thereunder.
"CERTIFICATE OF COMPLIANCE" shall have the meaning set forth in
Section 7A(iii).
"CHANGE OF CONTROL" shall mean the occurrence of any of the
following:
(a) the acquisition or holding by
(i) any person (as such term is used in Section 13(d) and
Section 14(d)(2) of the Exchange
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Act as in effect on the Closing Date) other than an Acceptable
Controlling Person or the holders of Securities, or
(ii) related Persons constituting a group (as such term is
used in Rule 13d-5 under the Exchange Act as in effect on the
Closing Date) other than Acceptable Controlling Persons or the
holders of Securities constituting such a group,
of legal and/or beneficial ownership of more than 40% of the Common
Stock or any securities convertible into more than 40% of the Common
Stock of the Company or any Guarantor outstanding at such time
(excluding for such purpose persons who own shares through any
employee benefit plan of the Company in connection therewith);
(b) all or substantially all of the assets of the Company are
sold or otherwise transferred, in a single transaction or in a series
of related transactions, to any other Person;
(c) any merger, consolidation, stock sale or other similar
transaction of, or in respect of, the Company which results in the
failure by the owners of Common Stock on the Closing Date to,
directly or indirectly in the aggregate, maintain beneficial
ownership (as defined for Commission reporting purposes) and voting
control of at least fifty percent (50%) of the outstanding Common
Stock of the surviving entity in such merger, consolidation or
similar transaction;
(d) any liquidation or dissolution of the Company; or
(e) the first day on which a majority of the members of the
Board of Directors of the Company are not individuals who on the
Closing Date constitute the Board of Directors (together with any new
directors whose election by the Board of Directors or whose
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds of the members of the Board of
Directors then in office who either were members of the Board of
Directors on the
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Closing Date or whose election or nomination was previously so
approved).
Any transaction permitted under the provisions of Section 7H hereof
shall not constitute a "Change of Control."
"CHANGE OF CONTROL EVENT" shall mean the earlier of the occurrence of
(a) a Change of Control, (b) the Company acquiring knowledge of a pending
Change of Control or (c) any action taken by the Board of Directors of the
Company to authorize any liquidation or dissolution of the Company.
"CHANGE OF CONTROL NOTICE" shall have the meaning set forth in
Section 4C.
"CLOSING" shall have the meaning specified in Section 2B.
"CLOSING DATE" shall have the meaning specified in Section 2B.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMISSION" shall mean the United States Securities and Exchange
Commission.
"COMMON STOCK" shall mean the shares of Common Stock, par value $.001
per share, of the Company.
"COMPANY" shall have the meaning specified in the preamble.
"DEFAULT" shall mean any of the events specified in Section 9 hereof,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any of these conditions, event or act has been satisfied.
"DEFAULT NOTICE" shall have the meaning specified in Section 8B(i).
"EBDITA" shall mean, for any period, the sum of net earnings of the
Company and its Subsidiaries on a consolidated basis PLUS each of the
following, to the extent actually deducted in arriving at such net earnings:
(a) depreciation and amortization, (b) Interest Expense and (c) Income Tax
Expense.
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"ENVIRONMENTAL LAWS" shall have the meaning specified in Section 6Q
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which together with the Company would be deemed to be a "single
employer" within the meaning of Section 4001 of ERISA.
"EVENT OF DEFAULT" shall mean any of the events specified in Section
9, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act.
"EXCHANGE ACT" shall mean the United States Securities Exchange Act
of 1934, as amended.
"EXCHANGE ACT REGISTRATION STATEMENT" shall have the meaning
specified in Section 6L.
"FAIR MARKET VALUE" shall have the meaning specified in Section 5B.
"FINANCING AGREEMENTS" shall mean all agreements, instruments and
documents, including, without limitation, any other agreement evidencing Senior
Debt and all security agreements, loan agreements, promissory notes, letter of
credit applications, guarantees, mortgages, deeds of trust, subordination
agreements, pledges, powers of attorney, consents, assignments, leases,
financing statements, intercreditor agreements, and all other written matter
whether heretofore, now, or hereafter executed by or on behalf of the Company
and delivered to any bank and between the Company and any bank, lender or other
Person extending credit to the Company or any Guarantor.
"FIXED CHARGE COVERAGE RATIO" shall mean, for any period, the
quotient obtained by dividing (a) EBDITA less Cash Tax Expense by (b) Fixed
Charges.
"FIXED CHARGES" shall mean, without duplication, for any period,
(a) the amounts for such period of Cash Interest
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Expense, PLUS (b) the amounts of scheduled principal payments on Funded Debt,
PLUS (c) Capital Expenditures made in such period, PLUS (d) cash dividends
paid during such period, PLUS (e) to the extent not otherwise included in the
foregoing, cash payments of principal and interest made on any Indebtedness
other than the Senior Debt.
"FULLY DILUTED OUTSTANDING SHARES" shall mean, when used with
reference to Common Stock on any date of determination, all shares of Common
Stock Outstanding at such date and all shares of Common Stock of the Company
issuable in respect of the Warrants issued pursuant to this Agreement and any
other warrants, options or convertible securities.
"FUNDED DEBT" shall mean all Indebtedness of a Person which matures
more than one year from the date of creation or matures within one year from
such date but is renewable or extendible, at the option of such Person, by its
terms or by the terms of any instrument or agreement relating thereto, to a
date more than one year from such date or arises under a revolving credit or
similar agreement which obligates the Bank to extend credit during a period of
more than one year from such date, and includes, without limitation, all
amounts of any Funded Debt required to be paid or prepaid within one year from
the date of determination of the existence of any such Funded Debt. The term
"Funded Debt" also includes the present value (discounted at the implicit rate,
if known, or ten percent (10%) per annum otherwise) of all obligations in
respect of Capitalized Lease Obligations of the Company.
"GAAP" shall mean generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be in general use by significant
segments of the accounting profession, which are applicable to the
circumstances as of the date of determination.
"GOVERNMENTAL AUTHORITY" shall mean any governmental agency,
authority, instrumentality or regulatory body, other than a court or other
tribunal, in each case whether federal, state, local or foreign.
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"GOVERNMENTAL REQUIREMENT" shall mean any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement
having the force of law, including, without limitation, Environmental Laws,
energy regulations and occupational, safety and health standards or controls,
of any Governmental Authority.
"GUARANTY" shall mean, with respect to any Person, any obligation,
contingent or otherwise, of such Person directly or indirectly guaranteeing any
Indebtedness of another Person, including, without limitation, by means of an
agreement to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or to maintain financial covenants, or to assure
the payment of such Indebtedness by an agreement to make payments in respect of
goods or services regardless of whether delivered or otherwise, PROVIDED THAT
the term "Guaranty" shall not include endorsements for deposit or collection in
the ordinary course of business; and such term when used as a verb shall have a
correlative meaning.
"HAZARDOUS SUBSTANCES" shall have the meaning specified in Section
6Q.
"INDEBTEDNESS" shall mean (without duplication), for any person, (a)
indebtedness of such Person for borrowed money or arising out of any extension
of credit to or for the account of such Person (including, without limitation,
extensions of credit in the form of reimbursement or payment obligations of
such Person relating to letters of credit issued for the account of such
Person) or for the deferred purchase price of property or services, except
indebtedness which is owing to trade creditors in the ordinary course of
business and which is due within ninety (90) days after the original invoice
date; (b) indebtedness of the kind described in clause (a) of this definition
which is secured by (or for which the holder of such Indebtedness has any
existing right, contingent or otherwise, to be secured by) any Lien upon or in
Property (including, without limitation, accounts and contract rights) owned by
such Person, whether or not such Person has assumed or become liable for the
payment of such indebtedness or obligations; (c) Capitalized Lease Obligations
of such Person; and (d) obligations under direct or indirect Guaranties in
respect of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or
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obligations of others of the kinds referred in clauses (a) through (c) above,
including without limitation, (i) any endorsement not for collection in the
ordinary course of business or discount with recourse or undertaking
substantially equivalent to or having economic effect similar to a guaranty
in respect of any such Indebtedness; (ii) any agreement (1) to purchase, or
to advance or supply funds for the payment or purchase of, any such
Indebtedness, (2) to purchase, sell, or lease property, products, materials,
supplies, transportation, or services, in order to enable such Person to pay
any such Indebtedness or to assure the owner thereof against loss regardless
of the delivery or non-delivery of the property, products, materials,
supplies, transportation, or services or (3) to make any loan, advance, or
capital contribution to, or other investment in, or to otherwise provide
funds to or for, such other Person in order to enable such Person to satisfy
any obligation (including any liability for a dividend, stock liquidation
payment or expense) or to assure a minimum equity, working capital, or other
balance sheet condition in respect of any such obligation; and (iii)
obligations under surety, appeal, or custom bonds; and (e) liabilities in
respect of unfunded vested benefits under plans covered by Title IV of ERISA.
"INDEMNITEE" shall have the meaning specified in Section 6Q.
"INTEREST DEBENTURES" shall have the meaning set forth in Section 1A.
"INTEREST EXPENSE" shall mean, for any period, total interest
expense, whether paid or accrued (including the interest component of Capital
Leases), of the Company for such period, all as determined in conformity with
GAAP.
"INTERIM FINANCIALS" shall have the meaning set forth in Section 10B.
"INVESTMENT" shall mean any stock, partnership or joint venture
interest or other security, any loan, Guaranty, advance, contribution to
capital, any acquisitions of real or personal property (other than real and
personal property acquired in the ordinary course of business), and any
purchase or commitment or option to purchase stock or other securities of or
any interest in another Person or any integral part of any business or the
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assets comprising such business or part thereof whether existing on the date of
this Agreement or hereafter made.
"INVESTOR PARTIES" shall have the meaning set forth in Section 6M.
"INVESTORS" shall have the meaning set forth in the preamble.
"LIABILITIES" shall mean any and all liabilities, obligations and
Indebtedness of the Company to any bank of any and every kind and nature,
whether heretofore, now or hereafter owing, arising, due or payable and
howsoever evidenced, created, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed or otherwise and whether arising or
existing under the Bank Debt Agreement or any of the other Financing
Agreements.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, including, without limitation, any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof and the filing of or
agreement to file any financing statement under the Uniform Commercial Code of
any jurisdiction.
"MARGIN STOCK" shall have the meaning set forth in Section 10K.
"MATERIAL ADVERSE EFFECT" shall mean (i) a material adverse effect on
the business or financial condition, assets, properties, rights or results of
operations of the Company and its Subsidiaries taken as a whole, or (ii) any
effect which could materially adversely affect the ability of the Company to
perform any of its material obligations under any of the Related Documents.
"MULTIEMPLOYER PENSION PLAN" shall mean any multiemployer plan, as
defined in Section 4001 of ERISA and subject to Title IV of ERISA, which the
Company or any ERISA Affiliate has an obligation to make contributions (or has
had an obligation to make contributions during the five calendar years
preceding the Closing) for the employees of the Company or any ERISA
Affiliates.
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"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotations system.
"OFFICER'S CERTIFICATE" of a Person shall mean a certificate of the
President, one of the Vice Presidents or the Treasurer or Controller of such
Person.
"OPTION CLOSING" shall have the meaning set forth in Section 5C.
"OUTSTANDING" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock.
"PENSION PLAN" shall mean any single-employer plan, as defined in
Section 4001 of ERISA and subject to Title IV of ERISA, which is maintained or
contributed to (or previously maintained or contributed to during the five
calendar years preceding the Closing) for employees of the Company or any ERISA
Affiliates.
"PERMITTED ACQUISITIONS" shall mean acquisitions of businesses
engaged in whole blood or plasma collection, processing and marketing and
selling of blood or plasma and plasma byproducts, and any related business or
activities in accordance with Section 7E.
"PERMITTED INVESTMENTS" shall mean (i) direct obligations of the
United States, or obligations guaranteed as to principal and interest by the
United States government, (ii) bankers' acceptances and certificates of deposit
issued by any bank or any other bank or trust company or, in the case of any
subsidiary bank of a bank holding company, a bank holding company, having
capital, surplus and undivided profits of at least $500,000,000, the short-term
deposits of which are given an A1 or P1 rating by Standard & Poor's Rating
Group or Moody's Investors Service, Inc., as applicable, (iii) obligations of
any bank or trust company or bank holding company described in clause (ii)
above, in respect of the repurchase of obligations of the type described in
clause (i) hereof, provided that such repurchase obligations shall be fully
secured by obligations of the type described in said clause (i) and the
possession of such obligations shall be transferred to, and segregated from
other obligations owned by, and any such bank's trust company or bank holding
company, (iv) commercial paper given a rating of A1 or P1 by Standard & Poor's
Ratings Group or Moody's Investors Service,
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Inc., as applicable and (v) money market funds organized under the laws of
the United States or any state thereof that invest substantially all of their
assets in any of the types of investments described in clauses (i), (ii),
(iii) or (iv); PROVIDED, HOWEVER, that no such investment shall have a
maturity longer than 270 days from the date of acquisition by the Company.
"PERSON" shall mean and include an individual, partnership,
corporation (including a business trust), a limited liability company, joint
stock company, trust, unincorporated association, joint venture, or other
entity, or a government, or any political subdivision or agency of any of the
foregoing.
"PROCEEDINGS" shall have the meaning set forth in Section 8B(2).
"PROPERTY" shall mean any interest or right in any kind of property
or asset, whether real, personal or mixed, owned or leased, tangible or
intangible, and whether now held or hereafter acquired.
"PUBLIC OFFERING" shall mean the closing of a public offering of
securities by the Company pursuant to a registration statement declared
effective under the Securities Act, except that a Public Offering shall not
include an offering made in connection with a business acquisition or an
employee benefit plan.
"PURCHASE MONEY DEBT" shall mean debt of the Company and any
Subsidiary incurred to finance an acquisition of assets which is secured by a
Purchase Money Security Interest.
"PURCHASE MONEY SECURITY INTEREST" shall mean a purchase money
security interest within the meaning of Section 9-107 of the New York Uniform
Commercial Code, as in effect on the date hereof.
"QUALIFYING PUBLIC OFFERING" shall mean the sale by the Company in an
underwritten offering registered under the Securities Act of any equity
securities of the Company (or its successor) which results in aggregate gross
proceeds from such sales (before underwriters' discounts and selling
commissions) to the Company greater than or equal to $25,000,000.
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"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement between the Company and the Investors in the form of Exhibit E
attached hereto.
"RELATED DOCUMENTS" shall mean this Agreement, the Senior
Subordinated Debentures, the Securityholders Agreement, the Registration Rights
Agreement, and the Guaranty.
"REPAYMENT DATE" shall have the meaning set forth in Section 4C.
"REPORTABLE EVENT" means: a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
Pension Benefit Guaranty Corporation has been waived by regulation).
"RESTRICTED PAYMENT" by any Person shall mean (i) any dividend or
other distribution on any shares of the capital stock (other than dividends or
distributions payable solely in shares of such capital stock) of such Person,
and (ii) any payment on account of the purchase, redemption, retirement or
acquisition of (a) any shares of the capital stock of such Person or (b) any
option, warrant, convertible or exchangeable security (except the Warrants) or
other right to acquire shares of the capital stock of such Person.
"SECURITIES" shall have the meaning specified in Section 1B.
"SECURITIES ACT" shall mean the United States Securities Act of 1933,
as amended.
"SECURITYHOLDERS AGREEMENT" shall mean the Securityholders Agreement
between the Company, certain shareholders thereof and the Investors in the form
of Exhibit F hereto.
"SENIOR DEBT" shall mean all obligations (whether now outstanding or
hereafter incurred) for the payment of which the Company is responsible or
liable as obligor, guarantor or otherwise in respect of the principal, premium
(if any), and unpaid interest on and all other amounts due with respect to (i)
the Bank Debt and (ii) all renewals and extensions of any such Indebtedness or
obligations; PROVIDED, HOWEVER, that the following shall not constitute Senior
Debt: (a) Indebtedness
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evidenced by the Senior Subordinated Debentures or any extension or refunding
thereof, or (b) Indebtedness which purports to be senior to subordinated
debt, including the Senior Subordinated Debentures, but subordinate to the
Indebtedness described in the first sentence hereof; and FURTHER PROVIDED
that notwithstanding anything else contained in this definition (i) Senior
Debt may not exceed the amount set forth in Section 7B(i) of this Agreement;
and (ii) shall be incurred only for (A) Permitted Acquisitions or (B) working
capital purposes.
"SENIOR DEBT AGREEMENT" shall mean any agreement evidencing Senior
Debt.
"SENIOR FUNDED DEBT" shall mean Senior Debt which is Funded Debt.
"SENIOR SUBORDINATED DEBENTURES" shall have the meaning specified in
Section 1A.
"SUBORDINATED DEBT" shall have the meaning specified in Section 8A.
"SUBSIDIARY" shall mean a corporation or other entity of which shares
or similar stock having ordinary voting power to elect a majority of the board
of directors or other managers of such corporation or entity are at the time
owned, directly or indirectly, through one or more intermediaries, by such
Person. Except as otherwise expressly indicated herein, references to
Subsidiaries shall mean any Subsidiaries of the Company.
"TAX EXPENSE" shall mean, for any period, total federal and state
income taxes, before adjustment for extraordinary items, as shown in the
financial statements of the Company for such period, all as determined in
conformity with GAAP.
"UCC" shall mean the Uniform Commercial Code as adopted in the State
of New York.
"WHOLLY OWNED" shall mean with respect to any designated Person that
all of the shares or similar stock having ordinary voting power to elect the
board of directors and Indebtedness in respect of borrowing of such Person is
owned by the specified Person or by one or more wholly owned subsidiaries of
such specified Person, or both.
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14. MISCELLANEOUS.
13A. HOME OFFICE PAYMENT. The Company agrees that it will make
payments of principal of and interest on the Senior Subordinated Debentures
not later than 3:00 p.m., New York time, on the date such payments are due,
by transfer of immediately available funds for credit to the holders of the
Senior Subordinated Debentures as shown on the register maintained by the
Company as of the third Business Day immediately preceding the date of
payment. Such payments shall be made to each such holder's account in the
United States as specified on the attachments to the signature pages hereto
or to such other U.S. account as may be designated to the Company in writing.
13B. INDEMNIFICATION. The Company and each of the Guarantors
jointly and severally agree, whether or not the transactions hereby
contemplated shall be consummated, to pay, and save the Indemnitees harmless
against liability for the payment of, all reasonable out-of-pocket expenses
arising in connection with the transactions and other agreements and
instruments contemplated by this Agreement, including reasonable fees,
expenses and disbursements of Willkie Farr & Gallagher incurred in connection
with the preparation and negotiation of this Agreement, any other agreement
or instrument to be executed and delivered in connection with this Agreement,
any subsequent modification hereof or thereof or consent hereunder or
thereunder (regardless of whether any such modifications or consent becomes
effective) or the execution, delivery or acquisition of any Senior
Subordinated Debenture, capital stock or Warrant issued under or pursuant to
this Agreement, printing, reproduction and similar costs, and the reasonable
costs and expenses, including reasonable attorneys' fees, incurred by any
Indemnitees in enforcing any of its rights hereunder or thereunder, including
without limitation reasonable costs and expenses incurred in any bankruptcy
case (including reasonable fees and expenses of the Indemnitees' counsel in
connection with such bankruptcy case), provided, however, that in no event
shall the Company be required to pay for more than one legal counsel for all
of the Indemnitees. The fees of Willkie Farr & Gallagher incurred in
connection with the preparation and negotiation of this Agreement shall be
paid at the Closing. The Company and the Guarantors jointly and severally
agree to indemnify the Indemnitees and hold them harmless from and against
any and all liabilities, losses, damages, costs and expenses of any kind
(including, without limitation, the reasonable fees and disbursements of the
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Indemnitees' counsel in connection with any investigative, administrative or
judicial proceeding or inquiry, whether or not the Indemnitees be designated
a party thereto) which may be incurred by the Indemnitees relating to or
arising out of this Agreement or the Securities or any actual or proposed use
of the proceeds of the sale of Securities hereunder, provided that no
Indemnitee shall have the right to be indemnified hereunder for its own gross
negligence or willful misconduct as finally determined by a court of
competent jurisdiction. The obligations of the Company and the Guarantor
under this Section 13B shall survive the transfer of any Security or shares
of Common Stock issuable upon exercise of the Warrants and the payment of any
Senior Subordinated Debenture. The indemnification required by this Section
13B shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liabilities are incurred.
