<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. For the quarterly period ended March 31, 2000
or
[ ] Transitional report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transitional period from _______________________ to __________________
Commission file number 0-29100
---------
PRWW, LTD.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3264604
- ------------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employeer
incorporation or organization) Identification No.)
30 South 17th Street
Philadelphia, PA 19103
- ---------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
215-972-0420
----------------------------------------------------
(Registrant's telephone number, including area code)
Premier Research Worldwide, Ltd.
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(Former name, former address and formal fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports, and (2) has been subject to such filing
requirements for the past 90 days. X Yes No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
The number of shares of Common Stock, $.01 par value, outstanding as of May 12,
2000, was 6,960,187.
<PAGE>
PRWW, LTD. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1. Consolidated Financial Statements
Condensed consolidated balance sheets--March 31, 2000 (unaudited) and
December 31, 1999 3
Condensed consolidated statements of operations (unaudited)--Three Months
Ended March 31, 2000 and 1999 4
Condensed consolidated statements of cash flows (unaudited)--Three Months
Ended March 31, 2000 and 1999 5
Notes to condensed consolidated financial statements (unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 8-13
Item 3. Qualitative and Quantitative Disclosures about Market Risk 13-14
Part II. Other Information 15-16
Item 2. Changes in Securities and Use of Proceeds
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits
b.) Reports on Form 8-K
None
Signatures 17
Exhibits
</TABLE>
2
<PAGE>
PRWW, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 26,623 $ 16,765
Short-term investments 3,641 4,300
Marketable securities 7,975 --
Accounts receivable, net 5,522 4,537
Note receivable -- 8,000
Prepaid expenses and other 1,018 1,177
Deferred income taxes 322 322
-------- --------
Total current assets 45,101 35,101
Property and equipment, net 2,663 2,705
Goodwill, net 1,765 1,844
Investments in non-marketable securities 2,725 2,625
Other assets 257 23
Deferred income taxes 2,176 2,914
-------- --------
$ 54,687 $ 45,212
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 932 $ 1,761
Accrued expenses 2,159 3,322
Income taxes payable 550 2,348
Deferred revenues 4,691 2,404
-------- --------
Total current liabilities 8,332 9,835
-------- --------
Minority interest in subsidiary 9,500 --
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock-$10 par value, 500,000 shares authorized,
none issued and outstanding -- --
Common stock-$.01 par value, 15,000,000 shares authorized,
7,459,787 and 7,390,152 shares issued and outstanding 75 74
Additional paid-in capital 38,517 38,147
Unrealized gain on marketable securities, net of tax 1,320 --
Treasury stock, 499,800 shares at cost (2,711) (2,711)
Accumulated deficit (346) (133)
-------- --------
Total stockholders' equity 36,855 35,377
-------- --------
$ 54,687 $ 45,212
======== ========
</TABLE>
The accompanying notes are an integral part of these statements
3
<PAGE>
PRWW, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
Three Months Ended March 31
---------------------------
2000 1999
---- ----
(unaudited)
Net revenues:
Licenses and services $ 6,081 $ 5,512
Clinical research services -- 3,997
-------- ---------
Total net revenues 6,081 9,509
-------- ---------
Costs of revenues:
Cost of licenses and services 3,239 2,903
Cost of clinical research services -- 3,218
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Total costs of revenues 3,239 6,121
-------- ---------
Gross margin 2,842 3,388
-------- ---------
Operating expenses:
Selling and marketing 1,192 907
General and administrative 1,474 1,334
Research and development 803 598
-------- ---------
Total operating expenses 3,469 2,839
-------- ---------
Operating income (loss) (627) 549
Other income, net 272 148
-------- ---------
Income (loss) before income taxes (355) 697
Income tax provision (benefit) (142) 279
-------- ---------
Net income (loss) $ (213) $ 418
======== =========
Basic and diluted net income (loss) per share $ (.03) $ .06
======== =========
The accompanying notes are an integral part of these statements
4
<PAGE>
PRWW, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
2000 1999
---- ----
(unaudited)
<S> <C> <C>
Operating activities:
Net income (loss) $ (213) $ 418
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 454 513
Provision for losses on accounts receivable 262 30
Issuance of common stock options and warrants for services rendered 52 --
Deferred income taxes (142) 279
Changes in assets and liabilities:
Accounts receivable (1,247) (1,890)
Prepaid expenses and other (75) 834
Accounts payable (829) (71)
Income taxes payable (1,798) --
Accrued expenses (1,163) 265
Deferred revenues 2,287 (1,161)
-------- -------
Net cash used in operating activities (2,412) (783)
-------- -------
Investing activities:
Purchases of property and equipment (333) (912)
Purchases of short-term investments -- (400)
Purchase of marketable securities (5,775) --
Investment in non-marketable securities (100) --
Proceeds from note receivable 8,000 --
Proceeds from sales of short-term investments 659 --
-------- -------
Net cash provided by (used in) investing activities 2,451 (1,312)
-------- -------
Financing activities:
Proceeds from issuance of subsidiary convertible preferred stock 9,500 --
Proceeds from exercise of stock options 319 42
-------- -------
Net cash provided by financing activities 9,819 42
-------- -------
Net increase (decrease) in cash and cash equivalents 9,858 (2,053)
Cash and cash equivalents, beginning of period 16,765 10,822
-------- -------
Cash and cash equivalents, end of period $ 26,623 $ 8,769
======== =======
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE>
PRWW, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for fair presentation have
been included. Operating results for the three month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. Further information on potential factors that could
affect the Company's financial results can be found in the Company's Report on
Forms 10-K filed with the Securities and Exchange Commission.