13C. CONSENT TO AMENDMENTS. This Agreement may be amended and the
Company and each of the Guarantors may take any action herein prohibited, or
omit to perform any act herein required to be performed by it, or take action
which by the express terms of this Agreement requires the consent of the
holders of Securities only if the Company and each of the Guarantors shall
have obtained the prior written consent to such amendment, action or omission
to act after the Closing Date of the holders of a majority of the aggregate
unpaid principal amount of the Senior Subordinated Debentures at the time
outstanding. Each holder of any Security at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 13C,
whether or not such Security shall have been marked to indicate such consent,
but any Security issued thereafter shall contain a reference or bear a
notation referring to any such consent; PROVIDED, HOWEVER, that
notwithstanding anything in this Section 13C to the contrary, without the
prior written consent of the holder or holders of all Senior Subordinated
Debentures at the time outstanding and affected thereby, no consent,
amendment or waiver to or under this Agreement shall extend or reduce the
maturity of any Senior Subordinated Debenture, or change the principal of, or
the rate or time of payment of interest payable with respect to any Senior
Subordinated Debentures, or affect the time, amount or allocation of any
required or optional prepayments, or reduce the proportion of the principal
amount of the Senior Subordinated Debentures required with respect to any
consent, amendment or waiver, or
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affect the provisions of Section 8 or amend the provisions of this Section
13C. The Company shall promptly send copies of any amendment, waiver or
consent (and any request for any such amendment, waiver or consent) relating
to this Agreement or the Securities to each holder of Senior Subordinated
Debentures and shall consult with such holders in connection with each such
amendment, consent and waiver. No course of dealing between the Company, any
of the Guarantors or any Subsidiary and the holder of any Security nor any
delay in exercising any rights hereunder or under any Security shall operate
as a waiver of any rights of any holder of such Security. As used herein and
in the Securities, the term "this Agreement" and references thereto shall
mean this Agreement as it may, from time to time, be amended or supplemented.
Any amendments to this Agreement shall also require the consent of the
Company and each of the Guarantors proposed to be affected thereby.
13D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF SENIOR
SUBORDINATED DEBENTURES; LOST SENIOR SUBORDINATED DEBENTURE. The Senior
Subordinated Debentures are issuable as registered notes transferable by
endorsement and delivery, each without coupons in denominations of $1,000 and
any larger integral multiple of $1,000. The Company shall keep at its
principal office a register in which the Company shall provide for the
registration of the Senior Subordinated Debentures. Upon surrender for
registration of transfer of any registered Senior Subordinated Debenture at
such office, the Company shall, at its expense, execute and deliver one or
more replacing Senior Subordinated Debentures of like tenor and of a like
aggregate principal amount which replacing Senior Subordinated Debentures
shall be registered as Senior Subordinated Debentures. At the option of the
holder of any Senior Subordinated Debenture, such Senior Subordinated
Debentures, may be exchanged, for other Senior Subordinated Debentures of any
authorized denominations, of a like tenor and of a like aggregate principal
amount, upon surrender of the Senior Subordinated Debenture to be exchanged
at the office of the Company. Whenever any Senior Subordinated Debentures are
so surrendered for exchange, the Company shall execute and deliver, at its
expense, the Senior Subordinated Debentures which the holder thereof making
the exchange is entitled to receive. Every Senior Subordinated Debenture
presented or surrendered for registration of transfer shall be duly endorsed,
or be accompanied by a written instrument of transfer duly executed, by the
holder of such Senior Subordinated Debenture, or his attorney duly authorized
in writing. Any
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Senior Subordinated Debentures issued in exchange for or upon transfer shall
carry the rights to unpaid interest and interest to accrue which were carried
by the Senior Subordinated Debentures so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the Investors or other
evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Senior Subordinated Debenture held by the
Investors and, in the case of any such loss, theft or destruction, upon
receipt of its unsecured indemnity agreement, or other indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Senior Subordinated Debenture, the Company
will make and deliver a replacement Senior Subordinated Debenture of like
tenor, in lieu of such lost, stolen, destroyed or mutilated Senior
Subordinated Debenture.
13E. PROVISIONS APPLICABLE IF ANY OF THE SECURITIES ARE SOLD. The
parties acknowledge that, subject to compliance with applicable securities
laws, the Investors shall be free to transfer the Securities without
restriction. In the event that the Investors should sell or otherwise
transfer any of the Securities or any part thereof to any Person other than
the Company, if any Security shall have been transferred to another holder
and such holder shall have designated in writing the address to which
communications and/or payments with respect to Security shall be mailed, all
payments, notices, certificates, requests, statements and other documents
required to be delivered to the Investors by any provision hereof by reason
of the holding of the transferred Security shall also be delivered to such
holder at such address.
13F. RESTRICTIVE LEGENDS. Each Senior Subordinated Debenture shall
bear the following (or substantially equivalent) legend on the face or
reverse side thereof:
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended, or applicable
state securities laws, and the securities may not be sold,
transferred or otherwise disposed of in the absence of such
registration or an exemption therefrom under said Act and such
laws and the respective rules and regulations thereunder. The
securities represented hereby are also subject to certain
66
<PAGE>
agreements contained in a Securities Purchase Agreement dated
February 13, 1998 among the Company and certain parties thereto,
a Registration Rights Agreement dated February 13, 1998 among
the Company and certain parties thereto, and a Securityholders
Agreement dated February 13, 1998 among the Company and certain
parties thereto.
In addition, the shares of Common Stock issuable upon exercise of the
Warrants shall bear at the time of issuance a legend in substantially the
form set forth above and any legend required by the state securities or "Blue
Sky" laws of any state in which a registered holder thereof is resident,
unless such shares have been registered under the Securities Act.
13G. PERSONS DEEMED OWNERS. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Security is registered as the owner and holder of such Security for the
purpose of receiving payment of principal of and interest on such Security
and for all other purposes whatsoever, whether or not such Security shall be
overdue, and the Company shall not be affected by notice to the contrary.
13H. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made in writing by or on
behalf of any party to this Agreement in connection herewith shall survive
the execution and delivery of this Agreement, regardless of any investigation
made by the Investors or on their behalf.
13I. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
all covenants and agreements in this Agreement contained by or on behalf of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
13J. NOTICES. All communications provided for hereunder shall be
sent by first class mail, overnight courier or by fax with hard copy by first
class mail or overnight courier and, if to the Investors, addressed to the
holders of Securities in the manner (except as otherwise provided in Section
13A with respect to payments of principal of (and premium, if any) and
interest on the Senior Subordinated Debentures) in which its address appears
on the signature page hereof, with a copy to
67
<PAGE>
William J. Grant, Jr., Esq., at Willkie Farr & Gallagher, One Citicorp
Center, 153 East 53rd Street, New York, New York 10022-4677, telecopy number
(212) 821-8111, if to the Company or any Guarantor, addressed to it at 1925
Century Park East, Suite 1970, Los Angeles, California 90067, telecopy no.
(310) 772-7770, Attention: Chief Executive Officer, with a copy to O'Melveny
& Myers LLP, 610 Newport Center Drive, Newport Beach, CA 92660, telecopy
(214) 669-6994, attention: David Krinsky, Esq., or to such other address with
respect to any party as such party shall notify the other in writing, and
(unless otherwise specified herein) shall be deemed received 24 hours after
it is sent if sent via facsimile (with receipt confirmed) or overnight
courier; PROVIDED, HOWEVER, that any such communication to the Company or the
Guarantor may also, at the option of the Investors, be either delivered to
the Company or the Guarantor at their address set forth above or to any
executive officer of the Company or the Guarantor, as applicable .
13K. DESCRIPTIVE HEADINGS. The descriptive headings of the several
Sections and Sections of this Agreement are inserted for convenience only and
do not constitute a part of this Agreement.
13L. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS
BEING DELIVERED AND IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE
PARTIES SHALL BE GOVERNED BY, THE LAW OF SUCH STATE WITHOUT GIVING EFFECT TO
THE CHOICE OF LAW OR CONFLICTS OF LAW PRINCIPLES THEREOF. THIS AGREEMENT IS
EFFECTIVE ONLY WHEN DELIVERED AND ENTERED INTO BY THE INVESTORS IN NEW YORK.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT
IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE COMPANY AT ITS ADDRESS SET FORTH IN SECTION 13J. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE INVESTORS OR ANY HOLDER OF A SECURITY TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
68
<PAGE>
13M. REMEDIES. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the
Company, any Guarantor or any holder of Securities, the Company, any
Guarantor or any holder of Securities (or any of them), as applicable, may
proceed to protect and enforce its or their rights either by suit in equity
and/or by action at law, including, but not limited to, an action for damages
as a result of any such breach and/or an action for specific performance of
any such covenant or agreement contained in this Agreement. Without
limitation of the foregoing, each of the Company and any Guarantor agrees
that failure to comply with any of the covenants including, without
limitation, those included in Sections 6A, 6B, 6C, 6F, 6L, 6M, 6N, 6O and 6Q
and those in respect of the Senior Subordinated Debentures will cause
irreparable harm and that specific performance shall be available in the
event of any breach thereof. The Company, any Guarantor or the Investors
acting pursuant to this Section 13M, shall be indemnified against all
liability, loss or damage, together with all reasonable costs and expenses
related thereto (including reasonable legal and accounting fees and expenses)
in accordance with Section 13B.
13N. ENTIRE AGREEMENT. This Agreement, the other Related
Documents and the other writings referred to herein or delivered pursuant
hereto contain the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior and contemporaneous
arrangements or understandings with respect thereto. This Agreement shall
not constitute a valid and binding agreement, enforceable in accordance with
its terms, until it has been executed and delivered by duly authorized
representatives of each party hereto. No discussions regarding or exchange
of drafts or comments in connection with the transactions contemplated herein
shall constitute an agreement among the parties.
13O. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
13P. AMENDMENTS. This Agreement may not be changed orally, but
(subject to the provisions of Section 13C) only by an
69
<PAGE>
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
13Q. PAYMENT DATE. Notwithstanding any provision of this
Agreement to the contrary, any payment on account of principal of or interest
on any Senior Subordinated Debenture which is due on a date which is not a
Business Day shall be paid on the next succeeding Business Day, and the
amount of interest included in any such payment shall be computed to the date
on which such payment is actually made.
13R. WAIVER OF TRIAL BY JURY. THE COMPANY AND EACH OF THE
GUARANTORS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE
EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT OR ANY OTHER
AGREEMENT OR DOCUMENT REFERRED TO HEREIN AND AGREES THAT ANY SUCH DISPUTE
SHALL, AT THE OPTION OF THE INVESTORS, BE TRIED BEFORE A JUDGE SITTING
WITHOUT A JURY.
13S. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
70
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
SERACARE, INC.
By: /s/ Barry D. Plost
-------------------------------------
Barry D. Plost, Chairman of the
Board, President and Chief
Executive Officer
<PAGE>
INVESTOR:
The foregoing Agreement is
hereby accepted as of the
date first above written.
DECLARATION OF TRUST
FOR DEFINED BENEFIT PLANS
OF ZENECA HOLDINGS INC.
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, New York 10020
Attention: Robert J. Cresci
By: Pecks Management Partners Ltd.,
Its Investment Adviser
By: /s/ Robert J. Cresci
------------------------- Principal Amount of Senior
Robert J. Cresci Subordinated Debentures: $1,865,000
Managing Director
Tax ID Number: 042-809861
Nominee: FUELSHIP & COMPANY
Bank: State Street Bank & Trust Company
One Enterprise Drive-
Solomon Willard Building, 4A
North Quincy, MA 02171
ABA Routing Number: 0110-00028 for Master Trust/
(Wiring Dividend Payments) State Street Bank & Trust Company
Boston, MA 02101
BNF Zeneca Holdings
Acct. JG10
DDA: 34758508
Physical Delivery State Street Bank & Trust Company
Via Federal Express: 225 Franklin Street
Incoming Securities, Concourse Level
Boston, MA 02101
Attn: David Kay
Account: Zeneca Holdings
Account #JG10
<PAGE>
The foregoing Agreement is
hereby accepted as of the
date first above written.
DECLARATION OF TRUST
FOR DEFINED BENEFIT PLANS
OF ICI AMERICAN HOLDINGS INC.
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, New York 10020
Attention: Robert J. Cresci
By: Pecks Management Partners Ltd.,
Its Investment Adviser
By: /s/ Robert J. Cresci Principal Amount of Senior
-------------------------
Robert J. Cresci Subordinated Notes: $2,775,000
Managing Director
Tax ID Number: 043-171-204
Nominee: NORTHMAN & CO.
Bank: State Street Bank & Trust Company
One Enterprise Drive-
Solomon Willard Building, 4A
North Quincy, MA 02171
ABA Routing Number: 0110-00028 for Master Trust/
State Street Bank & Trust Company
Boston, MA 02101
BNF: ICI Americas
Account: I510
DDA: 34758649
Physical Delivery State Street Bank & Trust Company
Via Federal Express: 225 Franklin Street
Incoming Securities, Concourse Level
Boston, MA 02101
Attn: David Kay
Account Name: ICI Americas
Acct # I510
<PAGE>
The foregoing Agreement is
hereby accepted as of the
date first above written.
DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, New York 10020
Attention: Robert J. Cresci
By: Pecks Management Partners Ltd.,
Its Investment Adviser
By: /s/ Robert J. Cresci
--------------------------
Robert J. Cresci Principal Amount of Senior
Managing Director Subordinated Notes: $10,080,000
Tax ID Number: 516-00-0279
Nominee: NAP & COMPANY
Bank: Mercantile Safe Deposit & Trust Company
2 Hopkins Plaza
Baltimore, MD 21201
Attn: Isabelle Corbett
ABA Routing Number: 052-000618 for State of
Delaware Account
Account #214380-8
Physical Delivery Mercantile Safe Deposit & Trust Company
2 Hopkins Plaza
Baltimore, MD 21201
Attn: Connie Philpot
<PAGE>
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE J.W. MCCONNELL FAMILY
FOUNDATION
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, New York 10020
Attention: Robert J. Cresci
By: Pecks Management Partners Ltd.,
Its Investment Adviser
By: /s/ Robert J. Cresci
---------------------------
Robert J. Cresci Principal Amount of Senior
Managing Director Subordinated Notes: $1,280,000
Tax ID Number: 015-7859-03
Nominee: HARE & CO
Bank: Royal Trust Corporation of Canada
Royal Trust Tower, 10th Floor
777 King Street West
Toronto, Ontario M5W1P9
ABA Routing Number: 021000018
Bank of New York
BK of NY/CUST
Account: Royal Trust, #298324
Physical Delivery The Bank of New York
Via Federal Express 1 Wall Street, 5th Floor
New York, NY 10286
Attn: Special Processing Department
Re: Account #298324
<PAGE>
LIST OF OMITTED SCHEDULES
TO SECURITY PURCHASE AGREEMENT*
<TABLE>
<S> <C>
Schedule 10A ORGANIZATION, QUALIFICATION AND AUTHORITY
Schedule 10B FINANCIAL STATEMENTS NOT PREPARED IN ACCORDANCE WITH GAAP;
MATERIAL ADVERSE CHANGES
Schedule 10C CAPITAL STOCK AND RELATED MATTERS
Schedule 10D ACTIONS PENDING OR THREATENED
Schedule 10E OUTSTANDING DEBT; DEFAULTS
Schedule 10F TITLE TO PROPERTIES
Schedule 10G TAXES
Schedule 10H CONFLICTING AGREEMENTS
Schedule 10L ENVIRONMENTAL MATTERS
Schedule 10M POSSESSION OF FRANCHISES, LICENSES, ETC.
Schedule 10N PATENTS, ETC.
Schedule 10S RELATED PARTY TRANSACTIONS
Schedule 10T REGISTRATION RIGHTS
Schedule 10V AGREEMENTS WITH AFFILIATES
</TABLE>
- ------------------------------
* Registrant agrees to furnish supplementally a copy of any of the
omitted Schedules and Exhibits listed above to the Commission upon
request.
<PAGE>
EXHIBIT 4.2
FORM OF SENIOR SUBORDINATED DEBENTURE
THE SENIOR SUBORDINATED DEBENTURE REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, AND IT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION THEREFROM UNDER SAID ACT AND
SUCH LAWS AND THE RESPECTIVE RULES AND REGULATIONS THEREUNDER.
THE SENIOR SUBORDINATED DEBENTURE REPRESENTED HEREBY IS ISSUED WITH ORIGINAL
ISSUE DISCOUNT. FOR INFORMATION CONCERNING THE ISSUE PRICE, AMOUNT OF
ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY OF THIS AGREEMENT,
CONTACT SERACARE, INC. AT 1925 CENTURY PARK EAST, SUITE 1970, LOS ANGELES, CA
90067, TELECOPY NO. (310) 772-7777.
THE INDEBTEDNESS EVIDENCED BY THIS SENIOR SUBORDINATED DEBENTURE IS
SUBORDINATED TO OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED
IN, AND IS OTHERWISE SUBJECT TO THE TERMS OF SECTION 8 OF THAT CERTAIN
SECURITIES PURCHASE AGREEMENT DATED AS OF FEBRUARY 13, 1998 (AS AMENDED,
SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME PURSUANT TO THE TERMS
THEREOF), AMONG SERACARE, INC., AND THE INVESTORS NAMED ON THE SIGNATURE
PAGES THEREOF. (THE "SECURITIES PURCHASE AGREEMENT")
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS SPECIFIED IN THE SECURITIES PURCHASE AGREEMENT AND THE
SECURITYHOLDERS AGREEMENT, DATED AS OF FEBRUARY 13, 1998 (AS AMENDED,
SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME PURSUANT TO THE TERMS
THEREOF), AMONG SERACARE, INC., THE INVESTORS NAMED ON EXHIBIT I.A THEREOF
AND THE SHAREHOLDERS LISTED ON EXHIBIT I.B THEREOF (THE "SECURITYHOLDERS
AGREEMENT"). A COPY OF THE SECURITIES PURCHASE AGREEMENT AND THE
SECURITYHOLDERS AGREEMENT SHALL BE FURNISHED BY SERACARE, INC. TO THE HOLDER
HEREOF UPON WRITTEN REQUEST.
SERACARE, INC.
12% Senior Subordinated Debenture
due February 13, 2005
No. R-1 February 13, 1998
FOR VALUE RECEIVED, the undersigned, SERACARE, INC., a corporation
organized and existing under the laws of the State of Delaware (herein called
the "COMPANY"), hereby promises to pay to ___________ or registered assigns,
the principal sum of $__________ on February 13, 2005,
<PAGE>
with interest (computed on the basis of a 360-day year of twelve 30-day
months) on the unpaid balance thereof at the rate of 12% per annum from the
date hereof, payable quarterly in arrears in cash on the last Business Day of
March, June, September and December in each year, commencing on March 31,
1998, until the principal hereof (or any portion thereof), shall have become
due and payable (whether at maturity, upon acceleration, upon notice of
prepayment or otherwise) or shall have been paid; PROVIDED, HOWEVER, that the
Company may, at its option as provided in paragraph 1A of the Agreement
(defined below) issue interest debentures ("INTEREST DEBENTURES" and
individually called an "INTEREST DEBENTURE"), together with additional
Warrants (as defined in the Agreement) to purchase shares of Common Stock of
the Company to the extent provided in paragraph 6S of the Agreement (defined
below), in the same form and containing the same terms as this Senior
Subordinated Debenture, in lieu of any cash payment of interest due
hereunder. Under certain circumstances set forth in paragraph 4 of the
Agreement (defined below), the Company shall be required to issue default
debentures ("DEFAULT DEBENTURES" and individually called a "DEFAULT
DEBENTURE"), together with additional Warrants to purchase shares of Common
Stock, in the same form and containing the same provisions as this Senior
Subordinated Debenture. For all purposes hereof, all references to "Senior
Subordinated Debenture" shall be deemed to include any "Interest Debenture"
or "Default Debenture." Upon the occurrence and during the continuation of
any payment default, the rate of interest under this Senior Subordinated
Debenture shall be increased to a rate per annum from time to time equal to
the lower of (a) 14% and (b) the maximum rate, if any, permitted by
applicable law, compounded quarterly.
Payments of both principal and interest are to be made at the address
shown on the Company's registry or at such other place as the holder hereof
shall designate to the Company in writing, in lawful money of the United
States of America, all in accordance with Section 13 of the Agreement.
This Senior Subordinated Debenture is one of the 12% Senior Subordinated
Debentures of the Company made and delivered by the Company pursuant to a
Securities Purchase Agreement dated as of February 13, 1998 (as amended,
supplemented or otherwise modified from time to time pursuant to the terms
thereof (the "AGREEMENT"), among the Company, the Guarantors named on the
signature pages thereof(including all interest and principal payments with
respect to this Senior Subordinated Debenture) and the Investors named on the
signature pages thereof and is entitled to the benefits and is subject to the
provisions of the Agreement. As provided in the Agreement, this Senior
Subordinated Debenture is subject to prepayment in whole or in part in
certain cases as specified in the Agreement. Capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Agreement.