Note 2. Net Income (Loss) per Share
The Company follows SFAS No. 128 "Earnings per Share". This statement requires
the presentation of basic and diluted earnings per share. Basic net income
(loss) per share is computed by dividing net income (loss) by the weighted
average number of shares of common stock outstanding during the year. Diluted
net income (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding during the year,
adjusted for the dilutive effect of common stock equivalents, which consist
primarily of stock options, using the treasury stock method.
The table below sets forth the reconciliation of the numerators and denominators
of the basic and diluted net income per share computations.
Three Months Ended March 31,
- ----------------------------
Net Per
Income Share
2000 (Loss) Shares Amount
- --------------------------------- ------ ------ ------
Basic net loss .................. $(213,000) 6,960,000 $(0.03)
Effect of dilutive shares........ -- -- --
--------- --------- ------
Diluted net loss................. $(213,000) 6,960,000 $(0.03)
========= ========= ======
1999
- ---------------------------------
Basic net income................. $ 418,000 7,049,000 $0.06
Effect of dilutive shares........ -- 106,000 --
--------- --------- -----
Diluted net income............... $ 418,000 7,155,000 $0.06
========= ========= =====
Options to purchase 712,988 shares of common stock were outstanding at March 31,
2000 but were not included in the diluted computation because the Company
incurred a net loss and the inclusion would be anti-dilutive.
Options to purchase 215,635 shares of common stock were outstanding at March 31,
1999 but were not included in the computation of diluted net income per share
because the option exercise prices were greater than the average market price of
the Company's common stock during the period.
6
<PAGE>
Note 3. Comprehensive Income
The Company follows SFAS No. 130, "Reporting Comprehensive Income." The
Company's comprehensive income includes net income and unrealized gains and
losses from foreign currency translation and marketable securities. The
unrealized gains and losses from foreign currency translation were immaterial as
of March 31, 2000 and 1999. For the three months ended March 31, 2000, the
Company recorded an unrealized gain of $1,320,000, net of tax, from its
investment in Medical Advisory Systems. There were no unrealized gains or losses
from short-term investments during the three months ended March 31, 1999.
Note 4 Operating Segments
The Company's operating segments are strategic business units that offer
different products and services to a common client base. The Company's products
and services are provided both in the United States and internationally through
two reportable business segments: Clinical Operations, which includes clinical
research support services, clinical trial management services and clinical data
management services; and Technology Operations, which includes software sales
and support and consulting services. The Company closed its international
clinical research services business during the second half of 1999 and sold its
domestic clinical research services business in December 1999, both of which
were included in the Clinical Operations Segment in 1999.
The Company evaluates performance based on the net revenues and operating
earnings performance of the respective business segments. Segment information is
as follows:
<TABLE>
<CAPTION>
Three months ended March 31, 2000
-------------------------------------------------------------------
Clinical Technology
Operations Operations Other Total
---------- ---------- ----- -----
<S> <C> <C> <C> <C>
Net revenues from external customers $ 2,938,000 $3,143,000 $ -- $ 6,081,000
Loss from operations (84,000) (543,000) -- (627,000)
Identifiable assets 6,263,000 4,878,000 43,546,000 54,687,000
Three months ended March 31, 1999
-------------------------------------------------------------------
Clinical Technology
Operations Operations Other Total
---------- ---------- ----- -----
Net revenues from external customers $ 7,491,000 $2,018,000 $ -- $ 9,509,000
Income from operations 266,000 283,000 -- 549,000
Identifiable assets 16,131,000 4,025,000 19,509,000 39,665,000
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
We are a business-to-business provider of technology-based products and services
used to manage clinical trials and collect, analyze and report clinical data. We
also are a leading provider of centralized collection and interpretation of
electrocardiograms, one of the most frequently used diagnostic tests in a
clinical trial. We offer our products and services to our customers in the
pharmaceutical, biotechnology and medical device industries and to clinical
research organizations serving those industries.
In December 1999, we formed eResearchTechnology, Inc. (eRT) as a wholly owned
subsidiary. Effective January 1, 2000, we contributed all of our technology and
operating businesses to eRT in exchange for all of its issued and outstanding
common stock. On March 24, 2000, the Company's eRT subsidiary sold 95,000 shares
of convertible preferred stock and agreed to issue a warrant to purchase 2.5% of
eRT's outstanding common stock for $9,500,000. On March 29, 2000, eRT filed a
registration statement with the Securities and Exchange Commission in connection
with a contemplated initial public offering of its common stock. Our results of
operations are generated primarily through the operations of eRT.