<PAGE>
This Senior Subordinated Debenture is a registered Senior Subordinated
Debenture and, as provided in the Agreement, upon surrender hereof for
registration of transfer, duly endorsed, or accompanied by a written
instrument of transfer duly executed, by the registered holder hereof or his
attorney duly authorized in writing, one or more new Senior Subordinated
Debentures of like tenor and for a like aggregate principal amount will be
issued to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company and any agent of the
Company may treat the person in whose name this Senior Subordinated Debenture
is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company shall not be affected by any notice
to the contrary.
The Company has agreed to make prepayments of principal on the dates and
in the amounts specified in the Agreement. The principal amount of this
Debenture may be prepaid by the Company, in whole or in part, without
penalty, at any time.
In case an Event of Default, as defined in the Agreement, shall occur
and be continuing, the principal of this Senior Subordinated Debenture may be
declared due and payable in the manner and with the effect provided in the
Agreement. Upon the terms set forth in the Agreement, the Company has agreed
to pay, and save the holder hereof harmless against any liability for,
liabilities, losses, damages and expenses arising in connection with the
enforcement by the holder hereof of any of its rights under this Senior
Subordinated Debenture, the Agreement or any other Related Document.
This Senior Subordinated Debenture is intended to be performed in the
State of New York, and shall be construed and enforced in accordance with the
law of such State, without giving effect to the conflicts or choice of law
principles of such State.
SERACARE, INC.
ATTEST: By: /s/ Barry D. Plost
By: /s/ Jerry L. Burdick -----------------------------------
------------------------------ Barry D. Plost, Chairman of the Board,
Name: Jerry L. Burdick President and Chief Executive Officer
Title: Secretary
<PAGE>
Exhibit 4.3
FORM OF WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NO SALE, TRANSFER, PLEDGE
OR OTHER DISPOSITION OF THIS WARRANT OR THE SHARES PURCHASABLE
HEREUNDER SHALL BE MADE EXCEPT PURSUANT TO REGISTRATION UNDER
THE SECURITIES ACT, AND APPLICABLE STATE SECURITIES LAWS, OR
PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH ACT AND SUCH STATE
LAWS AND THE RESPECTIVE RULES AND REGULATIONS THEREUNDER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE TERMS AND CONDITIONS SPECIFIED IN THE PURCHASE AGREEMENT
(AS DEFINED BELOW), THE REGISTRATION RIGHTS AGREEMENT DATED AS
OF FEBRUARY 13, 1998 (AS AMENDED, SUPPLANTED OR OTHERWISE
MODIFIED FROM TIME TO TIME PURSUANT TO THE TERMS THEREOF) AMONG
SERACARE INC. AND THE INVESTORS NAMED ON THE SIGNATURE PAGE
THERETO (THE "REGISTRATION RIGHTS AGREEMENT") AND THE
SECURITYHOLDERS AGREEMENT, DATED AS OF FEBRUARY 13, 1998 (AS
AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME
PURSUANT TO THE TERMS THEREOF), AMONG SERACARE, INC., THE
INVESTORS NAMED ON EXHIBIT I.A THEREOF AND THE SHAREHOLDERS
LISTED ON EXHIBIT I.B THEREOF (THE "SECURITYHOLDERS AGREEMENT").
A COPY OF THE SECURITIES PURCHASE AGREEMENT, THE REGISTRATION
RIGHTS AGREEMENT AND THE SECURITYHOLDERS AGREEMENT SHALL BE
FURNISHED BY SERACARE, INC. TO THE HOLDER HEREOF UPON WRITTEN
REQUEST.
_______________________________________________
WARRANT TO PURCHASE COMMON STOCK OF
SERACARE, INC.
_______________________________________________
Exercisable as of the
Commencement Date
<PAGE>
(as defined below)
Void After
the Expiration Date
(as defined below)
THIS CERTIFIES that, for value received, _________________, or registered
assigns, is entitled, subject to the terms and conditions set forth in this
Warrant, to purchase from SERACARE, INC., a Delaware corporation (the
"Company"), _____________ shares (subject to adjustment as provided in
paragraph 4 of this Warrant) fully paid and nonassessable shares of Common
Stock, par value $.001 per share, of the Company (the "Common Stock"), at any
time commencing on the date hereof (the "Commencement Date") and continuing
(unless earlier called or redeemed pursuant to the Securities Purchase
Agreement among the Company, the Investors and Guarantors dated as of
February 13, 1998 (the "Purchase Agreement")) up to 5 p.m. New York time on
the first date on which there are no longer any Warrants outstanding (the
"Expiration Date"), at a price of $.01 per share (the "Exercise Price").
(A) THIS WARRANT MAY BE EXERCISED BY THE HOLDER HEREOF, IN WHOLE
OR IN PART (BUT NOT AS TO A FRACTIONAL SHARE), BY THE PRESENTATION AND
SURRENDER OF THIS WARRANT WITH THE FORM OF ELECTION TO PURCHASE ATTACHED
HERETO, PROPERLY COMPLETED AND EXECUTED BY THE HOLDER BY CERTIFIED MAIL, BY
OVERNIGHT COURIER, IN PERSON OR BY A LEGAL REPRESENTATIVE OR ATTORNEY DULY
AUTHORIZED TO DO SO IN WRITING, AT THE PRINCIPAL OFFICE OF THE COMPANY (OR AT
SUCH OTHER ADDRESS AS THE COMPANY MAY DESIGNATE BY NOTICE IN WRITING TO THE
HOLDER HEREOF AT THE ADDRESS OF SUCH HOLDER APPEARING ON THE BOOKS OF THE
COMPANY), AND UPON PAYMENT TO THE COMPANY OF AN AMOUNT EQUAL TO THE EXERCISE
PRICE MULTIPLIED BY THE NUMBER OF SHARES BEING PURCHASED PURSUANT TO SUCH
EXERCISE, PAYABLE AS FOLLOWS: (i) BY PAYMENT TO THE COMPANY IN CASH, BY
CERTIFIED CHECK OR BY WIRE TRANSFER, (ii) THE DELIVERY AND SURRENDER TO THE
COMPANY OF DEBENTURES ISSUED PURSUANT TO THE PURCHASE AGREEMENT, WHICH
DEBENTURES ARE GUARANTEED BY THE GUARANTORS (AS DEFINED IN THE PURCHASE
AGREEMENT) (THE "GUARANTEE"), IN AN AGGREGATE PRINCIPAL AMOUNT EQUAL TO THE
PURCHASE PRICE FOR SHARES BEING OBTAINED UPON EXERCISE, OR (iii) BY A
COMBINATION OF THE METHODS DESCRIBED IN CLAUSES (i) AND (ii)
<PAGE>
ABOVE. IN THE EVENT THAT THE HOLDER HEREOF CHOOSES TO EXERCISE THIS WARRANT,
IN WHOLE OR IN PART, BY DELIVERY AND SURRENDER TO THE COMPANY OF DEBENTURES
(i) THE HOLDER SHALL BE ENTITLED TO RECEIVE FROM THE COMPANY, AND THE COMPANY
WILL PAY, UPON SUCH DELIVERY AND SURRENDER CASH IN AN AGGREGATE AMOUNT EQUAL
TO ANY AND ALL INTEREST ACCRUED BUT UNPAID ON SUCH DEBENTURES TO THE DATE OF
DELIVERY AND SURRENDER, AND (ii) THE GUARANTORS WILL BE RELIEVED OF THEIR
OBLIGATIONS UNDER THE GUARANTEE TO THE EXTENT OF THE DEBENTURES SURRENDERED
IN ACCORDANCE WITH THIS WARRANT. IN LIEU OF EXERCISING THIS WARRANT, BUT
UPON SURRENDER HEREOF, THE HOLDER MAY ELECT TO RECEIVE A PAYMENT EQUAL TO THE
DIFFERENCE BETWEEN (a) THE FAIR MARKET VALUE (AS SUCH TERM IS DEFINED IN
PARAGRAPH 5B OF THE PURCHASE AGREEMENT) OF A SHARE OF THE COMMON STOCK ON THE
SURRENDER DATE MULTIPLIED BY THE NUMBER OF SHARES AS TO WHICH THE PAYMENT IS
THEN BEING ELECTED AND (b) THE EXERCISE PRICE WITH RESPECT TO SUCH SHARES,
PAYABLE BY THE COMPANY TO THE HOLDER OF THIS WARRANT ONLY IN SHARES OF COMMON
STOCK, THE NUMBER OF WHICH SHALL BE THE NEAREST WHOLE NUMBER OBTAINED BY
DIVIDING SUCH DIFFERENCE BY THE FAIR MARKET VALUE OF A SHARE OF COMMON STOCK
ON THE DATE OF EXERCISE.
The shares of Common Stock so purchased pursuant to paragraph
1(A) above shall be deemed to be issued to the holder hereof as the record
owner of such shares as of the close of business on the date on which this
Warrant shall have been surrendered and payment made for such shares.
Certificates for the shares of Common Stock so purchased shall be delivered
or mailed to the holder promptly after this Warrant shall have been so
exercised, and, unless this Warrant has expired or has been exercised in
full, a new Warrant identical in form but representing the number of shares
of Common Stock with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof at the expense of the
Company.
The Company shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Company upon exercise of the Warrants; PROVIDED, HOWEVER,
that the Company shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
<PAGE>
for such shares in a name other than that of the holder of the Warrant in
respect of which such shares are being issued.
EXCEPT AS OTHERWISE STATED IN THE PURCHASE AGREEMENT, THE
SECURITYHOLDERS AGREEMENT OR THE REGISTRATION RIGHTS AGREEMENT BETWEEN THE
COMPANY AND THE INVESTORS NAMED ON THE SIGNATURE PAGES THEREOF DATED AS OF
FEBRUARY 13, 1998, THE WARRANTS DO NOT CONFER ANY RIGHTS OR PRIVILEGES OR
IMPOSE ANY LIABILITIES OF A SHAREHOLDER OF THE COMPANY UPON THE HOLDER HEREOF.
THIS WARRANT IS EXCHANGEABLE, UPON ITS SURRENDER BY THE HOLDER
AT THE OFFICE OF THE COMPANY REFERRED TO IN PARAGRAPH 1 ABOVE, FOR NEW
WARRANTS (CONTAINING THE SAME TERMS AS THIS WARRANT) EACH REPRESENTING THE
RIGHT TO PURCHASE SUCH NUMBER OF SHARES OF COMMON STOCK AS SHALL BE
DESIGNATED BY SUCH HOLDER AT THE TIME OF SURRENDER (BUT NOT EXCEEDING IN THE
AGGREGATE THE REMAINING NUMBER OF SHARES OF COMMON STOCK WHICH MAY BE
PURCHASED HEREUNDER). UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE COMPANY OF
THE LOSS, THEFT, DESTRUCTION OR MUTILATION OF THIS WARRANT AND UPON DELIVERY
OF INDEMNITY SATISFACTORY TO THE COMPANY (OR, IN THE CASE OF MUTILATION, UPON
SURRENDER OF THIS WARRANT), THE COMPANY WILL ISSUE TO THE HOLDER A
REPLACEMENT WARRANT (CONTAINING THE SAME TERMS AS THIS WARRANT). THE
UNSECURED UNDERTAKING OF THE ORIGINAL HOLDER OF THIS WARRANT OR ANY OF ITS
AFFILIATES (AS SUCH TERM IS DEFINED IN THE PURCHASE AGREEMENT) SHALL
CONSTITUTE SATISFACTORY INDEMNITY FOR PURPOSES OF THIS PARAGRAPH 3. AS USED
HEREIN, "WARRANT" SHALL INCLUDE ALL NEW WARRANTS ISSUED IN EXCHANGE FOR OR
REPLACEMENT OF THIS WARRANT.
THE COMPANY REPRESENTS AND WARRANTS THAT, AS OF THE
COMMENCEMENT DATE, THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THE WARRANTS PROVIDES THE HOLDER OF THIS WARRANT WITH THE RIGHT
TO PURCHASE UP TO _______ OF THE FULLY DILUTED OUTSTANDING SHARES (AS SUCH
TERM IS DEFINED IN PARAGRAPH 4A HEREOF) OF COMMON STOCK. THE NUMBER OF
SHARES OF COMMON STOCK ISSUABLE
<PAGE>
UPON EXERCISE OF THIS WARRANT, AT ANY TIME AFTER THE COMMENCEMENT DATE, SHALL
BE SUBJECT TO ADJUSTMENT FROM TIME TO TIME AS FOLLOWS:
(1) In the event that the Company issues any shares of Common
Stock or other capital stock of the Company, warrants, options, rights or
other Securities convertible into or exchangeable or exercisable for shares
of Common Stock of the Company (other than pursuant to any employee benefit
plan of the Company in existence on the date hereof, but only with respect to
up to 500,000 shares of Common Stock of the Company) for a consideration per
share which would value the Company below $46,000,000 prior to such issuance
(as reflected on the audited balance sheet of the Company delivered in
accordance with paragraph 6A(iii) of the Purchase Agreement) then the number
of shares of Common Stock then issuable upon the exercise of this Warrant
outstanding immediately prior to such issuance, shall forthwith be adjusted
by increasing the number of shares of Common Stock issuable upon exercise of
this Warrant necessary to provide the holders of this Warrant with the right
to purchase up to 10.08% (subject to adjustment to give effect to any
previous exercise of such Warrant) of the Fully Diluted Outstanding Shares of
Common Stock.
In the event that the Company's actual aggregate Pre-Tax
Earnings per share for the fiscal years ending February 28, 1999 and February
29, 2000 (as reflected on the audited balance sheet for each such fiscal year
delivered in accordance with paragraph 6A(iii) of the Purchase Agreement) are
less than 75% of its aggregate Projected Pre-Tax Earnings per share for such
fiscal years (determined using the same methods and procedures for the
projected calculations as will be used for the actual calculations) then the
number of shares of Common Stock then issuable upon exercise of this Warrant
outstanding immediately prior to February 29, 2000, shall forthwith be
adjusted by increasing the number of shares of Common Stock issuable upon
exercise of this Warrant in an amount necessary to provide the holders of
this Warrant with the right to purchase an additional number of shares of
Common Stock in an amount equal to 4.41% of the Fully Diluted Outstanding
Shares of Common Stock as of the Commencement Date.
<PAGE>
In the event that the Company's actual aggregate Pre-Tax
Earnings per share for the fiscal years ending February 28, 1999 and February
29, 2000 (as reflected on the audited balance sheet for each such fiscal year
delivered in accordance with paragraph 6A(iii) of the Purchase Agreement)
exceed 150% of its aggregate Projected Pre-Tax Earnings per share for such
fiscal years (determined using the same methods and procedures for the
projected calculations as will be used for the actual calculations) then the
number of shares of Common Stock then issuable upon exercise of this Warrant
outstanding immediately prior to February 29, 2000, shall forthwith be
adjusted by decreasing the number of shares of Common Stock issuable upon
exercise of this Warrant by an amount equal to _______ of the Fully Diluted
Outstanding Shares of Common Stock as of the Commencement Date; PROVIDED,
HOWEVER, that such adjustment will not occur if the average trading price of
the Company's Common Stock for the thirty (30) consecutive trading days
(calculated based on the volume-weighted average for each trading day)
immediately following release of the Company's earnings for fiscal year
ending February 29, 2000 is less than $7.50 per share.
Sections 4(A)(2) and (3) of this Warrant shall terminate and no
longer be effective upon the earlier to occur of (i) a Qualifying Public
Offering (as defined in the Purchase Agreement), or (ii) February 29, 2000.
The "Fully Diluted Outstanding Shares" of Common Stock, at any date
as of which the number of shares thereof is to be determined, will be the sum
of (i) all issued and outstanding shares of Common Stock as of such date,
PLUS (ii) all shares of Common Stock issuable in respect of all the Warrants
issued pursuant to the Purchase Agreement, PLUS (iii) all shares of Common
Stock or other capital stock of the Company issuable with respect to
Convertible Securities. For purposes of this Warrant, "Convertible
Securities" shall mean evidence of indebtedness, shares of stock, warrants,
options, and other securities which are convertible into, exercisable for, or
exchangeable, with or without payment of additional consideration in cash or
property, for shares of Common Stock or other capital stock of the Company
either immediately or upon the occurrence of a specified date or specified
event. Each holder of a Warrant may reasonably request, at any time, that
the Company provide a reasonably detailed calculation of the Fully Diluted
Outstanding Shares of
<PAGE>
Common Stock, and the Company hereby covenants that it will promptly deliver
such information to the holders of Warrants.
The "Projected Pre-Tax Earnings" shall be as reflected on Exhibit G
to the Purchase Agreement.
For the purposes of any adjustment of the number of shares of
Common Stock issuable upon exercise of the Warrants pursuant to clause (A)
and in the case of the issuance of (i) options to purchase or rights to
subscribe for Common Stock or other capital stock of the Company, (ii)
securities by their terms convertible into or exchangeable for Common Stock
or other capital stock of the Company or (iii) options to purchase or rights
to subscribe for such convertible or exchangeable securities, the following
provisions shall be applicable:
the aggregate maximum number of shares of Common Stock
or other capital stock of the Company deliverable upon exercise
of such options to purchase or rights to subscribe for Common
Stock or other capital stock of the Company shall be deemed to
have been issued at the time such options or rights were issued;
the aggregate maximum number of shares of Common Stock
or other capital stock of the Company deliverable upon
conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued;
on any change in the number of shares of Common Stock
deliverable upon exercise of any such options or rights or
conversions of or exchange for such convertible or exchangeable
securities, other than a change resulting from the antidilution
provisions thereof, the number of shares of Common Stock
issuable upon exercise of
<PAGE> the Warrants shall forthwith be readjusted and to
such number of shares as would have been obtained had the
adjustment made upon the issuance of such options, rights or
securities that were not converted prior to such change been
made upon the basis of such change; and
on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible
or exchangeable securities, the number of shares of Common Stock
issuable upon exercise of the Warrants shall forthwith be
readjusted to such number of shares as would have been obtained
had such options, rights, securities or options or rights
related to such securities not been issued.
If the number of shares of Common Stock outstanding at any
time hereafter is increased by a stock dividend payable in shares of Common
Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date fixed for the determination of holders of Common
Stock entitled to receive such stock dividend, subdivision or split-up, the
number of shares of Common Stock issuable on exercise of the Warrants shall
be increased in proportion to such increase in outstanding shares.
If at any time hereafter the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of Common
Stock or a reverse stock-split, following the record date for such
combination, the number of shares of Common Stock issuable on exercise of the
Warrants shall be decreased in proportion to such decrease in outstanding
shares.
If at any time hereafter any reorganization, reclassification
of the capital stock of the Company (other than a change in par value or from
par value to no par value or from no par value to par value or as a result of
a stock dividend or subdivision, split-up or combination of shares),
consolidation or merger (including a merger in which the Company is the
surviving
<PAGE>
entity), sale or other disposition of all or substantially all of the
Company's assets or a distribution of property to shareholders (other than
distributions payable out of earnings or retained earnings) shall occur, then
each Warrant shall (in lieu of or, in respect of sales of all or
substantially all assets or distribution of property to shareholders, in
addition to, being exercisable for shares of Common Stock) after such
reorganization, reclassification, consolidation or merger be exercisable into
the kind and number of shares of stock or other securities or property
(including cash) of the Company or of the corporation resulting from such
consolidation or surviving such merger or to which such properties and assets
shall have been sold or otherwise disposed of or distributed to which the
holder of the number of shares of Common Stock deliverable (immediately prior
to the time of such reorganization, reclassification, consolidation, merger,
sale or other disposition or distribution) upon exercise of such Warrant
would have been entitled upon such reorganization, reclassification,
consolidation, merger, sale or other disposition or distribution. The
provisions of this Section shall similarly apply to successive
reorganizations, reclassifications and other transactions contemplated above.
All calculations under this paragraph 4 shall be made to the
nearest cent ($.01) or to the nearest whole share, as the case may be.
In any case in which the provisions of this paragraph 4 shall
require that an adjustment of the number of shares of Common Stock issuable
upon exercise of the Warrants shall become effective immediately after a
record date for an event, the Company may, until the occurrence of such
event, defer issuing to the holder of any Warrant exercised after such record
date and before the occurrence of such event the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by
such event over and above the shares of capital stock issuable upon exercise
before giving effect to such adjustment; PROVIDED, HOWEVER, that the Company
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
<PAGE>
Whenever the number of shares of Common Stock issuable upon
exercise of the Warrants shall be adjusted as provided in paragraph 4, the
Company shall promptly thereafter file, at its principal office or at such
other place as may be designated by the Company, a statement, signed by its
president or chief financial officer and by its treasurer, showing in
reasonable detail the facts requiring such adjustment and the number of
shares of Common Stock issuable upon exercise of the Warrants that shall be
in effect after such adjustment. The Company shall cause a copy of such
statement to be sent by first-class, certified mail, return receipt
requested, postage prepaid, to each holder of the Warrants at such holder's
address appearing in the Company's records. Where appropriate, such copy may
be given in advance and may be included as part of a notice required to be
mailed under the provisions of Paragraph 4(I).