We have been continuously committed to the effective use of technology in
clinical applications for over 20 years. This commitment included our filing of
the first computer-assisted new drug application with the Food and Drug
Administration in 1985, our introduction of a technology-enhanced
electrocardiogram service in 1988 and our acquisition of DLB Systems in October
1997. The research and development and baseline technology obtained in the DLB
Systems acquisition provided the platform for the development of our current
software applications. Over time we have also conducted various clinical and
diagnostic operations, including operating a clinical research organization from
1995 until December 31, 1999. The sale of our domestic clinical research
operations on December 31, 1999 marked the completion of our efforts to cease
providing clinical research services and allowed us to focus exclusively on
providing technology-based solutions to the clinical trials market.
In March 1999, we signed a two-year consulting agreement with AmericasDoctor.com
to help it develop Internet-based clinical trial patient recruitment and
referral services. Our relationship with AmericasDoctor.com has been critical to
the development of our Internet-based patient recruitment product. In August
1999, we signed agreements with Breast Cancer International Research Group,
under which we are providing some of our software applications through an
electronic research network (eResNet) we are implementing and that we expect
will eventually connect at least 400 investigator sites in more than 20
countries. An eResNet integrates our products and provides a comprehensive
solution that links important data with the key participants in a clinical
trial: sponsoring manufacturers, investigating physicians, patients or subjects
and any clinical research organization that a sponsor may use to help in
conducting a clinical trial.
Our license and services revenues consist of up-front software license revenues,
consulting and training service revenues, software maintenance service revenues
and usage service revenues that we generate from repeated use of our products
and services. To date, usage service revenues have consisted primarily of fees
generated from our centralized electrocardiogram services. Prior to the December
1999 sale of the domestic clinical research service business, we also generated
revenues from managing clinical trials. We have not accounted for the clinical
research service business (Clinical research services) as a discontinued
operation because it was not a separate reportable segment. We will not generate
any future revenues from Clinical research services.
We are shifting our strategy to create more of a recurring revenue business
model by deploying eResNets and modular solutions under agreements that permit
their use in multiple clinical trials at any number of sites and charge for
their use on a per user, per trial, per site basis. We anticipate that an
increasing portion of our revenues will be attributable to these types of usage
service revenues. However, this business model is in an emerging state and its
revenue and income potential is unproven. Furthermore, our historical revenue
sources will likely continue to be major contributors to our overall revenues.
8
<PAGE>
We expect to incur losses in 2000 for two primary reasons. First, we plan to
invest substantial resources in product development, sales and customer support
and the general growth of our organization. Second, we will record a charge
related to the value of two eRT common stock warrants and, if the eRT preferred
stock is converted, the value of the beneficial conversion price of such
preferred stock.
We recognize software revenues in accordance with Statement of Position 97-2,
Software Revenue Recognition, as amended by Statement of Position 98-9.
Accordingly, we recognize license revenues when a formal agreement exists,
delivery of the software and related documentation has occurred, collectibility
is probable and the license fee is fixed or determinable. We recognize revenues
from software maintenance contracts on a straight-line basis over the term of
the maintenance contract, which is typically twelve months. We provide
consulting and training services on a time and materials basis and recognize
revenues as we perform the services. Usage service revenues consist of revenues
from services that we provide on a fee-for-service basis. We recognize usage
service revenues as the services are performed. Clinical research services were
generally based on fixed-price contracts, with variable components. Revenues
from Clinical research services were recognized as services were rendered.
Usage service and Clinical research service revenues vary based on the conduct
of our customers' clinical trials. Customers terminate or delay trials for a
variety of reasons, including the failure of the product being tested to satisfy
safety or efficacy requirements, unexpected or undesired clinical results, the
customer's decision to forgo a particular study, insufficient patient enrollment
or investigator recruitment, and production problems resulting in shortages of
required supplies. Customers frequently pay us a portion of our fee for these
services upon contract execution as an up-front deposit, which is typically
nonrefundable upon contract termination.
Cost of licenses and services includes the cost of licenses, the cost of
technology consulting and maintenance services and the cost of usage services.
Cost of licenses consists primarily of the cost of producing compact disks and
related documentation and royalties paid to third parties in connection with
their contributions to our product development. Cost of technology consulting
and maintenance services consists primarily of wages, fees paid to outside
consultants and other direct operating costs related to our consulting and
customer support functions. Cost of usage services consists primarily of direct
costs related to our centralized electrocardiogram services and includes wages,
fees paid to outside consultants, shipping expenses and other direct operating
costs. Cost of Clinical research services consisted primarily of wages, fees
paid to outside consultants and other direct operating costs associated with our
clinical research operations. Selling and marketing expenses consist primarily
of salaries and commissions paid to sales and marketing personnel or paid to
third parties under marketing assistance agreements, travel expenses and
advertising and promotional expenditures. General and administrative expenses
consist primarily of salaries, benefits and direct costs for our finance,
administrative and executive management functions, in addition to professional
service fees. Research and development expenses consist primarily of salaries
and benefits paid to our product development staff, costs paid to outside
consultants and direct costs associated with the development of our technology
products.
Historically, we operated through two business segments: Technology Operations
and Clinical Operations. We conduct our operations on a global basis, with
offices in the United States and the United Kingdom.
9
<PAGE>
Results of Operations
The following table presents certain financial data as a percentage of total
revenues:
Three Months Ended March 31,
----------------------------
2000 1999
---- ----
Net revenues:
Licenses and services 100.0% 58.0%
Clinical research services -- 42.0
------ ------
Total net revenues 100.0 100.0
------ ------
Cost of revenues:
Cost of licenses and services 53.3 30.5
Cost of clinical research services -- 33.8
------ ------
Total cost of revenues 53.3 64.3
------ ------
Gross margin 46.7 35.7
------ ------
Operating expenses:
Selling and marketing 19.6 9.6
General and administrative 24.2 14.0
Research and development 13.2 6.3
------ ------
Total operating expenses 57.0 29.9
------ ------
Operating income (loss) (10.3) 5.8
Other income, net 4.5 1.5
------ ------
Income (loss) before income taxes (5.8) 7.3
Income tax provision (benefit) (2.3) 2.9
------ ------
Net income (loss) (3.5%) 4.4%
====== ======
Three months ended March 31, 2000 compared to three months ended March 31, 1999.
Total net revenues decreased 36.1% to $6,081,000 for the three months ended
March 31, 2000 compared to $9,509,000 for the three months ended March 31, 1999.
Total net revenues of $9,509,000 for the three months ended March 31, 1999
included net revenues of $3,997,000 from Clinical research services. The Company
sold its domestic Clinical research services to SCP Communications, Inc. (SCP)
in December 1999 and closed its international Clinical research services during
the second half of 1999.
License revenues increased 734.5% to $993,000 for the three months ended March
31, 2000 from $119,000 for the three months ended March 31, 1999. The increase
in license revenues was due primarily to $625,000 of revenue recognized under
the master software license agreement signed during 1999 with the Breast Cancer
International Research Group. Technology consulting and training service
revenues increased 15.9% to $1,136,000 for the three months ended March 31, 2000
compared to $980,000 for the three months ended March 31, 1999. The increase in
technology consulting and training service revenues is due primarily to
additional support revenues from new software installations and increased
consulting activity in support of the Company's software and client needs.
Software maintenance revenue increased 10.2% to $1,013,000 for the three months
ended March 31, 2000 compared to $919,000 for the three months ended March 31,
1999. The increase in software maintenance was due to a larger installed base of
software licenses during the three months ended March 31, 2000 compared to the
three months ended March 31, 1999. Usage service revenues decreased 15.9% to
$2,939,000 for the three months ended March 31, 2000 compared to $3,494,000 for
the three months ended March 31, 1999. During 1999, the Company's clinical
laboratory operation was included in usage revenues. Clinical laboratory
operations were phased out during the second half of 1999. Clinical laboratory
operation net revenues for the three months ended March 31, 1999 were $317,000.
The remaining decline in usage revenues was due primarily to a lower volume of
electrocardiogram fees in the first quarter of 2000 compared to the first
quarter of 1999.
10
<PAGE>
Total cost of revenues decreased 47.1% to $3,239,000 for the three months ended
March 31, 2000 compared to $6,121,000 for the three months ended March 31, 1999.
As a percentage of net revenues, total cost of revenues decreased from 64.3% for
the three months ended March 31, 1999 to 53.3% for the three months ended March
31, 2000. Total cost of revenues of $6,121,000 for the three months ended March
31, 1999 included cost of revenues of $3,218,000 from Clinical research
services. The Company sold its domestic Clinical research services in December
1999 and closed its international Clinical research services during the second
half of 1999.
The cost of license revenues increased 168.8% to $86,000 for the three months
ended March 31, 2000 from $32,000 for the three months ended March 31, 1999. The
increase in the cost of license revenues was primarily due to third party
royalties incurred in the first quarter of 2000 based on software license
revenues. There were no royalties payable to third parties in the first quarter
of 1999. As a percentage of revenues, the cost of license revenues decreased to
8.7% for the three months ended March 31, 2000 from 26.9% for the three months
ended March 31, 1999. The decrease in the cost of license revenues as a
percentage of license revenues was due to the increase in license revenues
compared to the components of costs, which are relatively fixed in nature. The
cost of consulting and software maintenance revenues increased 68.6% to
$1,310,000 for the three months ended March 31, 2000 compared to $777,000 for
the three months ended March 31, 1999. As a percentage of revenues, the cost of
consulting and software maintenance revenues increased to 61.0% of revenues for
the three months ended March 31, 2000 from 40.9% of revenues for the three
months ended March 31, 1999. The increase in both the cost of consulting and
software maintenance revenues and the cost of consulting and software
maintenance revenues as a percentage of consulting and software maintenance
revenues were due primarily to additional personnel, recruiting fees,
subcontracting costs and travel and increased facility and depreciation expenses
to support the increase in maintenance and consulting revenues and to implement
the Company's new business model. The cost of usage services decreased 12.0% to
$1,843,000 for the three months ended March 31, 2000 compared to $2,094,000 for
the three months ended March 31, 1999. The cost of usage service revenues
included the cost associated with the Company's clinical laboratory operation,
which was phased out during the second half of 1999. For the three months ended
March 31, 1999, cost of revenues for the clinical laboratory operation was
$322,000. As a percentage of usage revenues, cost of usage services increased to
62.7% for the three months ended March 31, 2000 from 59.9% for the three months
ended March 31, 1999. The increase is due primarily to increased subcontracting
expenses required to complete client contract requirements.