In the event the Company shall propose to take any action of
the types described in clause (F) of paragraph 4, the Company shall give
notice to each holder of the Warrants in the manner set forth in clause (H)
above at such holder's address appearing in the Company's records, which
notice shall specify the record date, if any, with respect to any such action
and the date on which such action is to take place. Such notice shall also
set forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Warrants and the number, kind or class of
shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon exercise
of the Warrants. In the case of any action that would require the fixing of
a record date, such notice shall be given at least 10 days prior to the date
so fixed, and in case of all other action, such notice shall be given at
least 15 days prior to the taking of such proposed action. Failure to give
such notice, or any defect therein, shall not affect the legality or validity
of any such action.
(i) If any event occurs of the type contemplated by the
provisions of this paragraph 4 but not expressly provided for by such
provisions, the Board of Directors, or, at the election of holders of a
majority of the Warrants, an appraiser, will make appropriate adjustments to
the terms and conditions of the
<PAGE>
Warrants as may be necessary fully to carry out the adjustments contemplated
by this paragraph 4.
(ii) The Company will not, by amendment of its Articles of
Incorporation or By-laws or through any reorganization, transfer of assets,
reclassification, merger, dissolution, issue or sale of securities or
otherwise, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by the Company hereunder but will at all
times in good faith assist in the carrying out of all the provisions hereof
and in the taking of all such actions as may be necessary or appropriate in
order to protect the rights of the holders of the Warrants against impairment.
(A) SUBJECT TO AND UPON COMPLIANCE WITH THE PROVISIONS HEREOF, THE
HOLDER OF THIS WARRANT SHALL HAVE THE RIGHT AT SUCH HOLDER'S OPTION, AT ANY
TIME PRIOR TO THE CLOSE OF BUSINESS ON THE EXPIRATION DATE, TO EXERCISE ALL
OR ANY PART OF THIS WARRANT INTO COMMON STOCK AT THE EXERCISE PRICE.
In order to exercise its right, the holder hereof shall
surrender (by certified mail, by overnight courier, in person or by a legal
representative or attorney duly authorized to do so in writing) this Warrant
to the Company at its office at 1925 Century Park East, Suite 1970, Los
Angeles, California 90067, Attention: Chief Executive Officer, (or such
other office or agency as the Company may designate by notice in writing by
certified mail to the holders of the Warrants), together with a written
notice that the holder elects to exercise this Warrant, in accordance with
the provisions herein. Such notice shall also state the name or names (with
addresses) in which the certificate or certificates for Common Stock shall be
issued. Together with such notice there shall be paid an amount equal to the
Exercise Price times the number of shares of Common Stock as to which this
Warrant is being exercised. Such payment shall be by certified check or wire
transfer, or by surrender of Debentures and release of the relevant portion
of the Guarantee, or by the holder's election to receive a payment of shares
in Common Stock, each as set forth in paragraph 1(A) hereof.
<PAGE>
Promptly after the receipt of the written notice referred to
in paragraph 5(B) and surrender of this Warrant as aforesaid, the Company
shall issue and deliver to the holder hereof, registered in such name or
names as such holder may direct, a certificate or certificates for the number
of full shares of Common Stock issuable upon the exercise of this Warrant (or
specified portion thereof), bearing an appropriate restrictive legend in
respect of applicable federal and state securities laws and an additional
legend referencing the Purchase Agreement, the Registration Rights Agreement
and the Securityholder Agreement. To the extent permitted by law, such
exercise shall be deemed to have been effected and the exercise price shall
be determined as of the close of business on the date by which both (i) such
written statement shall have been received by the Company, accompanied by
payment as provided above, and (ii) this Warrant shall have been surrendered
as aforesaid, and at such time the rights of the holder of this Warrant (or
specified portion thereof) as such holder shall cease, and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall then be issuable upon exercise shall be deemed to have
become the holder or holders of record of the shares of Common Stock
represented thereby.
No fractional shares shall be issued upon exercise of
Warrants. In the case of any Warrant which is exercised in part only, the
Company shall, upon such exercise, execute and deliver to the holder thereof,
at the expense of the Company, a new Warrant or Warrants equal to the
unexercised portion of such Warrant. Instead of issuing any fractional
shares of Common Stock that would otherwise be issuable upon exercise of any
of the Warrants, the Company shall round off to the nearest whole number of
shares of Common Stock.
The Company will at all times reserve, free from any
preemptive rights, and keep available out of its authorized Common Stock,
solely for the purpose of issue upon the exercise of Warrants as herein
provided, such number of shares of Common Stock as shall then be issuable
upon the exercise of all outstanding Warrants. The Company covenants and
agrees that all shares of Common Stock which shall be so issuable will, upon
issuance, be duly authorized and issued, fully paid and
<PAGE>
nonassessable. The Company will not take any action which results in any
adjustment of the number of shares of Common Stock issuable upon exercise of
the Warrants if the total number of shares of Common Stock issuable after
such action upon exercise of the Warrants would (a) exceed the total number
of shares of Common Stock then authorized by the Company's Articles of
Incorporation in effect at such time or (b) would conflict with, or result in
any violation of, or require the consent or approval (unless the same shall
be obtained) of any court or administrative or governmental body pursuant to,
or result in a breach of the terms, conditions, or provisions of, or
constitute a default under, the Articles of Incorporation or By-laws of the
Company or any agreement or instrument to which the Company is then subject.
The Company will take all such action as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any
applicable requirements of any exchange upon which the Common Stock of the
Company may be listed or in respect of which the Common Stock has qualified
for unlisted trading privileges.
The Company will not close its books against the issuance or
transfer of any shares of Common Stock issuable upon exercise of the Warrants.
If this Warrant, or any part hereof, is transferred to another
holder and such holder shall have designated in writing the address to which
communications with respect to this Warrant shall be mailed, all notices,
certificates, requests, statements and other documents required to be
delivered to the transferring holder by any provision of the Purchase
Agreement by reason of the holding of this Warrant shall also be delivered to
such holder.
(A) UPON THE OCCURRENCE OF A CHANGE OF CONTROL (AS DEFINED IN THE
PURCHASE AGREEMENT), THE HOLDER OF THIS WARRANT SHALL HAVE THE RIGHT TO REQUIRE
THE COMPANY TO PURCHASE AT THE OPTION CLOSING (AS SUCH TERM IS DEFINED IN THE
PURCHASE AGREEMENT), AND THE COMPANY SHALL PURCHASE IN ACCORDANCE WITH THE
TERMS OF THE PURCHASE AGREEMENT, ALL OR ANY PART OF THIS WARRANT FOR A PURCHASE
<PAGE>
PRICE TO BE PAID AT THE OPTION CLOSING BY CERTIFIED CHECK OR WIRE TRANSFER OF
IMMEDIATELY AVAILABLE FUNDS EQUAL TO THE FAIR MARKET VALUE (AS CALCULATED IN
ACCORDANCE WITH PARAGRAPH 5B OF THE PURCHASE AGREEMENT) AT THE TIME OF THE
CHANGE OF CONTROL NOTICE (AS SUCH TERM IS DEFINED IN PARAGRAPH 4C OF THE
PURCHASE AGREEMENT) OF THE COMMON STOCK ISSUABLE UPON EXERCISE OF THAT
PORTION OF THE WARRANT BEING PURCHASED BY THE COMPANY, LESS THE APPLICABLE
EXERCISE PRICE.
If the holder of this Warrant exercises all or any part of its
right with respect to the event contemplated in clause (A) above, or
exercises all or any part of this Warrant in anticipation of such event, but
such event does not occur, such exercise of this Warrant shall be rescinded
and the holder of this Warrant will be entitled to the same rights and
remedies as if such exercise had never occurred, including, without
limitation, return of any Exercise Price paid and the reinstatement of its
Warrants (subject to return to the Company of any purchase price received) in
the same form and to the same extent as prior to such exercise.
SUBJECT TO THE TERMS AND CONDITIONS OF SECTION 5D OF THE
PURCHASE AGREEMENT, THIS WARRANT IS REDEEMABLE AT THE COMPANY'S OPTION, IN
WHOLE BUT NOT IN PART, AT ANY TIME ON OR AFTER A QUALIFYING PUBLIC OFFERING;
PROVIDED, HOWEVER, THAT THE COMPANY SHALL NOT HAVE THE RIGHT TO REDEEM THE
WARRANTS IN ANY EVENT PURSUANT TO SECTION 5D AS LONG AS ANY SENIOR
SUBORDINATED DEBENTURES ARE OUTSTANDING.
THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW OR CHOICE OF LAW.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer on this 13th day of February 1998.
SERACARE, INC.
By: /s/ Barry D. Plost
--------------------------------------------
Barry D. Plost, Chairman of the
Board, President and Chief
Executive Officer
<PAGE>
FORM OF ELECTION TO PURCHASE
SERACARE, INC.
The undersigned holder of this Warrant (1) hereby irrevocably elects to
exercise the right to purchase hereunder ___ fully paid shares of the Common
Stock of SERACARE, INC., (2) makes payment in full of the purchase price of
such shares, (3) requests that certificates for such shares be issued in the
name of ________________, and (4) if said number of shares shall not be all
the shares the holder is entitled to purchase under this Warrant, requests
that a new warrant for the unexercised and unexpired portion of this Warrant
be issued.
Dated:______________________, 199__.
________________________
(SIGNATURE)
<PAGE>
EXHIBIT 4.4
SECURITYHOLDERS AGREEMENT
AGREEMENT, dated as of February 13, 1998, among SeraCare, Inc., a
Delaware corporation (the "Company"), the investors listed on Exhibit I.A
hereto (the "Investors") and the shareholders of the Company listed on Exhibit
I.B hereto (the "Shareholders").
RECITALS
WHEREAS, the Company is concurrently herewith entering into a
Securities Purchase Agreement with the Investors and the Guarantors, dated as
of the date hereof (the "Securities Purchase Agreement"), authorizing the
issuance and delivery of (i) $16,000,000 of 12% Senior Subordinated Debentures
(the "Debentures") and (ii) Warrants to purchase Common Stock (as defined in
the Securities Purchase Agreement),
WHEREAS, it is a condition to the execution of the Securities
Purchase Agreement that the parties hereto enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and mutual
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. DEFINITIONS. Capitalized terms used but not defined
herein shall have the meaning ascribed to them in the Securities Purchase
Agreement. As used herein, the following terms shall have the following
meanings:
"AFFILIATE" shall mean, with respect to any person or entity, (i) any
other person or entity which, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with
such person or entity, (ii) any other person or entity which, directly or
indirectly, beneficially owns or holds 5% or more of any class of voting stock
of such person or entity, or (iii) any person or entity of which, directly or
indirectly, such person or entity owns or holds 5% or more of any equity
security (as defined in
<PAGE>
the Securities Act). The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a person or entity, whether by virtue of the ownership of
voting stock, by contract or otherwise.
"COMPANY" shall have the meaning set forth in the preamble.
"DEBENTURES" shall have the meaning set forth in the first recital.
"INVESTORS" shall have the meaning set forth in the preamble.
"OTHER PERMITTED TRANSFEREE" shall mean with respect to any
Shareholder who is a natural person:
(i) Any person related by lineal or collateral consanguinity
to such Shareholder or to the spouse of such Shareholder;
(ii) the spouse of such Shareholder or of any person described
in clause (i) above; and
(iii) all persons related to those persons described in clause
(i) or clause (ii) by lineal or collateral consanguinity.
For purposes of this definition of Other Permitted Transferee (i) adopted
persons shall be considered the natural born child of their adoptive parents;
(ii) lineal consanguinity is that relationship that exists between persons of
whom one is descended (or ascended) in a direct line from the other, as
between son, father, grandfather, great-grandfather; and (iii) collateral
consanguinity is that relationship that exists between persons who have the
same ancestors, but who do not descend (or ascend) from the other, as between
uncle and nephew, or cousin and cousin.
"OWNED" as to any Shares shall mean all Shares as to which any Person
would be deemed to be a beneficial owner, within the meaning of Rule 13d-3 of
the Exchange Act.
<PAGE>
"SECURITIES" shall mean the Debentures and the Warrants.
"SECURITIES PURCHASE AGREEMENT" shall have the meaning set forth in
the first recital.
"SHAREHOLDER(S)" shall have the meaning set forth in the preamble.
"SHAREHOLDER RELATION" shall mean (i) any Other Permitted
Transferee of an individual Shareholder, (ii) any inter-vivos trust whose
principal beneficiary is such individual Shareholder or any Other Permitted
Transferee of such individual Shareholder created during their respective
lifetimes and not as a result of death, (iii) any family limited partnership
in which an individual Shareholder is a general or limited partner, and (iv)
the legal representative or guardian of such individual Shareholder or any
Other Permitted Transferee of such individual Shareholder appointed during
their respective lifetimes and not as a result of death.
"SHARES" shall mean the shares of Common Stock and any other shares
of capital stock of the Company.
"TRANSFER" shall have the meaning set forth in Section 2.1 hereof.
"TRANSFEREE" shall mean any Person acquiring Shares from the
Shareholder and any subsequent transferee of any such Person herein referred to
as a "Transferee" of such Person.
"WARRANTS" shall have the meaning set forth in the first recital.
ARTICLE II.
RESTRICTIONS ON TRANSFER
Section 2.1. TRANSFER OF SHARES. During the term of this
Agreement, each Shareholder shall not, directly or indirectly, offer, sell,
assign, transfer, grant a participation interest in, pledge, encumber or
otherwise dispose of (including, without being limited to, any disposition of
voting or investment control over), or place in trust (voting or otherwise)
(each such transaction being herein called a "Transfer") any Shares Owned by
the Shareholder, except that, each Shareholder may over the term
<PAGE>
of this Agreement Transfer in the aggregate the number of Shares listed next
to such Shareholder's name on Schedule 1 hereto. The prohibition on Transfer
contained in this Section 2.1 (a) shall not apply to a transfer of any Shares
owned by the Shareholder, either during his lifetime or on death by will or
intestacy, to a Shareholder Relation, provided, in each such case, that (i)
the transferring Shareholder shall retain voting and investment power with
respect to such Shares, (ii) such transferee shall receive and hold such
Shares subject to the provisions of this Agreement and (iii) there shall be
no further transfer of such Shares in accordance herewith and (b) shall
terminate at such time as (i) the Company has completed a Qualifying Public
Offering and (ii) the Debentures are no longer outstanding.
Section 2.2. AGREEMENT TO BE BOUND. No Transfer of Shares by any
Shareholder shall be effective unless (i) the certificates representing such
Shares issued to the Transferee shall bear the legend provided in Section 2.3
and (ii) the Transferee (if not already a party hereto) shall have executed
and delivered to each Investor, as a condition precedent to such Transfer, an
instrument or instruments reasonably satisfactory to such parties confirming
that the Transferee agrees to be bound by the terms of this Agreement in the
same manner as such Transferee's transferor, except as otherwise provided in
this Agreement.
Section 2.3. RESTRICTIVE LEGEND. Each certificate evidencing
Shares Owned by the Shareholder shall be conspicuously stamped or otherwise
imprinted with a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFER AND CAN BE TRANSFERRED ONLY
PURSUANT TO THE TERMS OF A SECURITYHOLDERS AGREEMENT DATED AS OF
FEBRUARY 13, 1998 AMONG THE COMPANY AND CERTAIN HOLDERS OF ITS
SECURITIES. A COPY OF SUCH AGREEMENT WILL BE FURNISHED WITHOUT
CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
Section 2.4. IMPROPER TRANSFER. Any attempt to Transfer any
Shares not in compliance with this Agreement shall be null and void and
neither the Company nor any transfer agent shall give any effect in the
Company's stock records to such attempted Transfer.
<PAGE>
ARTICLE III.
MISCELLANEOUS
Section 3.1. BOARD OF DIRECTORS. (a) As long as (x) any Senior
Debentures are outstanding, (y) the Investors hold any combination of (i)
Warrants exercisable into or (ii) shares obtained upon exercise of Warrants
representing, at least 25% of the shares of Common Stock issuable upon
exercise of the Warrants as of the date hereof (or, if an adjustment pursuant
to Section 4 of the Warrants shall occur, then at least 25% of the shares of
Common Stock issuable upon exercise of the Warrants, after giving effect to
any such adjustment) or (z) holders of Securities hold Warrants exercisable
into at least 25% of the shares of Common Stock issuable upon exercise of the
Warrants as of the date hereof (or, if adjustment pursuant to Section 4 of
the Warrants shall occur, then at least 25% of the Shares of Common Stock
issuable upon exercise of the Warrants, after giving effect to any such
adjustment), the Company and the Shareholders shall take all action within
their respective power, including, but not limited to, the voting of capital
stock of the Company and any Subsidiary, as the case may be, Owned by them,
required to (i) cause the Board of Directors of the Company and each
Subsidiary to at all times consist of one nominee designated by the Investors
(the "Designee"). The Shareholders and the Company agree to vote any of the
shares of capital stock of the Company and any Subsidiary Owned by them,
including but not limited to their Shares, which are outstanding at all
meetings of stockholders of the Company and its Subsidiaries (or any written
consents in lieu thereof) in which directors are elected in favor of the
Designee.
(b) In the event that a Designee (the "Withdrawing Director"),
designated in the manner set forth in Section 3.1(a) above is unable to
serve, or once having commenced to serve, is removed or withdraws from the
Board of Directors of the Company or any Subsidiary such Withdrawing
Director's replacement (the "Substitute Director") on the Board of Directors
of the Company or Subsidiary, as the case may be, will be designated by the
holders of Securities. The Company and the Shareholders agree to take all
action within their respective power, including, but not limited to, the
voting of outstanding capital stock of the Company to cause the election of
such Substitute Director as soon as practicable following his or her
designation.
<PAGE>
(c) In the event the holders of Securities entitled to designate a
Director pursuant to this Agreement cease to be so entitled, the vacancy
resulting therefrom shall be filled by the remaining directors or by the
stockholders in the manner provided by the Company's bylaws and by applicable
law, or the number of directors constituting the Board shall be reduced. In
the event the Investors entitled to designate a Director pursuant to this
Agreement choose not to designate a Director, such directorship shall remain
vacant.
Section 3.2. TERMINATION OF AGREEMENT. This Agreement shall
terminate upon the first to occur of the following events:
(a) upon the agreement of the Company, the Shareholders and the
Investors to terminate this Agreement; or
(b) on such date as there are no longer any Debentures or Warrants
outstanding and all shares of Common Stock which may be issued upon
exercise of the Warrants shall be free of any volume restrictions on
transfer, including, but not limited to, any restrictions pursuant to Rule
144 (other than as a result of the shareholder's affiliation with a
director of the Company or otherwise being classified as an Affiliate of
the Company), as such rule may be amended from time to time.
Section 3.3. REPRESENTATIONS. Each party hereto represents that (i)
the execution and delivery of this Agreement and the performance of such
party's obligations hereunder will not violate or conflict with any material
agreement to which such party is a party or any law, rule, license, regulation,
judgment, order, ruling or decree governing or affecting such party; (ii) no
consents or filings with any governmental authority or any other person are
required to be obtained or made in connection with such party's execution,
delivery and performance of this Agreement; and (iii) this Agreement
constitutes the valid and binding obligation of such party, enforceable against
such party in accordance with its terms.
Section 3.4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SHAREHOLDERS. Each Shareholder represents and warrants to the holders of
Securities that all shareholders of the Company who are Shareholder Relations
of such Shareholder or with whom
<PAGE>
such Shareholder shares voting and/or investment power are parties to this
Agreement. Each Shareholder covenants that if after the date hereof any
person or entity who is or becomes a shareholder of the Company is or becomes
a Shareholder Relation of such Shareholder or a person with whom such
Shareholder shares voting and/or investment power, then such Shareholder
shall use all reasonable efforts to cause such person or entity to become a
party to this Agreement.
Section 3.5. SUCCESSORS AND ASSIGNS. All agreements contained
herein by or on behalf of the parties hereto shall bind and inure to the
benefit of the respective successors and assigns of the parties hereto whether
so expressed or not, including, without limitation, any Person who acquires any
Securities (or any securities issued upon exercise of any Warrant) from any
party.
Section 3.6. NOTICES. All communications provided for hereunder
shall be sent by first class mail or overnight courier and, if to any Investor,
addressed to the Investor in the manner in which its address appears on Exhibit
I.A hereto, with a copy to William J. Grant, Jr., Esq., at Willkie Farr &
Gallagher, 153 East 53rd Street, New York, New York 10022; if to any
Shareholder, addressed to such Shareholder at the address set forth below such
Shareholder's name on Exhibit I.B hereto; and if to the Company, addressed to
it at SeraCare, Inc., 19255 Century Park West, Los Angeles 90067, Attention:
Chief Executive Officer, or to such other address with respect to any party as
such party shall notify the other in writing.