Selling and marketing expenses increased 31.4% to $1,192,000 for the three
months ended March 31, 2000 compared to $907,000 for the three months ended
March 31, 1999. The increase in selling and marketing expenses was due to
increased advertising, promotion, convention and other selling expenses as a
result of the Company's market introduction of its eRT subsidiary and increased
commission expense resulting from software license revenues in the three months
ended March 31, 2000. These increases were partially offset by lower
compensation costs resulting from the sale of the domestic Clinical research
services to SCP.
General and administrative expenses increased 10.5% to $1,474,000 for the three
months ended March 31, 2000 from $1,334,000 for the three months ended March 31,
1999. The year-to-year increase was primarily due to increased accounting, legal
and insurance expenses in addition to an increased provision for bad debts
associated with a specific customer receivable balance. These increases were
partially offset by lower compensation costs from reduced personnel as a result
of the sale of the domestic Clinical research services.
Research and development expenses increased 34.3% to $803,000 for the three
months ended March 31, 2000 compared to $598,000 for the three months ended
March 31, 1999. The Company has increased its investment in research related
activities to implement its new business model. The year-to-year increase was
due primarily to increased payroll, subcontracting, training and facility costs.
Other income, which consisted primarily of interest earned on the Company's
cash, cash equivalents and short-term investments, increased to $272,000 from
$148,000 for the three months ended March 31, 2000 and 1999, respectively. The
increase was due to higher cash and short-term investment balances in 2000.
The Company's effective tax rate was 40.0% for the three months ended March 31,
2000 and 1999.
11
<PAGE>
Liquidity and Capital Resources
At March 31, 2000, the Company had $26,623,000 of cash and cash equivalents and
$3,641,000 invested in short-term investments. The Company generally places its
investments in A1P1 rated commercial bonds and paper, municipal securities and
certificates of deposit with maturities of less than one year.
For the three months ended March 31, 2000, the Company used cash in operations
of $2,412,000 compared to cash used in operations of $783,000 for the three
months ended March 31, 1999. The year-to-year change was primarily the result of
decreased accounts payable, income taxes payable and accrued expenses partially
offset by increased deferred revenues.
During the three months ended March 31, 2000, the Company purchased $333,000 of
equipment compared to $912,000 during the three months ended March 31, 1999. The
decrease in equipment purchases reflects the additional capital equipment needed
in the first quarter of 1999 to support the growth of the Company and the move
of the Company to new facilities in Philadelphia in 1999.
In January 2000, the Company received $8,050,000 from SCP in payment of a note
receivable plus accrued interest. The note resulted from the Company's sale of
its domestic Clinical research services to SCP in December 1999.
During the three months ended March 31, 2000, the Company received $319,000 in
cash from the exercise of 69,635 employee stock options.
In March 2000, the Company made an investment of $5,775,000 for a 10% equity
ownership in Medical Advisory Systems (MAS), a publicly traded company.
Concurrently, the Company's eRT subsidiary finalized a 5-year sales, services
and marketing agreement with MAS. Under this agreement, MAS will provide several
services to assist eRT in deploying its suite of integrated proprietary clinical
research software available to the pharmaceutical, medical device and
biotechnology industries as well as to clinical research organizations.
On March 24, 2000, the Company's eRT subsidiary sold 95,000 shares of
convertible preferred stock and agreed to issue a warrant to purchase 2.5% of
eRT's outstanding common stock for $9,500,000. The preferred stock will
automatically convert into eRT's common stock upon an initial public offering
with proceeds of at least $25,000,000 at the public offering price per share
less underwriting discounts and commissions. If eRT does not complete an initial
public offering before March 24, 2001, the holder of the preferred stock has the
right, for a period of one year,to require the Company to purchase the preferred
stock for a price equal to the investor's original purchase price, with the
purchase price being paid at the Company's option in cash or shares of the
Company's common stock at the then market price. On March 27, 2000, eRT issued a
warrant to purchase common stock of eRT to Scirex Corporation, an affiliate of
the preferred stockholder. The warrant entitles Scirex to purchase the number of
eRT common shares equal to $1 million divided by eRT's initial public offering
price per share, at an exercise price per share equal to eRT's initial public
offering price per share.
The Company has a line of credit with a bank, through June 30, 2000, that
provides for borrowings up to $3,000,000 at an interest rate of prime minus 35
basis points. The line of credit agreement includes certain covenants, the most
restrictive of which limit future indebtedness and require compliance with a
liabilities-to-tangible net worth ratio. To date, the Company has not borrowed
any amounts under its line of credit.
The Company expects that existing cash and cash equivalents, short-term
investments, marketable securities, cash flows from operations and available
borrowings under its line of credit will be sufficient to meet its foreseeable
cash needs for at least the next year. However, there may be acquisition and
other growth opportunities that require additional external financing and the
Company may from time to time seek to obtain additional funds from the public or
private issuances of equity or debt securities. There can be no assurance that
such financings will be available or available on terms acceptable to the
Company.