Section 3.7. DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
Section 3.8. GOVERNING LAW. The corporate law of the State of New
York will govern all issues concerning the relative rights of the Company, on
the one hand, and the Shareholder and the Investors, on the other hand. All
other questions concerning the construction, validity and interpretation of
this Agreement will be governed by, and construed and enforced in accordance
with, the law of the State of New York without regard to the conflicts of laws
principles thereof.
<PAGE>
Section 3.9. REMEDIES. In case any one or more of the provisions
set forth in this Agreement shall have been breached by the Company or any
Shareholder or Investor, the Company or the Shareholders or Investors (or any
of them), as applicable, may proceed to protect and enforce its or their rights
either by suit in equity and/or by action at law, including, but not limited
to, an action for damages as a result of any such breach and/or an action for
specific performance of any such provision contained in this Agreement. The
Company, or any Investor acting pursuant to this Section 3.9 shall be
indemnified against all liability, loss or damage, together with all reasonable
costs and expenses related thereto (including reasonable legal and accounting
fees and expenses) in accordance with paragraph 14B of the Securities Purchase
Agreement.
Section 3.10. ENTIRE AGREEMENT. This Agreement, the Securities
Purchase Agreement and the Registration Rights Agreement and the other writings
referred to herein or therein or delivered pursuant hereto or thereto contain
the entire agreement among the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous arrangements or
understandings with respect thereto. This Agreement shall not constitute a
valid and binding agreement, enforceable in accordance with its terms, until it
has been executed and delivered by duly authorized representatives of each
party hereto.
Section 3.11. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 3.12. AMENDMENTS. This Agreement may not be changed orally,
but only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
Section 3.13. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument, and it
shall not be
<PAGE>
necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
SERACARE, INC.
By: /s/ Barry D. Plost
-------------------------------------------
Barry D. Plost, Chairman
of the Board, President and Chief Executive
Officer
SHAREHOLDERS:
/s/ Barry D. Plost
-------------------------------------------
Barry D. Plost
<PAGE>
INVESTORS:
DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ Robert J. Cresci
----------------------------------------------
Robert J. Cresci
Managing Director
DECLARATION OF TRUST FOR DEFINED
BENEFIT PLAN OF ICI AMERICAN HOLDING INC.
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ Robert J. Cresci
----------------------------------------------
Robert J. Cresci
Managing Director
DECLARATION OF TRUST FOR DEFINED
BENEFIT PLAN OF ZENECA HOLDING INC.
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ Robert J. Cresci
----------------------------------------------
Robert J. Cresci
Managing Director
THE J.W. MCCONNELL FAMILY FOUNDATION
By: Pecks Management Partners Ltd.,
Its Investment Advisor
By: /s/ Robert J. Cresci
----------------------------------------------
Robert J. Cresci
Managing Director
<PAGE>
EXHIBIT I.A (INVESTORS)
-----------------------
DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, NY 10020
DECLARATION OF TRUST FOR
DEFINED BENEFIT PLAN OF ICI
AMERICAN HOLDINGS INC.
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, NY 10020
DECLARATION OF TRUST FOR
DEFINED BENEFIT PLAN OF
ZENECA HOLDINGS INC.
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, NY 10020
THE J.W. McCONNELL FAMILY
FOUNDATION
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, NY 10020
<PAGE>
EXHIBIT I.B (SHAREHOLDERS)
--------------------------
Name
- ----
Barry D. Plost
c/o SeraCare, Inc.
1925 Century Park East
Los Angeles, CA 90067
<PAGE>
SCHEDULE 1
----------
Barry D. Plost 188,768 shares
<PAGE>
EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 13, 1998, among
SeraCare, Inc., a Delaware corporation (the "Company") and the investors whose
names appear under the heading "Investors" (the "Investors") on the signature
page hereof.
1. BACKGROUND. The Company is a party to a securities purchase
agreement, dated the date hereof (the "Securities Purchase Agreement"), entered
into with the Investors and the Guarantors, pursuant to which the Company
issued to the Investors (i) $16,000,000 of 12% Senior Subordinated Debentures
(the "Debentures") and (ii) Warrants to purchase Common Stock (as defined
herein) (the "Warrants").
In connection with the Securities Purchase Agreement, the Company
entered into this Registration Rights Agreement, to which the Investors who
received securities under the Securities Purchase Agreement became parties.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1. REGISTRATION OF REGISTRABLE SECURITIES ON REQUEST. (a)
REQUEST. During the term of this Agreement, the holder or holders of not less
than 50% (by number of shares) of the Registrable Securities shall twice have
the right to request in writing that the Company effect an underwritten
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of all or part of such holders' Registrable Securities; PROVIDED, that
the aggregate Fair Market Value (as defined in the Securities Purchase
Agreement) of the Registrable Securities to be so registered is at least
$3,000,000. The Company will promptly give written notice of such requested
registration to all other holders of Registrable Securities, which holders
shall be entitled to include their Registrable Securities in such registration
subject to Sections 2.1(b) and 2.1(g) if they notify the Company of their
desire for their Registrable Securities to be included within 15 calendar days
of the date of the Company's notice. Thereupon the Company will use its best
efforts to effect the registrations under the Securities Act of:
(i) the Registrable Securities which the Company has been
so requested to register by such holders; and
<PAGE>
(ii) subject to Sections 2.1(b) and 2.1(g), all other
Registrable Securities which the Company has been requested to
register by the holders thereof by written request given to the
Company within 30 days after the giving of such written notice by the
Company (which request shall specify the intended method of
disposition of such Registrable Securities) all to the extent
requisite to permit the disposition of the Registrable Securities so
to be registered.
(b) REGISTRATION OF OTHER SECURITIES. Whenever the Company shall
effect a registration pursuant to this Section 2.1, no securities other than
Registrable Securities shall be included among the securities covered by such
registration unless the managing underwriter of such offering shall have
advised each holder of Registrable Securities to be covered by such
registration in writing that the inclusion of such other securities would not
in the underwriter's reasonable judgment adversely affect the marketing or the
selling price of the Registrable Securities to be covered by such registration
and the holders of a majority of Registrable Securities to be covered by such
registration shall have consented in writing to the inclusion of such other
securities. The Company will not grant to any person at any time on or after
the date hereof any right to be included among the securities registered
pursuant to this Section 2.1 that is inconsistent with this Section 2.1(b).
(c) REGISTRATION STATEMENT FORM. Registrations under this Section
2.1 shall be on such appropriate registration form or prospectus of the
Commission (i) as shall be selected by the Company and as shall be reasonably
acceptable to the holders of more than 50% (by number of shares) of the
Registrable Securities so to be registered and (ii) as shall permit the
disposition of such Registrable Securities in accordance with the intended
method or methods of disposition specified in their request for such
registration. The Company agrees to include in any such registration statement
all information which holders of Registrable Securities being registered shall
reasonably request.
(d) EXPENSES. The Company will pay all Registration Expenses in
connection with the registration requests made pursuant to this Section 2.1.
<PAGE>
(e) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Section 2.1 shall not be deemed to have been effected and
shall not count as a requested registration pursuant to Section 2.1 (a) hereof
(i) unless a registration statement with respect thereto has become effective,
(ii) if a registration statement has been filed with the Commission and prior
to its becoming effective a majority of holders of the Registrable Securities
to be registered has decided to terminate the registration process but only if,
in such case, each such holder pays to the Company its pro rata share of any
expenses directly incurred by the Company in connection with the preparation of
such registration statement (except for expenses incurred as payment of
compensation to employees of the Company), (iii) if after it has become
effective, such registration is interfered with by any stop order, injunction
or other order or requirement of the Commission or other governmental agency or
court for any reason not the fault of a holder of Registrable Securities and
the Registrable Securities covered thereby have not been sold, or (iv) if
the conditions to closing pertaining to the Company specified in the selling
agreement or underwriting agreement entered into in connection with such
registration are not satisfied or waived by the parties thereto other than a
holder of Registrable Securities.
(f) UNDERWRITERS. Any registration effected pursuant to this
Section 2.1 shall at the election of the holders of at least 50% (by number of
shares) of the Registrable Securities so to be registered be an underwritten
public offering on a firm commitment basis or a best efforts basis. The
managing underwriter or underwriters thereof shall be selected by the Company
and such underwriter as well as the price, terms and provisions of the offering
shall be subject to the approval of the Company and the holders of more than
50% (by number of shares) of the Registrable Securities so to be registered.
(g) APPORTIONMENT IN REGISTRATIONS REQUESTED. If, in connection
with a registration requested pursuant to this Section 2.1, the managing
underwriter shall advise the Company in writing (with a copy to each holder of
Registrable Securities requesting registration) that, in its opinion, the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering within a price range acceptable to
the holders of more than 50% (by number of shares) of the Registrable
Securities requested to be included in such
<PAGE>
registration, the number of securities that are otherwise entitled to be
included in such registration shall be allocated in the following manner:
(i) all securities other than Registrable Securities shall be reduced, on a
pro rata basis (based on the number of securities requested to be included in
such registration) and (ii) if, after the exclusion of all such securities
(if necessary), further reductions are still required, the Registrable
Securities requested to be included in such registration shall be reduced pro
rata among the holders thereof requesting such registration on the basis of
the percentage of the Registrable Securities sought to be registered held by
such holders of Registrable Securities which have requested that such
Registrable Securities be included. If the pro ration as aforesaid results
in the exclusion of in excess of 25% of the Registrable Securities originally
sought to be registered, the request shall not be counted for purposes of
determining the number of registrations pursuant to Section 2.1 hereof.
2.2. REGISTRATIONS ON FORM S-3. The Company shall use its best
efforts to qualify for registration on Form S-3 promulgated under the
Securities Act or any successor form thereto ("Form S-3") for secondary sales.
Anything contained in Section 2.1 to the contrary notwithstanding, at such time
as the Company shall have qualified for the use of Form S-3, the holder or
holders of the Registrable Securities shall have the right to request in
writing an unlimited number of registrations on Form S-3 of Registrable
Securities, which request or requests shall (i) specify the number of
Registrable Securities intended to be sold or disposed of and the holders
thereof and (ii) state the intended method of disposition of such Registrable
Securities. A requested registration on Form S-3 in compliance with this
Section 2.2 shall not count as a registration statement initiated pursuant to
Section 2.1 but shall otherwise be treated as a registration initiated pursuant
to, and shall, except as otherwise expressly provided in this Section 2.2, be
subject to Section 2.1.
2.3. "PIGGYBACK" REGISTRATIONS. (a) RIGHT TO INCLUDE REGISTRABLE
SECURITIES. If the Company at any time proposes to register any of its
securities under the Securities Act whether or not for sale for its own
account, it will each such time give prompt written notice to all holders of
Registrable Securities of its intention to do so and of such holders' rights
under this Section 2.3. Upon the written request of any such holder made
within 10 days after the date of any such notice given in
<PAGE>
accordance with Section 7 hereof, the Company will use its best efforts to
effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holders
thereof, to the extent requisite to permit the disposition of the Registrable
Securities so to be registered, PROVIDED that if, at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or
to delay registration of such securities, the Company may, at its election,
give written notice of such determination to each holder of Registrable
Securities and, thereupon, (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation
to pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any holder or holders of Registrable Securities
entitled to do so to request that such registration be effected as a
registration under Section 2.1 or Section 2.2, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering
any Registrable Securities for the same period as the delay in registering
such other securities. No registration effected under this Section 2.3 shall
relieve the Company of its obligation to effect any registration upon request
under Section 2.1 or Section 2.2. The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities
requested pursuant to this Section 2.3.
(b) APPORTIONMENT IN "PIGGYBACK" REGISTRATIONS. If (i) a
registration pursuant to this Section 2.3 involves an underwritten offering of
the securities being registered, whether or not for sale for the account of the
Company, to be distributed (on a firm commitment basis) by or through one or
more underwriters of recognized national or regional standing (as reasonably
determined by the Company) under underwriting terms appropriate for such a
transaction, and (ii) the managing underwriter of such underwritten offering
shall inform the Company and the holders of the Registrable Securities
requesting such registration by letter that marketing considerations require a
limitation on the number of securities that can be included in such
registration, then the Company may include all securities proposed by the
Company to be sold for its own account or the maximum amount that the
underwriter considers saleable and such limitation on any remaining securities
that may, in the opinion
<PAGE>
of the underwriter, be sold will be imposed (x) first, upon holders of
securities other than Registrable Securities and (y) second, pro rata among
holders of Registrable Securities requested to be included in such
registration statement on the basis of the percentage of the Registrable
Securities sought to be registered held by such holders of Registrable
Securities. To the extent that any Registrable Securities or other
securities are excluded from the registration pursuant to this Section
2.3(b), no shares of Common Stock issued to management of the Company after
the date hereof pursuant to a stock option (or any other type of benefit
plan) ("Option Shares") shall be included in such registration.
Notwithstanding the foregoing, if the registration referred to herein
involves an underwritten offering of securities being registered for sale by
holders of securities other than Registrable Securities (pursuant to the
exercise by such holders of demand registration rights or otherwise), the
Company will include in such registration the securities proposed by such
holders to be sold and may decrease the number of Registrable Securities and
such other securities exercising "piggyback" registration rights proposed to
be sold in such registration on a pro rata basis based upon the amount
requested by all sellers of securities exercising piggyback rights to the
extent necessary to reduce the number of securities to be included in the
registration to the level recommended by the managing underwriter. In such
case, (x) no securities shall be offered for sale by the Company and (y) no
Option Shares shall be included in such registration.
2.4. REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1, 2.2 and 2.3,
the Company will as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any
event no later than 60 days after the end of the period within which
requests for registration may be given to the Company) file with the
Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such
registration statement to become effective, PROVIDED that the Company
may discontinue any registration of its securities which are not
Registrable Securities (and, under the circumstances specified in
Section 2.3(a), its securities which are
<PAGE>
Registrable Securities) at any time prior to the effective date of
the registration statement relating thereto;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such registration statement until such time as all of such
securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in
such registration statement;
(iii) furnish to each seller of Registrable Securities
covered by such registration statement such number of conformed
copies of such registration statement and of each such amendment and
supplement thereto, such number of copies of the prospectus contained
in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule
424 or Rule 430A under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws
of such jurisdictions as each seller thereof shall reasonably
request, to keep such registration or qualification in effect for so
long as such registration statement remains in effect, and take any
other action which may be reasonably necessary to enable such seller
to consummate the disposition in such jurisdictions of the securities
owned by such seller, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (iv) be obligated to be so qualified
or to consent to general service of process in any such jurisdiction
or subject itself to
<PAGE>
be required to pay any franchise or income taxes in any such
jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a
signed counterpart, addressed to such seller, except as provided in
(y) below (and the underwriters, if any), of
(x) an opinion of counsel for the Company, dated
the effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the
date of the closing under the underwriting agreement),
reasonably satisfactory in form and substance to counsel for all
such sellers or, if such registration includes an underwritten
public offering, to such underwriter, covering substantially the
same matters with respect to such registration statement (and
the prospectus included therein) as are customarily in opinions
of issuer's counsel to underwriters and
(y) a "comfort" letter, dated the effective date
of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's
financial statements included in such registration statement,
addressed to each seller, to the extent the same can be
reasonably obtained, and addressed to the underwriters, if any,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein)
and, in the case of the accountants' letter, with respect to
events subsequent to the date of such financial
<PAGE>
statements, as are customarily covered in accountants' letters
delivered to the underwriters in underwritten public offerings
of securities and such other financial matters as such seller
or such holder (or the underwriters, if any) may reasonably
request;
(vii) notify each seller of Registrable Securities covered
by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon 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 the light of the circumstances under which they were
made, and at the request of any such seller or holder promptly
prepare to furnish to such seller or holder 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 securities, 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 the light of the circumstances under which
they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable,
an earnings statement covering the period of at least twelve months,
but not more than eighteen months, beginning with the first full
calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act, and, in the case of a
registration requested pursuant to Section 2.1 or 2.2 hereof, will
furnish to each such seller at least two business days prior to the
filing thereof a copy of any amendment or supplement to such
registration statement or prospectus and shall not file any thereof
to which
<PAGE>
any such seller shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or of the
rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement; and
(x) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the Registrable Securities is then listed.
Notwithstanding the foregoing, the Company may defer its obligations
under Section 2.1 and Section 2.2 to file a registration statement, but not its
obligations to initiate the process of preparing the applicable registration
statement, for a period of no more than (i) 90 days in any 365-day period, if
the Company's Board of Directors determines in good faith based upon a written
opinion of counsel that filing such a registration statement would require a
public disclosure by the Company, which disclosure would interfere with a
material transaction then under consideration by the Company, PROVIDED that
once such information has been publicly disclosed, the Company shall promptly
proceed to fulfill its obligations under Section 2.1 and (ii) 180 days from the
most recent effective date of any registration statement of the Company filed
under the Securities Act and pursuant to Section 2.1 occurring prior to the
request for registration made pursuant to Section 2.1.
The Company may require each proposed seller of Registrable
Securities as to which any registration is being effected to promptly furnish
the Company, as a condition precedent to including such holder's Registrable
Securities in any registration, such information regarding such seller and the
distribution of such securities as the Company may from time to time reasonably
request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the
<PAGE>
kind described in subdivision (vii) of this Section 2.4, such holder will
forthwith discontinue such holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by subdivision (vii) of this Section 2.4 and,
if so directed by the Company, will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such holder's
possession of the prospectus relating to such Registrable Securities current
at the time of receipt of such notice.
2.5. UNDERWRITTEN OFFERINGS. (a) REQUESTED UNDERWRITTEN OFFERINGS.
If requested by the underwriters for any offering by holders of Registrable
Securities pursuant to a registration requested under Section 2.1, the Company
will enter into an underwriting agreement with such underwriters for such
offering, such agreement to be satisfactory in substance and form to the
Company, to holders of more than 50% (by number of shares) of the Registrable
Securities included in such registration and the underwriters and to contain
such representations and warranties by the Company and such other terms as are
generally prevailing in agreements of this type, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.7. The
holders of the Registrable Securities will cooperate with the Company in the
negotiation of the underwriting agreement and will give consideration to the
reasonable requests of the Company regarding the form thereof, PROVIDED that
nothing herein contained shall diminish the foregoing obligations of the
Company. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders of Registrable
Securities. The Company shall use its best efforts to ensure that any such
holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements other than representations,
warranties or agreements typical in an offering of that type, including those
regarding such holder, such holder's Registrable Securities, and such holder's
intended
<PAGE>
method of distribution, any other information supplied by such holder to the
Company for use in the Registration Statement and any other representation
required by law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.3 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in Section 2.3 and subject to
the provisions of Sections 2.3(a), 2.3(b) and 2.4, arrange for such
underwriters to include all the Registrable Securities to be offered and sold
by such holder among the securities to be distributed by such underwriters.
The holders of Registrable Securities to be distributed by such underwriters
shall be parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made to
and for the benefit of such holders of Registrable Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of
such holders of Registrable Securities. The Company shall use its best
efforts to ensure that any such holder of Registrable Securities shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties, or
agreements typical in an offering of this type, including those regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution, any other information supplied by such holder to the
Company for use in the Registration Statement and any other representation
required by law.
2.6. PREPARATION; REASONABLE INVESTIGATION. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the holders
of Registrable Securities registered under such registration statement, the
underwriters, if any, and their respective counsel (such holders' counsel to
be appointed by the holders of more than 50% (by number of shares) of
Registrable Securities so to be registered, the opportunity to participate in
the preparation of such registration statement, each prospectus included
therein or filed with the Commission,
<PAGE>
and each amendment thereof or supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary, in the opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
2.7. INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. In
the event of any registration of any securities of the Company under the
Securities Act, the Company will, and hereby does, indemnify and hold
harmless the seller of any Registrable Securities covered by such
registration statement, its directors and officers, each other Person who
participates as an underwriter in the offering or sale of such securities and
such other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, against any losses, claims, damages
or liabilities, joint or several, to which such seller or any such director
or officer or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, 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 securities were registered under the Securities
Act, any preliminary prospectus (unless such is corrected in the final
prospectus), final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will reimburse such
seller and each such director, officer, underwriter and controlling person
for any legal or any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, liability, action or
proceeding; PROVIDED, HOWEVER, that the Company 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, said
preliminary or final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by
such seller, specifically for use in the preparation thereof. Such indemnity
shall remain
<PAGE>
in full force and effect regardless of any investigation made by or on behalf
of such seller or any such director, officer, underwriter or controlling
person and shall survive the transfer of such securities by such seller.