12
<PAGE>
Year 2000
The Company completed implementation of its Year 2000 remediation plan on a
timely basis and such remediation plan as implemented addressed all mission
critical systems. The Company is not aware of any adverse effects of Year 2000
issues on the Company, including its systems and operations. The Company has no
information that indicates that a significant vendor may be unable to sell to
the Company; a significant customer may be unable to purchase from the Company;
or a significant service provider may be unable to provide services to the
Company, because of Year 2000 compliance problems.
The Company estimates that the costs associated with its Year 2000 program was
approximately $ 0.3 million and future costs associated with its Year 2000
program will not be material.
Inflation
The Company believes the effects of inflation generally do not have a material
adverse effect on its results of operations or financial condition.
Cautionary Statement for Forward-Looking Information.
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations set forth above may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements involve a number of risks and
uncertainties such as competitive factors, technology development, market demand
and the Company's ability to obtain new contracts and accurately estimate net
revenues due to variability in size, scope and duration of projects, and
internal issues of the sponsoring client. Further information on potential
factors that could affect the Company's financial results can be found in the
Company's S-1 Registration Statement and its Reports on Form 10-K and 10-Q filed
with the Securities and Exchange Commission.
Item 3. Qualitative and Quantitative Disclosures About Market Risk
The Company's primary financial market risks include fluctuations in interest
rates and currency exchange rates.
Interest Rate Risk
The Company generally places its investments in A1P1 rated commercial bonds and
paper, municipal securities and certificates of deposit with fixed rates with
maturities of less than one year. The Company actively manages its portfolio of
cash equivalents and marketable securities but in order to ensure liquidity will
only invest in instruments with high credit quality where a secondary market
exists. The Company has not and does not hold any derivatives related to its
interest rate exposure. Due to the average maturity and conservative nature of
the Company's investment portfolio, a sudden change in interest rates would not
have a material effect of the value of the portfolio. Management estimates that
had the average yield of the Company's investments decreased by 100 basis
points, the Company's interest income for the three months ended March 31, 2000
would have decreased by less than $100,000. This estimate assumes that the
decrease occurred on the first day of 2000 and reduced the yield of each
investment by 100 basis points. The impact on the Company's future interest
income of future changes in investment yields will depend largely on the gross
amount of the Company's cash, cash equivalents and short-term investments.
See"Liquidity and Capital Resources".
Foreign Currency Risk
The Company operates on a global basis from locations in the United States and
the United Kingdom. All international net revenues are billed in either US
dollars or pounds sterling and international expenses are primarily incurred in
pounds sterling. As such, the Company faces exposure to adverse movements in the
exchange rate of the pound sterling. As the currency rate changes, translation
of the income statement of our UK subsidiary from the local currency to U.S.
dollars affects year-to-year comparability of operating results. The Company
does not hedge translation risks because any cash flows from international
operations are generally reinvested. To date, the effect of foreign currency
fluctuations are reflected in the Company's operating results and have not been
material.
13
<PAGE>
Management estimates that a 10% change in the exchange rate of the pound
sterling would have impacted the reported operating loss for international
operations by less than $100,000.
The introduction of the Euro as a common currency for members of the European
Monetary Union took place in January 1999. To date, the introduction of the Euro
has had no material impact on the Company's UK operations.
14
<PAGE>
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds
(1) Effective Date of Securities Act Registration Statement: February 3, 1997
registration No.: 333-17001
(2) Offering Date: February 4, 1997
(3) Not Applicable
(4) (i) The offering terminated after all shares registered were sold
(ii) Managing Underwriters: Montgomery Securities
Furman Selz
Genesis Merchant Group
(iii) Class of Securities Registered: Common Stock
Account of
(iv) Account of Company Selling Shareholder
------------------ -------------------
Amount Registered 2,206,250 common stock 956,250 common stock
Aggregate price of
Amount Registered $37,506,250 $16,256,250
Amount Sold 2,206,250 956,250
Aggregate Offering
Price of Amount Sold $37,506,250 16,256,250
(v) Expenses of offering for account of the Company:
Underwriting Discount and Commission $ 2,625,437
Other expenses $ 698,813
Total Expenses $ 3,324,250
(A) There were no direct or indirect payments to directors, officers,
general partners of the issuer or their associates; to persons
owning ten (10) percent or more of common stock of the Company;
or affiliates of the Company.
(B) All of the above payments were direct or indirect payments to
others not described in clause (A).
(vi) Net Offering Proceeds to the Company: $34,182,000
(vii) Use of Proceeds as of March 31, 2000:
Net cash paid for business acquisition 8,655,000
Net cash paid for minority equity investment 8,700,000
Purchase of equipment 6,105,000
Temporary Investments (consisting of short-term,
Investment-grade securities) 3,641,000
All of the above payments were to others not described in item (v)
(A) above.
(viii) The use of proceeds is consistent with the Prospectus
15
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits
3.1.1 Certificate of Amendment to Certificate of Incorporation
10.33 Management Consulting Agreement effective as of January 1,
2000 between Joel Morganroth, M.D., P.C. and
eResearchTechnology.*
10.34 Management Employment Agreement effective January 1, 2000
between Joseph A. Esposito and eResearchTechnology. *
10.35 Management Employment Agreement effective January 1, 2000
between Bruce Johnson and eResearchTechnology. *
10.36 Management Employment Agreement effective January 1, 2000
between Vincent Renz and eResearchTechnology. *
10.37 Management Employment Agreement effective January 1, 2000
between Robert Brown and eResearchTechnology. *
10.38 Voting Agreement dated as of March 24, 2000 between PRWW,
Ltd. and eResearchTechnology.