(b) INDEMNIFICATION BY THE HOLDERS OF SECURITIES. The holders of
Securities will, and hereby do, severally and not jointly, indemnify and hold
harmless (in the same manner and to the same extent as set forth in
subdivision (a) of this Section 2.7) the Company, each director of the
Company, each officer of the Company and each other Person, if any, who
controls the Company within the meaning of the Securities Act with respect to
any statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such holders of Securities for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling Person and shall survive
the transfer of such securities by such Purchaser with respect to information
furnished by such Purchaser prior to such transfer.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section
2.7, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action, PROVIDED that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this Section
2.7, except to the extent that the indemnifying party is prejudiced by such
failure to give notice.
In case any such action is brought against an indemnified party, unless in
such indemnified party's reasonable judgment a conflict of interest between
such indemnified party and indemnifying parties may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party
<PAGE>
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs
of investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any
governmental authority other than the Securities Act.
(e) INDEMNIFICATION PAYMENTS. The indemnification required by
this Section 2.7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
2.8. ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
will not effect or permit to occur any combination or subdivision of shares
which would adversely affect the ability of the holders of Registrable
Securities to include such Registrable Securities in any registration of its
securities contemplated by this Section 2 or the marketability of such
Registrable Securities under any such registration.
3. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
COMMISSION: The Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act.
<PAGE>
COMMON STOCK: All shares now or hereafter authorized and designated as
the Common Stock of the Company and stock of any other class with which
such shares may hereafter have been exchanged or reclassified.
DEBENTURES: As defined in Section 1.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
PERSON: A corporation, an association, a partnership, a limited liability
company, a business, an individual, a governmental or political
subdivision thereof or a governmental agency.
REGISTRABLE SECURITIES: The shares of Common Stock issuable upon exercise
of the Warrants held by the holders of Securities and/or their successors
and assigns and any additional shares of Common Stock received in respect
of such shares by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise upon any required adjustments under the
Warrant.
As to any particular Registrable Securities, such securities shall cease
to be Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective under
the Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (b) they shall have been
distributed to the public pursuant to Rule 144 (or any successor
provision) or otherwise without registration under the Securities Act, or
(c) they shall have ceased to be outstanding.
REGISTRATION EXPENSES: All expenses incident to the Company's performance
of or compliance with Section 2, including, without limitation, all
registration, filing and National Association of Securities Dealers, Inc.
fees, all fees and expenses of complying with securities or blue sky laws,
all word processing, duplicating and printing expenses, messenger and
delivery expenses, the reasonable fees and disbursements of counsel for
the Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or
<PAGE>
incident to such performance and compliance, the reasonable fees and
disbursements of a single counsel retained by the holder or holders of
more than 50% (by number of shares) of the Registrable Securities being
registered, premiums and other costs of policies of insurance obtained by
the Company against liabilities arising out of the public offering of the
Registrable Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities,
including reasonable fees of underwriters counsel incurred in the
qualification of the Securities under blue sky laws, but excluding all
agency fees and commissions, underwriting discounts and commissions and
transfer taxes, if any.
SECURITIES ACT: The Securities Act of 1933, as amended.
4. RULE 144. The Company will file the reports required to be
filed by it, and in the manner required to be filed by it, under the Securities
Act and the Exchange Act (or, if the Company is not required to file such
reports, will, upon the request of any holder of Registrable Securities, make
publicly available other information) and will take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time or (b) any similar rule or regulation hereafter
adopted by the Commission ("Rule 144"). Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Company may take any action herein prohibited or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of a majority or more (by number of shares) of Registrable Securities.
Each holder of any Registrable Securities at the time or thereafter outstanding
shall be bound by any consent authorized by this Section 5, whether or not such
Registrable Securities shall have been marked to indicate such consent.
<PAGE>
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any
Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may upon the giving of written notice
to the Company, at its election, be treated as the holder of such Registrable
Securities for purposes of any request or other action by any holder or
holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. The Company may require assurances reasonably satisfactory to it
of such owner's beneficial ownership of such Registrable Securities.
7. NOTICES. All communications provided for hereunder shall be
sent by first-class mail or overnight courier and (a) if addressed to a party
other than the Company, addressed to such party in the manner set forth in
the Securities Purchase Agreement, as the case may be, or at such other
address as such party shall have furnished to the Company in writing, or (b)
if addressed to any other holder of Registrable Securities, at the address
that such holder shall have furnished to the Company in writing, or, until
any such other holder so furnishes to the Company an address, then to and at
the address of the last holder of such Registrable Securities who has
furnished an address to the Company, or (c) if addressed to the Company, at
the address set forth for the Company in the Securities Purchase Agreement to
the attention of its President, or at such other address, or to the attention
of such other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding.
8. ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are
for the benefit of the parties hereto other than the Company shall also be
for the benefit of and enforceable by any subsequent holder of any
Registrable Securities, subject to the provisions respecting the minimum
numbers or percentages of shares of Registrable Securities required in order
to be entitled to certain rights, or take certain actions, contained herein.
9. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are
<PAGE>
inserted for reference only and shall not limit or otherwise affect the
meaning hereof.
10. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the
laws of the State of New York.
11. COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but
all such counterparts shall together constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
SERACARE, INC.
By: /s/ Barry D. Plost
-------------------------------------
Barry D. Plost, Chairman of the
Board, President and Chief
Executive Officer
<PAGE>
THE PURCHASERS:
DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ Robert J. Cresci
-------------------------------------
Robert J. Cresci
Managing Director
DECLARATION OF TRUST FOR DEFINED BENEFIT
PLAN OF ICI AMERICAN HOLDINGS INC.
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ Robert J. Cresci
-------------------------------------
Robert J. Cresci
Managing Director
DECLARATION OF TRUST FOR DEFINED BENEFIT
PLAN OF ZENECA HOLDINGS INC.
By: Pecks Management Partners Ltd.
Its Investment Advisor
By: /s/ Robert J. Cresci
-------------------------------------
Robert J. Cresci
Managing Director
THE J.W. MCCONNELL FAMILY FOUNDATION
By: Pecks Management Partners Ltd.,
Its Investment Adviser
By: /s/ Robert J. Cresci
-------------------------------------
Robert J. Cresci
Managing Director
<PAGE>
EXHIBIT 4.6
SUBSIDIARY GUARANTEE AGREEMENT
SUBSIDIARY GUARANTEE AGREEMENT dated as of February 13, 1998 made
by Avre, Incorporated, a Nevada corporation, Binary Associates, Incorporated,
a Colorado corporation, SeraCare Acquisitions, Inc., a Nevada corporation,
BHM Labs, Inc., an Arkansas corporation, SeraCare Technology, Inc., a Nevada
corporation, Western States Groups, Inc., a California corporation (together
with each Person that becomes a Subsidiary of the Company and executes a
counterpart signature page hereto as a Guarantor, the "GUARANTORS"),
wholly-owned subsidiaries of SeraCare, Inc., a Delaware corporation (the
"COMPANY") in favor of the Guaranteed Parties (as hereinafter defined).
W I T N E S S E T H
WHEREAS, pursuant to that certain Securities Purchase Agreement,
dated as of February 13, 1998 (as amended, supplemented or otherwise modified
from time to time pursuant to the terms thereof, the "SECURITIES PURCHASE
AGREEMENT"), by and among the Company, the Guarantors and the investors
listed on the signature pages thereto (the "INVESTORS"), the Investors have
agreed to purchase (i) the Company's 12% Senior Subordinated Debentures due
February 13, 2005 in the aggregate principal amount of $16,000,000 (as
amended, supplemented or otherwise modified from time to time pursuant to the
terms thereof, the "SENIOR SUBORDINATED DEBENTURES") and (ii) warrants to
purchase, in the aggregate, 2,100,572 shares of Common Stock (the "WARRANTS",
and together with the Senior Subordinated Debentures the "SECURITIES");
WHEREAS, it is a condition precedent to the issuance of the
Securities under the Securities Purchase Agreement that the Company shall
have caused its Subsidiaries to execute and deliver this Guarantee Agreement
to the Guaranteed Parties;
WHEREAS, the Guarantors desire to execute and deliver this
Guarantee Agreement to satisfy the conditions described in the preceding
paragraph;
WHEREAS, the Guarantors are Subsidiaries of the Company;
<PAGE>
WHEREAS, the Boards of Directors of the Guarantors have determined
that it is in the best interests of such Guarantors to execute this Guarantee
Agreement.
NOW, THEREFORE, in consideration of the benefits accruing to the
Guarantors, the receipt and sufficiency of which are hereby acknowledged, the
Guarantors hereby make the following representations and warranties and
hereby covenant and agree for the benefit of the Guaranteed Parties, as
follows:
ARTICLE I
GUARANTEE
SECTION 1.1. DEFINED TERMS. Unless otherwise defined herein,
terms defined in the Securities Purchase Agreement have such defined meanings
when used herein. For purposes of this Guarantee Agreement, the following
terms shall have the following meanings:
"GUARANTEE AGREEMENT" shall mean this Subsidiary Guarantee
Agreement, as amended, supplemented or otherwise modified from time to time
pursuant to the terms hereof.
"GUARANTEED PARTIES" shall mean, collectively, the holders of the
Senior Subordinated Debentures, including the Investors, and their respective
successors and assigns, in each case as a holder of Debentures, and
Guaranteed Party means any one of them.
"OBLIGATIONS" shall mean all obligations and liabilities (direct or
indirect, absolute or contingent, due or to become due or now existing or
hereafter incurred), whether for principal, interest, fees, indemnity, costs,
expenses or otherwise, of the Company and the Guarantors under the Senior
Subordinated Debentures, Warrants and any other Related Documents.
SECTION 1.2. GUARANTEE OF OBLIGATIONS. (a) The Guarantors hereby
irrevocably and unconditionally guarantee to the Guaranteed Parties all
Obligations, as and when the same shall become due and payable, without
regard to any defense, set-off or counterclaim that may at any time be
asserted by or available to the Company and notwithstanding any discharge of
the Company from the Obligations (other than on account of payment in
<PAGE>
full of the Obligations, including in connection with a "cashless" exercise
of the Warrants); PROVIDED, HOWEVER, that the Guarantors shall be liable
under this Guarantee Agreement for the maximum amount of such liability that
can be hereby incurred without rendering this Guarantee Agreement, as it
relates to such Guarantors, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer, and not for any greater amount.
(b) Any amount payable by the Guarantors hereunder which is not
paid when due shall bear interest, from the due date thereof until paid in
full, at a rate per annum equal to the default rate with respect to the
Senior Subordinated Debentures under the Securities Purchase Agreement.
SECTION 1.3. PAYMENTS BY THE GUARANTORS. In case the Company
shall fail to punctually pay the Obligations in full when due, the Guarantors
agree to make such payment punctually when and as the same shall become due
and payable. Each such payment shall be made to the Guaranteed Parties in
immediately available funds without set-off or counterclaim.
SECTION 1.4. OBLIGATIONS OF THE GUARANTORS UNCONDITIONAL. (a) The
obligations of the Guarantors under this Guarantee Agreement shall be
absolute and unconditional. This is a guaranty of payment and not merely of
collection. The Guarantors hereby agree that their liability hereunder shall
be irrevocable and unconditional, irrespective of (i) the validity, legality,
regularity or enforceability of the Obligations, the Securities Purchase
Agreement, the Senior Subordinated Debentures, Warrants, and other Related
Documents or any other guaranty of the Obligations, (ii) the absence of any
action to enforce the same, (iii) the failure by any Guaranteed Party to
perfect or enforce any Lien or the release by any Guaranteed Party of any or
all collateral security, (iv) the waiver or consent by any Guaranteed Party
with respect to any provision of any Related Document, (v) subject to Section
1.6 hereof, the recovery of any judgment against the Company or any action to
enforce the same or (vi) subject to Section 1.6 hereof, any other
circumstance which (with or without notice to or knowledge by the Company,
the Guarantors or any Guaranteed Party) might otherwise constitute a legal or
equitable discharge or defense of a guarantor. The Guarantors hereby waive
diligence, presentment, protest, demand of payment, notice of default to or
upon the Company or any of the Guarantors, filing of claims with a court
<PAGE>
in the event of a bankruptcy of the Company, any right to require a
proceeding first against the Company, protest or notice with respect to the
Obligations, and all demands whatsoever, and covenants that this Guarantee
Agreement will not be discharged except by complete payment and performance
of the Obligations.
(b) The Guarantors hereby agree that any Guaranteed Party may
at any time, or from time to time, in such Guaranteed Party's discretion,
subject in each instance to the applicable terms, if any, of the Related
Documents, (i) renew and/or extend or accelerate the time of payment, and/or
the manner, place or terms of payment of, all of the Obligations, or any part
or parts thereof or any renewal or renewals thereof of the obligations of any
other guarantor of the Obligations, (ii) renew, extend, amend or modify in
any manner whatsoever the Securities Purchase Agreement, the Senior
Subordinated Debentures, Warrants or any other Related Document, (iii)
release or surrender any other guaranty of the Obligations, (iv) exchange,
release, and/or surrender all or any of the collateral security, or any part
or parts thereof, which is now or may hereafter be held by, or on behalf of,
any Guaranteed Party in connection with this Guarantee Agreement or any or
all of the Obligations, (v) sell and/or purchase any or all such collateral
at public or private sale, or at any broker's board, and after deducting all
reasonable costs and expenses of every kind for collection, sale or delivery,
apply the proceeds of any such sale or sales upon any of the Obligations, and
(vi) subject to Section 1.8 hereof, settle or compromise any and all of the
Obligations with the Company and/or any other Person liable thereon, and/or
subordinate the payment of same or any part thereof to the payment of any
other debts or claims which may at any time be due or owing to the Guaranteed
Parties and/or any other Person; all in such manner and upon such terms as
the Guaranteed Parties may see fit, and without notice to or further assent
from the Guarantors, which hereby agree to be and remain bound upon this
Guarantee Agreement, irrespective of the existence, value or condition of any
collateral security, and notwithstanding any such change, exchange,
settlement, compromise, surrender, release, sale, application, renewal,
extension or any other action hereinbefore mentioned.
(c) The Guarantors waive any and all notices of the creation,
renewal, extension or accrual of any of the Obligations and notice or proof
of reliance by the Guaranteed Parties upon this Guarantee Agreement or
acceptance of this
<PAGE>
Guarantee Agreement. The Obligations shall conclusively be deemed to have
been created, contracted or incurred in reliance upon this Guarantee
Agreement, and all dealings between the Company or any of the Guarantors and
the Guaranteed Parties shall likewise be conclusively presumed to have been
had or consummated in reliance upon this Guarantee Agreement.
SECTION 1.5. OBLIGATIONS INDEPENDENT. The obligations of the
Guarantors hereunder are joint and several and are independent of the
obligations of any other guarantor or the Company. A separate action or
actions may be brought and prosecuted against each of the Guarantors whether
or not an action is brought against any other guarantor, Guarantor or the
Company and whether or not any other guarantor, Guarantor or the Company be
joined in any such action or actions. The Guarantors waive, to the fullest
extent permitted by law, the benefit of any statute of limitations affecting
their liability hereunder or the enforcement thereof. Any payment by the
Company or other circumstance which operates to toll any statute of
limitations as to the Company shall operate to toll the statute of
limitations as to the Guarantors.
SECTION 1.6. REINSTATEMENT OF LIABILITY. The liability of the
Guarantors under this Guarantee Agreement shall be reinstated with respect to
any amount paid to the Guaranteed Parties by the Company or the Guarantors
which is thereafter required to be returned to the Company or such Guarantors
or the Company's or such Guarantors' respective receivers or trustees, upon
the bankruptcy, insolvency or reorganization of the Company or such
Guarantors or for any other reason, all as though such amount had not been
paid by the Company or such Guarantors.
SECTION 1.7. SUBORDINATION OF OBLIGATIONS TO THE COMPANY. Subject
to Section 1.9 hereof, all indebtedness of the Company to the Guarantors
shall be subject and subordinate to the prior payment in full of the
Obligations. Subject to Section 1.9 hereof, upon the occurrence of an Event
of Default or a default under this Guarantee Agreement, the Guarantors shall
not accept any payment from the Company or out of its property on account of
the indebtedness of the Company to such Guarantors until the payment in full
of the Obligations, and any such payment received by such Guarantors from the
Company shall be held by it in trust for and shall be promptly paid over by
it to the Guaranteed Parties.
<PAGE>
SECTION 1.8. CONTINUING GUARANTY; TERMINATION. This is a
continuing guaranty of the Obligations, and this Guarantee Agreement shall
remain in full force and effect and be binding upon the Guarantors and their
successors and assigns until payment in full to the Guaranteed Parties of any
and all amounts due under the Obligations (including, without limitation,
costs of collection) owed under the Securities Purchase Agreement, the Senior
Subordinated Debentures, Warrants or any other Related Document, whereupon
this Guarantee Agreement shall, subject to the provisions of Section 1.6
hereof, terminate and be of no further force and effect.
SECTION 1.9. GUARANTEE SUBORDINATE TO SENIOR DEBT. All Obligations
of the Guarantors hereunder (the "GUARANTY") shall be junior and subordinate
to all Senior Debt, pursuant to, and to the extent provided in Section 8 of
the Securities Purchase Agreement and each of the Guaranteed Parties by its
acceptance of this Guarantee Agreement, agrees to be bound by the provisions
of such Section 8. The Senior Debt shall continue to be Senior Debt and
entitled to the benefits of such subordination provisions irrespective of any
amendment, modification or waiver of any term of the Senior Debt or extension
or renewal of the Senior Debt. The Guaranty shall not be junior or
subordinate to any Indebtedness of the Company or the Guarantors other than
the Senior Debt except that the Guaranty shall be subordinate to Purchase
Money Debt the incurence of which is permitted under Section 7B(v) of the
Securities Purchase Agreement. For purpose hereof, Indebtedness evidenced by
the Senior Subordinated Debentures, including any refinancing, extension or
modification thereof, shall constitute "SUBORDINATED DEBT".
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Each Guarantor hereby represents and warrants to the Guaranteed
Parties that:
SECTION 2.1. ORGANIZATION, CORPORATE POWERS, ETC. It is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, has full corporate power to own its
properties and to carry on its business as now being conducted, except as
shown on Schedule 10A to the Securities Purchase Agreement, is in good
standing in each jurisdiction in which the character of its properties or the
nature of its business makes such qualification necessary, except where the
failure to so qualify would not have a Material Adverse Effect, and has all
requisite corporate power and authority to execute, deliver and perform this
Guarantee Agreement.
SECTION 2.2. AUTHORIZATION, ABSENCE OF CONFLICTS. The execution,
delivery and performance by it of this Guarantee Agreement (a) has been duly
authorized by all requisite corporate action, (b) does not require the
approval of its stockholders, (c) will not (i) violate any law or regulations
or its Certificate of Incorporation or By-laws, (ii) violate or constitute
(with due notice or lapse of time or both) a default under any indenture,
agreement, license or other instrument to which it is a party or by which it
or any of its properties may be bound or affected, (iii) violate any order of
any court, tribunal or governmental agency binding upon it or its properties
or (iv) result in the creation or imposition of any Lien of any nature
whatsoever upon any of its properties or assets and (d) does not require any
license, consent or approval of any governmental agency or regulatory
authority.
SECTION 2.3. BINDING OBLIGATIONS. This Guarantee Agreement
constitutes its legal, valid and binding obligation, enforceable against it
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting enforceability of creditors' rights generally or equitable
principles at the time in effect.
<PAGE>
ARTICLE III
DEFAULT AND REMEDIES
SECTION 3.1. EXERCISE OF RIGHTS. If an Event of Default shall
occur and be continuing, a majority (by principal amount of the Senior
Subordinated Debentures then outstanding) of the Guaranteed Parties shall
have the right, power and authority to do all things they deem necessary or
advisable to enforce the provisions of this Guarantee Agreement. A majority
(by principal amount of the Senior Subordinated Debentures then outstanding)
of the Guaranteed Parties shall have the right in their sole collective
discretion to determine which rights, guarantees, liens, security interests
or remedies they shall retain, pursue, release, subordinate, modify or take
any other action with respect thereto, without in any way modifying or
affecting any other of them or any of their rights hereunder.
SECTION 3.2. EXPENSES. The Guarantors hereby jointly and severally
agree to pay on demand all reasonable costs and expenses of the Guaranteed
Parties (including without limitation all reasonable fees and disbursements
of one counsel to the Guaranteed Parties), incurred by the Guaranteed Parties
in connection with the enforcement of the Guaranteed Parties' rights
hereunder and the collection of amounts payable hereunder. This agreement to
pay costs is cumulative of, and shall not limit, the Guaranteed Parties
rights to indemnification against all liability, loss or damages pursuant to
paragraph 10B of the Securities Purchase Agreement.
SECTION 3.3. CUMULATIVE REMEDIES. This Guarantee Agreement and the
obligations of the Guarantors hereunder are in addition to and not in
substitution for any other obligations or security interests now or hereafter
held by the Guaranteed Parties. The remedies herein provided are cumulative
and are not exclusive of any remedy provided by law.