10.39 Tax Sharing Agreement effective as of January 1, 2000
between PRWW, Ltd. and eResearchTechnology, Ltd.
10.40 Services and Support Agreement effective as of January 1,
2000 between PRWW, Ltd. and eResearchTechnology, Ltd.
10.41 Series A Preferred Stock Purchase Agreement dated as of
March 24, 2000 among eResearchTechnology, Ltd., PRWW, Ltd.
and Communicade Inc.
10.42 Investor Rights Agreement dated as of March 24, 2000
between eResearchTechnology, PRWW, Ltd. and Communicade Inc.
10.43 Put Option Agreement dated March 24, 2000 between PRWW, ltd.
and Communicade Inc.
10.44 Form of Warrant to be issued by eResearchTechnology in favor
of Communicade Inc.
10.45 Warrant dated March 27, 2000 issued by eResearchTechnology
in favor of Scirex Corporation.
10.46 Stock Purchase Agreement dated March 8, 2000 between PRWW,
Ltd. and Medical Advisory Systems, Inc.
10.47 Amendment to Management Agreement dated September 7, 1999
between PRWW, Ltd. and Joel Morganroth, MD. *
27.0 Financial Data Schedule.
* Management contract or compensatory plan or arrangement.
b.) Reports on Form 8-K
None
16
<PAGE>
Signatures
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PRWW, LTD.
(Registrant)
Date: May 15, 2000 By: /s/ Joel Morganroth
------------------------------------
Joel Morganroth, MD
Chief Executive Officer
Date: May 15, 2000 By: /s/ Bruce Johnson
------------------------------------
Bruce Johnson
Chief Financial Officer
(Principal Financial and Accounting
Officer)
17
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
PREMIER RESEARCH WORLDWIDE, LTD.
TO: THE SECRETARY OF STATE
STATE OF DELAWARE
Pursuant to the provisions of Section 242 of the Delaware General
Corporation Law, this Certificate of Amendment is being filed in order to amend
the Certificate of Incorporation of Premier Research Worldwide, Ltd., a Delaware
corporation, as set forth below:
I. The name of the corporation is Premier Research Worldwide, Ltd.
II. Article I of the Certificate of Incorporation is amended to
read in its entirety as follows:
The name of the Corporation is PRWW, Ltd.
III. The amendment was approved and adopted at the Annual Meeting of
Shareholders of the Corporation duly held on April 17, 2000.
IV. The number of shares outstanding, the class of such shares,
the number of shares entitled to vote on the amendment, and the number of
shares voted for and against such amendment are as follows:
Number of Number of
Shares Shares Voted
Outstanding Class Entitled To Vote Voted For Against
6,952,297 Common 6,952,297 5,840,978 4,754
V. This amendment has been duly adopted in accordance with Section
242 of the Delaware General Corporation Law.
<PAGE>
VI. The amendment shall be effective upon the close of business on
April 20, 2000.
DATED: April 17, 2000 PREMIER RESEARCH WORLDWIDE, LTD.
By: /s/ Joel Morganroth, MD
-------------------------
Joel Morganroth, M.D.,
Chairman and Chief Executive Officer
718429
<PAGE>
[LOGO]
eResearchTechnololgy
Enabling the Clinical Advantage
A Wholly Owned Subsidiary of Premier Research Worldwide, Ltd
MANAGEMENT CONSULTANT AGREEMENT
The following agreement is hereby entered into between, Joel Morganroth, M.D.,
P.C. (hereinafter known as Consultant) and eResearchTechnololgy (together with
its affiliated corporations hereinafter known as the "Company") and having its
principal offices at 30 S. 17th Street, Philadelphia, PA 19103
1. SCOPE OF PROJECT
a) Consultant agrees to serve as Medical Director and/or
principal investigator and to advise the Company on matters
related to the successful operation of the Company's Clinical
Research Business unit.
b) Consultant agrees to provide medical interpretation for
diagnostic tests as such reading is from time to time
required.
2. ETHICAL CONDUCT
Consultant will conduct himself in a professional and ethical manner
at all times and will comply with all Company policies as well as all
State and Federal regulations and laws as they may apply to the
services, products, and business of the Company.
3. Compensation
a) Fees shall be $156,000/year payable in twelve equal
installments by the 15th of each month
b) Consultant will be reimbursed for reasonable out of picket
disbursement properly documented.
c) Consultant agrees to maintain his medical licenses as required
to carry out the duties described herein.
d) Consultant shall be acting as an independent contractor and
not as an employee of the Company. Payment of any tax and/or
social security liabilities relative to this compensation
shall be the responsibility of the Consultant.
1
<PAGE>
4. NON-DISCLOSURE
Consultant acknowledges that consultancy for the Company requires him
to have access to confidential information and material belonging to
the Company, including customer lists, contracts, proposals,
operating procedures, and trade secrets. Upon termination of the
consulting relationship for any reason, Consultant agrees to return
to the Company any such confidential information and material in his
possession with no copies thereof retained. Consultant further
agrees, whether during the term of this agreement with the Company or
any time after the termination thereof (regardless of the reason for
such termination), he will not disclose nor use in any manner, any
confidential or other material relating to the business, operations,
or prospects of the Company except as authorized in writing by the
Company.