SECTION 3.4. WAIVERS AND AMENDMENTS. No failure on the part of the
Guaranteed Parties to exercise, and no delay in exercising, and no course of
dealing with respect to, any right, power or remedy hereunder shall operate
as a waiver thereof or of any default, nor shall any single or partial
exercise by the Guaranteed Parties of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy of the Guaranteed Parties. No
<PAGE>
modification or waiver of any provision of this Guarantee Agreement nor
consent to any departure herefrom shall in any event be effective unless the
same shall be in writing and signed by the Guaranteed Parties and then such
waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on the Guarantors or the
Company in any case shall, of itself, entitle such Guarantors to any other or
further notice or demand in similar or other circumstances.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. NOTICES. All notices, requests, demands or other
communications related to this Guarantee Agreement to or on the Guarantors or
any Guaranteed Party shall be in writing and shall be sent by first class
mail, overnight courier or by fax with hard copy by first class mail or
overnight courier, if to the Guarantors, to the respective addresses set
forth on the signature pages hereto and, if to any Guaranteed Party, to the
respective addresses set forth on Schedule I, or at such other address or
facsimile numbers as any such party may hereafter specify to the others in
writing, and (unless otherwise specified herein) shall be deemed received 24
hours after it is sent if sent via facsimile (with receipt confirmed) or
overnight courier; PROVIDED, HOWEVER, that any such communication to the
Guarantors may also, at the option of the holders of Securities, be either
delivered to such Guarantors at its address set forth above or to any
executive officer of such Guarantors.
SECTION 4.2. SUCCESSORS AND ASSIGNS; SURVIVAL. (a) This Guarantee
Agreement shall inure to the benefit of and shall be binding upon the
respective successors and assigns of the parties hereto; PROVIDED, HOWEVER,
that the Guarantors may not assign their rights and obligations hereunder
without the prior written consent of the Guaranteed Parties. All covenants,
agreements, representations and warranties made herein by the Guarantors
shall survive the execution and delivery of this Guarantee Agreement and
shall continue in full force and effect until all Obligations have been paid
in full.
(b) Any Guaranteed Party may assign its rights and powers under
this Guarantee Agreement, and, in the event of such assignment, the assignee
of such rights and powers, to the extent
<PAGE>
of such assignment, shall have the same rights and remedies as if originally
named herein in the place of such Guaranteed Party.
SECTION 4.3. SET-OFF. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence of any default, each Guaranteed Party is hereby
authorized at any time or from time to time, without notice to the Guarantors
or to any other Person (any such notice being hereby expressly waived) to set
off and to appropriate and apply any and all credit balances and any other
indebtedness at any time held or owing by such Guaranteed Party for any
reason whatsoever to or for the credit or the account of the Company or the
Guarantors against and on account of the obligations and liabilities of such
Guarantors to the Guaranteed Parties under this Guarantee Agreement,
irrespective of whether the Guaranteed Parties shall have made any demand
hereunder.
SECTION 4.4. SECTION HEADINGS. Article and Section headings
contained in this Guarantee Agreement are for convenience only and shall not
affect the construction of this Guarantee Agreement.
SECTION 4.5. GOVERNING LAW. This Guarantee Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York without giving effect to the conflicts or choice of law principles
thereof.
SECTION 4.6. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS GUARANTEE AGREEMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
GUARANTEE AGREEMENT, THE GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE GUARANTOR AT ITS ADDRESS SET FORTH IN SECTION 4.1.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY GUARANTEED PARTY TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST ANY GUARANTOR IN ANY OTHER JURISDICTION.
<PAGE>
SECTION 4.7. SEVERABILITY. If any part of this Guarantee
Agreement is contrary to, prohibited by or deemed invalid under any
applicable law of any jurisdiction, such provision shall, as to such
jurisdiction, be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, without invalidating the remainder hereof or affecting
the validity or enforceability of such provision in any other jurisdiction.
SECTION 4.8. WAIVER OF TRIAL BY JURY. EACH OF THE GUARANTORS
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE EXTENT
PERMITTED BY APPLICABLE LAW) ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY OF
ANY DISPUTE ARISING UNDER OR RELATING TO THIS GUARANTEE AGREEMENT OR ANY
OTHER AGREEMENT OR DOCUMENT REFERRED TO HEREIN AND EACH GUARANTOR AGREES THAT
ANY SUCH DISPUTE SHALL, AT THE OPTION OF ANY GUARANTEED PARTY AS THE CASE MAY
BE, BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
SECTION 4.9. COUNTERPARTS. This Guarantee Agreement may be
executed in several counterparts, each of which shall be an original and all
of which shall constitute but one and the same instrument.
SECTION 4.10. PERSONS BECOMING SUBSIDIARIES. In accordance with
Section 6R of the Securities Purchase Agreement, upon any Person becoming a
Subsidiary of the Company after the date hereof, such Person will become a
party to this Guarantee Agreement by executing a separate counterpart of this
Guarantee Agreement, whereupon such Person will be deemed a Guarantor for
purposes of this Guarantee Agreement on and after the date of such execution
to the extent so provided in Section 6R of the Securities Purchase Agreement.
<PAGE>
IN WITNESS WHEREOF, the Guarantors hereto have caused this
Guarantee Agreement to be duly executed by their duly authorized officers as
of the day and year first above written.
AVRE, INCORPORATED
By: /s/ Barry D. Plost
-------------------------------------
Barry D. Plost, Chairman of the
Board, President and Chief
Executive Officer
BINARY ASSOCIATES, INCORPORATED
By: /s/ Barry D. Plost
--------------------------------------
Barry D. Plost, Chairman of the
Board, President and Chief
Executive Officer
SERACARE ACQUISITIONS, INC.
By: /s/ Barry D. Plost
--------------------------------------
Barry D. Plost, Chairman of the
Board, President and Chief
Executive Officer
BHM LABS, INC.
By: /s/ Barry D. Plost
--------------------------------------
Barry D. Plost, Chairman of the
Board, President and Chief
Executive Officer
SERACARE TECHNOLOGY, INC.
By: /s/ Barry D. Plost
--------------------------------------
Barry D. Plost, Chairman of the
Board, President and Chief
Executive Officer
WESTERN STATES GROUP, INC.
By: /s/ Barry D. Plost
--------------------------------------
Barry D. Plost, Chairman of the
Board, President and Chief
Executive Officer
<PAGE>
EXHIBIT 4.7
NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS WARRANT OR THE SHARES
PURCHASABLE HEREUNDER SHALL BE MADE EXCEPT PURSUANT TO REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR
PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH ACT AND SUCH STATE LAWS AND THE
RESPECTIVE RULES AND REGULATIONS THEREUNDER.
WARRANT TO PURCHASE UP TO 131,286 SHARES OF
COMMON STOCK OF SERACARE, INC. (SUBJECT TO ADJUSTMENT)
Exercisable as of the Exercisable Date (as defined below)
Void after the Expiration Date (as defined below)
THIS CERTIFIES that, for value received, SUTRO & CO. INCORPORATED, a Delaware
corporation ("Sutro"), or registered assigns, is entitled, subject to the terms
and conditions set forth in this Warrant, to purchase from SERACARE, INC., a
Delaware corporation (the "Company"), 131,286 (subject to adjustment as
provided in Section 4 of this Warrant) fully paid and nonassessable shares of
Common Stock, par value $.001 per share, of the Company (the "Common Stock"),
at any time commencing on February 13, 1999 (the "Exercisable Date") and
continuing up to 5:00 o'clock p.m. New York time on February 13, 2003 (the
"Expiration Date"), at a price of three dollars ($3.00) per share, subject to
adjustment as set forth herein (as adjusted, the "Exercise Price").
1. (A) This Warrant may be exercised by the holder hereof, in whole or
in part (but not as to a fractional share), by the presentation and surrender
of this Warrant with the Form of Election to Purchase attached hereto, properly
completed and executed by the holder by certified mail, by overnight courier,
in person or by a legal representative or attorney duly authorized to do so in
writing, at the principal office of the Company (or at such other address as
the Company may designate by notice in writing to the holder hereof at the
address of such holder appearing on the books of the Company), and upon payment
to the Company of an amount equal to the Exercise Price multiplied by the
number of shares being purchased pursuant to such exercise, payable to the
Company in cash, by certified check or by wire transfer. In lieu of exercising
this Warrant, the holder may elect to receive a payment equal to the difference
between (a) the Fair Market Value (as such term is defined in paragraph 5B of
that certain Securities Purchase Agreement among the Company, the investors
named in the signature pages thereto and the Guarantors named therein, dated as
of February 13, 1998 (the "Purchase Agreement")) of a share of Common Stock on
the surrender date multiplied by the number of shares as to which the payment
is then being elected and (b) the Exercise Price with respect to such shares,
which difference is payable by the Company to the holder of this Warrant only
in shares of Common Stock, the number of which shall be the nearest whole
<PAGE>
number obtained by dividing such difference by the Fair Market Value of a share
of Common Stock on the date of such election.
(B) The shares of Common Stock so purchased pursuant to paragraph 1(A)
above shall be deemed to be issued to the holder hereof as the record owner of
such shares as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such shares. Certificates for the
shares of Common Stock so purchased shall be delivered or mailed to the holder
promptly after this Warrant shall have been so exercised, and, unless this
Warrant has expired or has been exercised in full, a new Warrant identical in
form but representing the number of shares of Common Stock with respect to
which this Warrant shall not then have been exercised shall also be issued to
the holder hereof at the expense of the Company.
(C) The Company shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares of
capital stock of the Company upon exercise of the Warrant; PROVIDED, HOWEVER,
that the Company shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the holder of the Warrant in
respect of which such shares are being issued.
2. Except as otherwise stated in the Registration Rights Agreement between
the Company and Sutro of even date herewith (the "Registration Rights
Agreement"), this Warrant does not confer any rights or privileges or impose
any liabilities of a shareholder of the Company upon the holder hereof.
3. This Warrant is exchangeable, upon its surrender by the holder at the
office of the Company referred to in Section 1 above, for one or more new
Warrants (containing the same terms as this Warrant) each representing the
right to purchase such number of shares of Common Stock as shall be designated
by such holder at the time of surrender (but not exceeding in the aggregate the
remaining number of shares of Common Stock which may be purchased hereunder).
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and upon delivery of indemnity
reasonably satisfactory to the Company (or, in the case of mutilation, upon
surrender of this Warrant), the Company will issue to the holder a replacement
Warrant (containing the same terms as this Warrant). The unsecured undertaking
of the original holder of this Warrant shall constitute satisfactory indemnity
for purposes of this Section 3. As used herein, "Warrant" shall include all
new Warrant(s) issued in exchange for or replacement of this Warrant.
4. (A) The Company represents and warrants that the number of shares of
Common Stock issuable upon exercise of the Warrant as of the date of issuance
of this Warrant (the "Issuance Date") provides the holder of this Warrant with
one percent (1%) of the aggregate of (i) all issued and outstanding shares of
Common Stock as of such date, PLUS (ii) all shares of Common Stock issuable in
respect of all the Warrants issued pursuant to the Purchase Agreement, PLUS
(iii) all shares of Common Stock issuable in respect of this Warrant, PLUS
(iv) all shares of Common Stock or other capital stock of the Company issuable
with respect to Convertible Securities (hereinafter, the "Fully Diluted
Outstanding Shares"). For
<PAGE>
purposes of this Warrant, "Convertible Securities" shall mean evidence of
indebtedness, shares of stock, warrants and options and other securities
which are convertible into, exercisable for or exchangeable, with or without
payment of additional consideration in cash or property, for shares of Common
Stock or other capital stock of the Company either immediately or upon the
occurrence of a specified date or specified event. Each holder of a Warrant
may reasonably request at any time that the Company provide a reasonably
detailed calculation of its Fully Diluted Outstanding Shares of Common Stock,
and the Company hereby covenants that it will promptly deliver such
information to the holders of the Warrants upon such request. The number of
shares of Common Stock or other consideration issuable upon exercise of this
Warrant, and the Exercise Price applicable thereto, shall be subject to
adjustment from time to time as set forth in paragraphs 4(B)-(J) below.
(B) If the Company should, at any time or from time to time after the
Issuance Date, fix a record date for a split, subdivision, or combination of
the outstanding shares of Common Stock, then as of such record date (or the
date of such stock split, subdivision, or combination if no record date is
fixed) the number of shares of Common Stock that this Warrant is exercisable to
purchase as of such time shall be adjusted to be the same number of shares of
Common Stock that the holder of this Warrant would have received if this
Warrant had been exercised immediately prior to such split, subdivision, or
combination. The Exercise Price shall be adjusted to be the then-applicable
Exercise Price multiplied by a fraction, the numerator of which is the number
of shares of Common Stock purchasable under this Warrant immediately prior to
such stock split, subdivision, or combination, and the denominator of which is
the number of shares of Common Stock purchasable by this Warrant immediately
after such event.
(C) If the Company should, at any time or from time to time after the
Issuance Date, fix a record date for the determination of eligible stockholders
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend,
then and in each case, this Warrant shall represent the right to acquire, in
addition to the number of shares of the Common Stock receivable upon exercise
of this Warrant, and without payment of any additional consideration therefor
upon such exercise, the amount of such other or additional stock or other
securities or property (other than cash) of the Company receivable upon payment
of such dividend as a holder of the number of shares of Common Stock for which
this Warrant would have been exercisable immediately prior to such record date
would have had been entitled to receive, and had such holder thereafter, during
the period from the date of payment of such dividend to and including the date
of exercise of this Warrant, retained such shares and/or all other additional
stock payable in such dividend or dividends during such period, giving effect
to all adjustments called for during such period by the provisions of this
Section 4.
(D) If, at any time or from time to time after the Issuance Date, any
reorganization, reclassification of the capital stock of the Company (other
than a change in par value or from par value to no par value or from no par
value to par value or as a result of a
3
<PAGE>
stock dividend or subdivision, split-up or combination of shares),
consolidation or merger (including a merger in which the Company is the
surviving entity), sale or other disposition of all or substantially all of
the Company's assets or a distribution of property to shareholders (other
than distributions payable out of earnings or retained earnings) shall occur,
then each Warrant shall (in lieu of or, in respect of sales of all or
substantially all assets or distribution of property to shareholders, in
addition to, being exercisable for shares of Common Stock) after such
reorganization, reclassification, consolidation or merger be exercisable into
the kind and number of shares of stock or other securities or property
(including cash) of the Company or of the corporation resulting from such
consolidation or surviving such merger or to which such properties and assets
shall have been sold or otherwise disposed of or distributed to which the
holder of the number of shares of Common Stock deliverable (immediately prior
to the time of such reorganization, reclassification, consolidation, merger,
sale or other disposition or distribution) upon exercise of such Warrant
would have been entitled upon such reorganization, reclassification,
consolidation, merger, sale or other disposition or distribution. The
provisions of this Section shall similarly apply to successive
reorganizations, reclassifications and other transactions contemplated above.
(E) If the Company should, at any time or from time to time after the
Issuance Date, issue any shares of Common Stock or any warrant, option, right
or other security or instrument convertible into or exchangeable or exercisable
for shares of Common Stock of the Company (other than the Warrants issued
pursuant to the Purchase Agreement and any options or shares of Common Stock
issued pursuant to the Company's 1997 Informal Stock Compensation Plan), for an
amount per share (after giving effect to payment to the Company of all
applicable consideration in the case of any warrant, option, right or other
convertible, exchangeable or exercisable security or instrument) that is less
than the Exercise Price per share, as adjusted as of the date of such issuance,
then, effective immediately upon such issuance, the Exercise Price shall be
adjusted to an amount equal to the product obtained by multiplying the Exercise
Price in effect immediately prior to such issuance by a fraction, the numerator
of which shall be the sum of (x) the product obtained by multiplying (1) the
number of Fully Diluted Outstanding Shares immediately prior to such issuance
by (2) the Exercise Price in effect immediately prior to such issuance and (y)
the consideration, if any, received or to be received by the Company upon such
issuance, exercise or conversion, and the denominator of which shall be the
product obtained by multiplying the number of Fully Diluted Outstanding Shares
immediately after such issuance by the Exercise Price in effect immediately
prior to such issuance.
(F) All calculations under this Section 4 shall be made to the nearest
cent ($.01) or to the nearest whole share.
(G) In any case in which the provisions of this Section 4 shall
require that an adjustment of the number of shares of Common Stock issuable
upon exercise of the Warrant shall become effective immediately after a record
date for an event, the Company may, until the occurrence of such event, defer
issuing to the holder of any Warrant exercised after such
4
<PAGE>
record date and before the occurrence of such event the additional shares of
capital stock issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of capital stock issuable
upon exercise before giving effect to such adjustment; PROVIDED, HOWEVER,
that the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
(H) Whenever the Exercise Price or number of shares of Common Stock
issuable upon exercise of the Warrants shall be adjusted as provided in this
Section 4, the Company shall promptly thereafter file, at its principal office
or at such other place as may be designated by the Company, a statement, signed
by its president or chief financial officer and by its treasurer, showing in
reasonable detail the facts requiring such adjustment and the Exercise Price or
number of shares of Common Stock issuable upon exercise of this Warrant that
shall be in effect after such adjustment. The Company shall cause a copy of
each such statement to be sent by first-class, certified mail, return receipt
requested, postage prepaid, to each holder of the Warrant at such holder's
address appearing in the Company's records. Where appropriate, such copy may
be given in advance and may be included as part of a notice required to be
mailed under the provisions of paragraph 4(I) hereof.
(I) In the event the Company shall propose to take any action of the
types described in paragraph 4(D) hereof, the Company shall give notice to each
holder of the Warrants in the manner set forth in paragraph 4(H) hereof at such
holder's address appearing in the Company's records, which notice shall specify
the record date, if any, with respect to any such action and the date on which
such action is to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Warrant and the number, kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon exercise of the Warrants. In the case of any action
that would require the fixing of a record date, such notice shall be given at
least 10 days prior to the date so fixed, and in case of all other action, such
notice shall be given at least 15 days prior to the taking of such proposed
action. Failure to give such notice, or any defect therein, shall not affect
the legality or validity of any such action.
(J) (i) If any event occurs of the type contemplated by the
provisions of this Section 4 but not expressly provided for by such provisions,
the Board of Directors, or, at the election of holders of a majority of the
Warrants, an appraiser, will make appropriate adjustments to the terms and
conditions of the Warrants as may be necessary fully to carry out the
adjustments contemplated by Section 4 hereof.
(ii) The Company will not, by amendment of its organizational
document or by-laws or through any reorganization, transfer of assets,
reclassification, merger, dissolution, issuance or sale of securities or
otherwise, avoid or seek to avoid the observance
5
<PAGE>
or performance of any of the terms to be observed or performed by the Company
hereunder but will at all times in good faith assist in the carrying out of
all the provisions hereof and in the taking of all such actions as may be
necessary or appropriate in order to protect the rights of the holders of the
Warrant against impairment.
5. (A) Subject to and upon compliance with the provisions hereof, the
holder of this Warrant shall have the right at such holder's option, at any
time after the Exercisable Date through the Expiration Date, to exercise all or
any part of this Warrant into Common Stock at the Exercise Price.
(B) In order to exercise its right, the holder hereof shall follow the
procedures described in paragraph 1(A) hereof and elsewhere herein.
(C) Promptly after the receipt of the written notice referred to in
paragraph 1(A) and surrender of this Warrant as aforesaid, the Company shall
issue and deliver to the holder hereof, registered in such name or names as
such holder may direct, a certificate or certificates for the number of full
shares of Common Stock issuable upon the exercise of this Warrant (or specified
portion thereof), bearing an appropriate restrictive legend in respect of
applicable federal and state securities laws and an additional legend
referencing the Registration Right Agreement. To the extent permitted by law,
such exercise shall be deemed to have been effected and the exercise price
shall be determined as of the close of business on the date by which both
(i) such written statement shall have been received by the Company, accompanied
by payment as provided above, and (ii) this Warrant shall have been surrendered
as aforesaid, and at such time the rights of the holder of this Warrant (or
specified portion thereof) as such holder shall cease, and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall then be issuable upon exercise shall be deemed to have
become the holder or holders of record of the shares of Common Stock
represented thereby.
(D) No fractional shares shall be issued upon exercise of Warrants.
Instead of issuing any fractional shares of Common Stock that would otherwise
be issuable upon exercise of any of the Warrants, the Company shall round off
to the nearest whole number of shares of Common Stock. In the case of any
Warrant which is exercised in part only, the Company shall, upon such exercise,
execute and deliver to the holder thereof, at the expense of the Company, a new
Warrant or Warrants equal to the unexercised portion of such Warrant.
(E) The Company will at all times reserve, free from any preemptive
rights, and keep available out of its authorized Common Stock, solely for the
purpose of issue upon the exercise of Warrants as herein provided, such number
of shares of Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants. The Company covenants and agrees that all shares of
Common Stock which shall be so issuable will, upon issuance, be duly authorized
and issued, fully paid and nonassessable. The Company will not take any action
which results in any adjustment of the number of shares of Common Stock
issuable upon
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exercise of the Warrants if the total number of shares of Common Stock
issuable after such action upon exercise of the Warrants would (a) exceed the
total number of remaining shares of Common Stock then authorized to be issued
by the Company's organizational document in effect at such time or (b) would
conflict with, or result in any violation of, or require the consent or
approval (unless the same shall be obtained) of any court or administrative
or governmental body pursuant to, or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, the
organizational document or by-laws of the Company or any agreement or
instrument to which the Company is then subject. The Company will take all
such action as may be necessary to assure that all such shares of Common
Stock may be so issued without violation of any applicable requirements of
any exchange upon which the Common Stock of the Company may be listed or in
respect of which the Common Stock has qualified for unlisted trading
privileges.
(F) The Company will not close its books against the issuance or
transfer of any shares of Common Stock issuable upon exercise of the Warrants.
(G) If this Warrant, or any part hereof, is transferred to another
holder or holders and such holder(s) shall have designated in writing the
address to which communications with respect to this Warrant shall be mailed,
all notices, certificates, requests, statements and other documents required to
be delivered to the transferring holder by any provision of the Purchase
Agreement by reason of the holding of this Warrant shall also be delivered to
such holder(s).
6. This Warrant shall be construed and enforced in accordance with
the laws of the State of New York without regard to principles of conflicts of
law or choice of law.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer on this 13th day of February, 1998.
SERACARE, INC.
By: /S/ Jerry L. Burdick
-------------------------------
Name: Jerry L. Burdick
Title: Executive Vice President
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FORM OF ELECTION TO PURCHASE
SERACARE, INC.
The undersigned holder of this Warrant (1) hereby irrevocably elects to
exercise the right to purchase hereunder _____ fully paid shares of the Common
Stock of SERACARE, INC., (2) makes payment in full of the purchase price of
such shares, (3) requests that certificates for such shares be issued in the
name of _______________, and (4) if said number of shares shall not be all the
shares the holder is entitled to purchase under this Warrant, requests that a
new warrant for the unexercised and unexpired portion of this Warrant be
issued.
Dated:
-----------------------
-----------------------------------
(SIGNATURE)
Name:
Title:
<PAGE>
EXHIBIT 4.8
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of February 13, 1998, by and among SUTRO & CO. INCORPORATED, a
Delaware corporation, or its permitted assigns ("Sutro"), and SERACARE, INC., a
Delaware corporation (the "Company").
RECITAL
The Company is issuing to the Holder (as defined below), as of the date
hereof, that certain Warrant to purchase shares of Common Stock (as defined
below) of the Company (the "Warrant"), granting to the Holder the right to
purchase up to 131,286 shares (subject to adjustment) of the Company's Common
Stock, par value $.001 per share, for $3.00 per share (subject to adjustment).
The Company desires to grant certain incidental registration rights to the
Holder in connection with the shares purchasable upon exercise of the Warrant.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises and
covenants contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereby agree
as follows:
AGREEMENT
1. DEFINITIONS. Unless the context requires otherwise, the following
underlined terms shall have the following respective meanings:
1.1 AGREEMENT. This Registration Rights Agreement.
1.2 COMMON STOCK. The Company's common stock, par value $.001 per
share.
1.3 COMPANY. Seracare, Inc., a Delaware corporation.
1.4 EXCHANGE ACT. The Securities Exchange Act of 1934, as amended.
1.5 HOLDER OR HOLDERS. Sutro and its permitted assigns.
1.6 REGISTRABLE SECURITIES. The shares of Common Stock issued upon
exercise of the Warrant.
1.7 REGISTRATION EXPENSES. All expenses of registration, including
but not limited to registration and filing fees, including filing fees for
Nasdaq and all stock exchanges or quotation services on which the Common Stock
is listed or quoted, fees and expenses of
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complying with the Securities Laws, printing expenses, transfer agent fees,
and the fees and expenses of the Company's independent certified public
accountants, the Company's investment banker and underwriter and the
Company's legal counsel, but excluding the Holder's brokerage fees,
underwriting fees and discounts, transfer taxes, if any, and the fees and
expenses of any Selling Shareholder's legal counsel.
1.8 SEC. The United States Securities and Exchange Commission.
1.9 SECURITIES. The Warrant and the shares of Common Stock issuable
on exercise thereof of the Warrant.
1.10 SECURITIES ACT. The Securities Act of 1933, as amended.
1.11 SECURITIES LAWS. The Securities Act, the Exchange Act and all
applicable state securities laws, and all rules and regulations promulgated
thereunder.
1.12 SELLING SHAREHOLDER. With respect to any registration
statement, any Holder whose Registrable Securities are included therein.
1.13 SUTRO. Sutro & Co. Incorporated or its successors.
1.14 WARRANT. The Company's Common Stock Purchase Warrant dated
February 13, 1998, issued to the Holder and exercisable to purchase up to
131,286 shares (subject to adjustment) of Common Stock at $3.00 per share
(subject to adjustment).
2. REGISTRATION RIGHTS.
2.1 INCIDENTAL REGISTRATION RIGHTS.
(a) NOTICE OF REGISTRATION; REGISTRATION. Whenever the Company
proposes to file a registration statement under the Securities Act to offer
publicly shares of the Common Stock (other than in connection with any merger,
acquisition, exchange offer, dividend reinvestment plan, employee benefit plan,
or stock option plan), the Company shall give each Holder written notice of
such intention at least twenty (20) days prior to the anticipated initial
filing date of such registration statement. The Company shall use its best
efforts to include in such registration statement all Registrable Securities
requested to be so included by a Holder upon written notice to the Company
within ten (10) days of the Company's notice. If the registration statement is
for an underwritten offering, the Selling Shareholder shall sell its
Registrable Securities in such offering on the same terms and conditions as all
other shares of Common Stock being offered in such registration statement.
(b) HOLDBACK. If the notice of registration under this Section
2.1 is for an underwritten public offering and the Company is advised in
writing by the managing underwriter of such offering that in its reasonable
judgment the number of Registrable
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Securities for which incidental registration is requested pursuant to this
Agreement cannot be sold without impairing the ability to complete the
preestablished plan for distribution of the Common Stock (the grounds for
which shall be confidentially disclosed to any Selling Shareholder who so
requests and who agrees to maintain the confidentiality of such disclosure)
then the number of Registrable Securities to be sold by the Selling
Shareholder may be reduced as set forth below. The Company shall so advise
all Holders proposing to distribute their securities through such
underwriting and the number of shares of securities that may be included in
the registration and underwriting (other than on behalf of the Company) shall
be allocated (i) first, to those certain holders of contractual rights to
participate in such registration pursuant to that certain Registration Rights
Agreement, dated as of February 13, 1998, by and among the Company and the
investors listed on the signature page thereto, (ii) second, equally among
all Holders and (iii) third, among such other holders, if any, of contractual
rights to participate in such registration; provided, in the case of (ii) and
(iii) above, that such allocation be in each case in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities or other
securities requested to be included in such registration by such Holders and
such other holders, as the case may be. Notwithstanding the foregoing two
sentences, the Company shall require all officers, directors, and affiliates
exercising incidental registration rights in connection with such
registration statement to withdraw all securities from registration before
requiring the Selling Shareholder to reduce the number of Registrable
Securities to be sold. If the number of Registrable Securities of the Selling
Shareholder is reduced, the Selling Shareholder may withdraw all or part of
the Registrable Securities from registration without affecting such Selling
Shareholder's registration rights hereunder for the Registrable Securities so
withdrawn or reduced.
(c) UNDERWRITING AGREEMENT. As a condition for the inclusion
of any Registrable Securities in any registration statement, at the request of
the Company, the Selling Shareholder shall enter into an underwriting agreement
with the Company and the underwriter(s) with respect to the registration of its
Registrable Securities, in such customary form that is reasonably acceptable to
the Company, the Selling Shareholder and such underwriter(s), consistent with
the provisions of this Agreement.
(d) WITHDRAWAL BY THE COMPANY. The Company shall retain the
absolute right to withdraw any registration statement prior to the effective
date thereof, even if the Company shall have given notice to the Holder
pursuant to Section 2.1(a) hereof and the Selling Shareholder has requested
inclusion of its Registrable Securities therein.
(e) EXPENSES. The Company shall pay all Registration Expenses
for registrations under this Section 2.1. The Selling Shareholder shall pay
all brokerage fees, underwriting fees and discounts, transfer taxes, if any,
and the fees and expenses of the Selling Shareholder's legal counsel in
connection with the registration and sale of its Registrable Securities.
(f) TERM. The incidental registration rights granted pursuant
to this Section 2.1 shall terminate on the earliest of the sale of all
Registrable Securities by the Holder or the receipt by the Holder of the
written opinion of legal counsel for the Company that all of
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the Registrable Securities may be publicly sold pursuant to Rule 144, or
otherwise without the need for compliance with the registration provisions of
the Securities Laws.
2.2 REGISTRATION PROCEDURES.
(a) SELLING SHAREHOLDER INFORMATION. Each Selling Shareholder
shall provide the Company with such information about the Selling Shareholder
and its intended manner of distribution of the Registrable Securities, and
shall otherwise cooperate with the Company and the underwriters, if any, as may
be needed or helpful to complete any obligation of the Company hereunder.
(b) CONSULTATION. The Company shall supply drafts of any
registration statement to the Selling Shareholder prior to filing the
registration statement with the SEC, and shall reasonably consult with the
Selling Shareholder and its legal counsel with respect to the form and content
of such filing. The Company will amend such registration statement to include
such revisions as the Selling Shareholder or its legal counsel shall reasonably
request. If material revisions reasonably requested by the Selling Shareholder
or its legal counsel are not effected by the Company, the Selling Shareholder
may withdraw all or part of the Registrable Securities from registration
without affecting such Selling Shareholder's registration rights hereunder for
the Registrable Securities so withdrawn or reduced.
(c) PROVISION FOR PROSPECTUSES. The Company shall furnish the
Selling Shareholder with the number of copies of a summary prospectus or other
prospectus, including a preliminary prospectus in conformity with the
requirements of the Securities Act, and such other documents as the Selling
Shareholder may reasonably request, in order to facilitate the public sale or
other disposition of the Registrable Securities.
(d) STATE SECURITIES LAW COMPLIANCE. The Company shall use
reasonable efforts to register or qualify the Registrable Securities covered by
the registration statement under the Securities Laws of such states as the
Selling Shareholder may reasonably request in light of the costs of such
registration or qualification for the Company (provided, however, that the
Company shall not be required to consent to the general service of process for
all purposes in any jurisdiction where it is not then qualified to do business
or to qualify to do business) and do any and all other acts or things that may
be reasonably necessary or advisable to enable the Selling Shareholder to
consummate the public sale or other disposition of their Registrable Securities
in such states.
(e) AMENDMENTS. The Company shall use reasonable efforts to
prepare and file promptly with the SEC such amendments and supplements to the
registration statement filed with the SEC in connection with its registration
described in Section 2.1(a) hereof and the prospectus used in connection
therewith as may be necessary to keep such registration statement continuously
effective and in compliance with the Securities Act for up to six (6) months,
or until all Registrable Securities registered in such registration statement
have been sold, whichever is earlier.
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(f) PROSPECTUS DELIVERY. At any time when a sale or other
public disposition of Common Stock pursuant to a registration statement is
subject to a prospectus delivery requirement, the Company shall immediately
notify the Selling Shareholder of the occurrence 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 a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing. Upon receipt of such a notice, the Selling Shareholder shall
immediately discontinue sales or other dispositions of Registrable Securities
pursuant to such registration statement. The Selling Shareholder may resume
sales only upon receipt of an amended prospectus or after the Selling
Shareholder has been advised by the Company that use of the previous
prospectus may be legally resumed.
(g) OPINIONS. At the request of the Selling Shareholder, the
Company shall use reasonable efforts to furnish on the date that the
Registrable Securities are delivered to the underwriter for sale in
connection with an underwritten offering registration pursuant to this
Agreement (i) a letter from the legal counsel representing the Company for
the purposes of such registration giving the Selling Shareholder the right to
rely upon the opinion of such legal counsel delivered to the underwriter(s)
acting on behalf of the Company in connection with such registration insofar
as such opinion relates to the Selling Shareholder, and (ii) a letter from
the independent certified public accountants of the Company substantially the
same as the letter of such accountants delivered to the underwriter(s) acting
on behalf of the Company in connection with such registration, provided that
the Selling Shareholder provides to such accountants the opinion or
representation letter required by Statement of Auditing Standards No. 72.
(h) STOP ORDERS. The Company shall immediately notify the
Selling Shareholder of the issuance by the SEC of any stop order or order
suspending the effectiveness of any registration statement, the issuance by
any state regulatory authority of any order suspending the registration or
qualification of the Registrable Securities for sale in such jurisdiction, or
the initiation of any proceeding for such purposes. The Company, with the
reasonable cooperation of the Selling Shareholder, shall make every
reasonable effort to contest any such proceeding or to obtain the withdrawal
of any such order at the earliest possible date.
(i) REVIEW OF RECORDS. The Company shall make available all
financial and other records, pertinent corporate documents, and properties of
the Company for inspection by the Selling Shareholder or its underwriter,
legal counsel, or accountants, and shall cause the Company's officers,
directors, and employees to supply all information reasonably requested by
any such person in connection with any registration statement filed or to be
filed hereunder, so long as such person agrees to keep confidential any
records, information, or documents designated by the Company in writing as
confidential.
(j) COMPLIANCE WITH SECURITIES LAWS. In all actions taken
under this Agreement, the Company and the Selling Shareholder shall use their
best efforts to comply with all provisions of the Securities Laws.
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(k) MARKET STAND-OFF. If requested by the Company, the
Holder may not sell or otherwise transfer any Registrable Securities held by
the Holder, other than those Registrable Securities included in a
registration statement, during the one hundred and eighty (180) day period
following the effective date of a registration statement filed by the Company
under the Securities Act with respect to any underwritten offering. The
Company may impose stop-transfer instructions with respect to the Registrable
Securities subject to the foregoing restrictions until the end of such one
hundred and eighty day period.
2.5 SALES UNDER RULE 144. With the view to making the benefits of
Rule 144 under the Securities Act available to the Holder, the Company shall
use reasonable efforts to (a) ensure that there is adequate current public
information (as set forth in Rule 144(c)) available with respect to the
Company; (b) timely file with the SEC all reports and other documents
required to be filed by the Company under the Securities Act, the Exchange
Act, and the rules and regulations promulgated thereunder; and (c) promptly
furnish to the Holder upon request a written statement by the Company as to
the Company's compliance with these covenants and the provisions of Rule 144.
2.6 INDEMNIFICATION.
(a) THE COMPANY'S INDEMNIFICATION. The Company shall
indemnify, defend, save, and hold the Selling Shareholder (and any person who
controls the Selling Shareholder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act), with respect to which a
registration or qualification has been effected pursuant to this Agreement,
harmless from and against any and all liabilities, claims, damages, demands,
expenses, and losses, including but not limited to interest, penalties, court
costs, attorneys' fees, and settlements approved by the Company, which
consent shall not be unreasonably withheld, arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement or prospectus, or any amendment or supplement
thereto, incident to any such registration or qualification, or based on any
omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, or any violation
by the Company of the Securities Act applicable to the Company in connection
with any such registration or qualification, and the Company will reimburse
each such Holder, each of its officers and directors, and each person
controlling such Holder for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Company will not
be liable to any such person in any case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission (or alleged untrue statement or omission), made in
reliance upon and in conformity with written information furnished to the
Company by such Holder or controlling person and stated to be specifically
for use therein or the preparation thereby.
(b) THE SELLING SHAREHOLDER'S INDEMNIFICATION. Each Selling
Shareholder with Registrable Securities included in a registration statement
under this
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Agreement shall indemnify, defend, save, and hold (i) the Company and its
directors, officers, and controlling persons (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act), (ii) the
underwriter(s), if any, and their controlling persons, and (iii) all other
selling shareholders participating in such offering (and their respective
officers, directors, underwriters, and controlling persons) harmless from and
against any and all liabilities, claims, damages, demand, expenses, and
losses, including but not limited to interest, penalties, court costs,
attorneys' fees, and settlements approved by the Selling Shareholder, which
consent shall not be unreasonably withheld, arising out of (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any
such registration statement or a related prospectus, or any amendment or
supplement thereto, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) or any violation by such Selling
Shareholder of the Securities Act in connection with such registration or
qualification, and will reimburse the Company, such Holders, such directors,
officers, persons, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, in the case of
clause (i) above to the extent, but only to the extent that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement or in a related prospectus in reliance
upon and in conformity with written information furnished to the Company by
such Holder and stated to be specifically for use therein or the preparation
thereby.
(c) CONTRIBUTION. If the indemnification provided for in
this Section 2.6 from an indemnifying party is unavailable to an indemnified
party hereunder in respect to any liability, claim, damage, demand, expense,
or loss referred to herein, then the 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 liability, claim,
damage, demand, expense, or loss in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and the indemnified
party in connection with the statements or omissions that resulted in such
liability, claim, damage, demand, expense, or loss, as well as any other
relevant equitable consideration. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether the untrue statement of a material fact or the omission to
state a material fact relates to information supplied by such indemnifying
party or indemnified party and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such untrue
statement or omission. The amount paid or payable by a party as a result of
the liabilities, claims, damages, demands, expenses, and losses referred to
above shall be deemed to include any court costs, attorneys' fees, and other
expenses reasonably incurred by such party in connection with investigating
or defending any action, suit, or proceeding. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this Section
2.6(c) were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations
referred to in this Section 2.6(c). 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 is not also guilty of
such fraudulent misrepresentation.
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3. GENERAL PROVISIONS.
3.1 AMENDMENT. All amendments or modifications of this Agreement
shall be in writing and shall be signed by all of the parties hereto.
3.2 WAIVER. Any waiver of any right, power, or privilege
hereunder must be in writing and signed by the party being charged with the
waiver. No delay on the part of any party hereto in exercising any right,
power, or privilege hereunder shall operate as a waiver of any other right,
power, or privilege hereunder, nor shall any single or partial exercise of
any right power, or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege.
3.3 NOTICES. All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and
shall be delivered personally or sent by overnight courier, by telecopy with
confirmation by first-class mail, or by certified mail, return receipt
requested. Notices delivered personally or sent by overnight courier or by
telecopy with confirmation by first-class mail shall be effective on the date
first received, while notices sent by certified mail, return receipt
requested, shall be deemed to have been received and to be effective three
(3) business days after deposit into the mails. Notices shall be given to
the parties at the following respective addresses, or to such other addresses
as any party shall designate in writing:
If to the Company: SERACARE, INC.
1925 Century Park East, Suite 1970
Los Angeles, California 90067
Attn: Chief Executive Officer
With a copy to: O'Melveny & Myers, LLP
610 Newport Center Drive
Newport Beach, California 92660
Fax No. (714) 669-6994
Attention: David A. Krinsky, Esq.
If to the Holder: Sutro & Co. Incorporated
11150 Santa Monica Blvd., 15th Floor
Santa Monica, California 90025
Attn: Chief Financial Officer
3.4 SUCCESSORS AND ASSIGNS This Agreement and each of its
provisions shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, administrators
successors, and assigns. The Holder may assign this Agreement and its rights
hereunder only in connection with a transfer or assignment of all or part of
the Warrant or the Registrable Securities.
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3.5 LAW GOVERNING. This Agreement has been negotiated, executed
and delivered and shall be performed in the State of New York and shall be
governed by and construed and enforced in accordance with the laws of the
State of New York, without regard for its conflict of laws rules.
3.6 ATTORNEYS' FEE. In any suit to interpret or enforce the terms
and provisions of this Agreement, the prevailing party shall be entitled to
recover court costs and attorneys' fees, in addition to any other remedy or
recovery to which such party may be entitled.
3.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, including by facsimile transmission, all of which together
shall constitute a single instrument.
3.8 SEVERABILITY OF PROVISIONS. In the event any one or more of
the provisions of this Agreement shall for any reason be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof, and this
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
3.9 CONSTRUCTION. The headings in the sections and paragraphs of
this Agreement are for convenience only and shall not constitute a part
hereof. Whenever the context so requires, the masculine shall include the
feminine and the neuter, the singular shall include the plural, and
conversely. The terms and all parts of this Agreement shall in all cases be
interpreted simply and according to their plain meaning and neither for nor
against any party hereto.
IN WITNESS WHEREOF, the parties have duty executed and delivered
this Agreement as of the date first written above.
SERACARE, INC. SUTRO & CO. INCORPORATED
By: /S/ Jerry L. Burdick By:
----------------------------- -----------------------------
Name: Jerry L. Burdick Name:
Title: Executive Vice President Title:
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