5. INVENTIONS
a) Consultant agrees to promptly disclose to the Company each
discovery, improvement, or invention conceived, made, or
reduced to practice during the term of employment. Consultant
further agrees to grant to the Company the entire interest in
all of such discoveries, improvements, and inventions and to
sign all patent/copyright applications or other documents
needed to implement the provisions of this paragraph without
additional consideration. Consultant further agrees that all
works of authorship subject to statutory copyright protection
developed jointly or solely, while employed shall be
considered property of the Company and any copyright thereon
shall belong to the Company. Any invention, discovery, or
improvement conceived, made, or disclosed, during the one year
period following the termination of this agreement shall be
deemed to have been made, conceived, or discovered during the
term hereof.
b) If publication of data generated from studies conducted under
the auspices of the Company is anticipated, Consultant agrees
to obtain permission from the Company for such publication
6. NO CURRENT CONFLICT
Employee hereby assures the Company that he/she is not currently
restricted by any existing employment or non-compete agreement that
would conflict with the terms of this Agreement.
7. TERM OF AGREEMENT
The term of this Agreement is one year commencing from January 1,
2000 and will continue from year to year unless terminated.
2
<PAGE>
8. TERMINATION
a) The Company may terminate consulting services at any time upon
without the need to show cause upon 180 days written notice to
Consultant.
b) The Company may terminate consulting services without notice
for failure to meet obligations under the Agreement. The
following, as determined by the Company in its reasonable
judgement, shall constitute failure to meet these obligations:
(1) Consultant's failure to perform services defined under
the scope of the project.
(2) Any misconduct which is injurious to the business or
interests of the Company.
(3) Violation of any federal, state, or local law
applicable to the business of the Company.
(4) Any material breach of this agreement.
c) Consultant may terminate employment at any time upon 60 days
written notice to the Company.
9. MISCELLANEOUS
a) This Agreement and any disputes arising herefrom shall be
governed by Pennsylavnia law.
b) In the event that any provision of this Agreement is held to
be invalid or unenforceable for any reason, including without
limitation the geographic or business scope or duration
thereof, this Agreement shall be construed as if such
provision had been more narrowly drawn so as not to be invalid
or unenforceable.
c) This Agreement supersedes all prior agreements, arrangements,
and understandings, written or oral, relating to the subject
matter.
d) The failure of either party at any time or times to require
performance of any provision hereof shall in no way affect the
right at a later time to enforce the same.
For Consultant: For the Company:
/s/ Joel Morganroth /s/ Joseph Esposito
- ----------------------------- ------------------------------
Date: 1-1-2000 Date: 1/1/2000
------------------------ -----------------------
3
<PAGE>
[LOGO]
eResearchTechnololgy
Enabling the Clinical Advantage
A Wholly Owned Subsidiary of Premier Research Worldwide, Ltd
MANAGEMENT EMPLOYMENT AGREEMENT
The following agreement is hereby entered into between, Joseph
Esposito(hereinafter known as Employee) and eResearchTechnology (together with
its affiliated corporations hereinafter known as the "Company") and having its
principal offices at 30 S. 17th Street, Philadelphia, PA 19103
1. DUTIES AND RESPONSIBILITIES
Employee agrees to hold the position of President and Chief Executive
Officer and shall be directly responsible to Board of Directors.
2. BEST EFFORTS
Employee agrees to devote his best efforts to his employment with the
Company, on a full-time (no less than 40 hours/week) basis. He further
agrees not to use the facilities, personnel or property of the Company
for personal or private business benefit.
3. ETHICAL CONDUCT
Employee will conduct himself in a professional and ethical manner at
all times and will comply with all company policies as well as all
State and Federal regulations and laws as they may apply to the
services, products, and business of the Company.
4. TERM OF THE AGREEMENT
This agreement will be for a period of one year, commencing January 1,
2000 and will continue from year to year unless terminated.
5. COMPENSATION
a. Salary shall be $270,000/year payable in equal installments as
per the company's payroll policy. Salary shall be considered
on an annual basis and adjusted based on performance.
b. Benefits shall be the standard benefits of the Company as they
shall exist from time to time with the exception of vacation
which will be four weeks.
c. Car Allowance of $700/month.
<PAGE>
6. NON-DISCLOSURE
Employee acknowledges that employment with the Company requires him/her
to have access to confidential information and material belonging to
the Company, including customer lists, contracts, proposals, operating
procedures, trade secrets and business methods and systems, which have
been developed at great expense by the Company and which Employee
recognizes to be unique assets of the Company's business. Upon
termination of employment for any reason, Employee agrees to return to
the Company any such confidential information and material in his
possession with no copies thereof retained. Employee further agrees,
whether during employment with the Company or any time after the
termination thereof (regardless of the reason for such termination), he
will not disclose nor use in any manner, any confidential or
proprietary material relating to the business, operations, or prospects
of the Company except as authorized in writing by the Company or
required during the performance of his duties.
7. BUSINESS INTERFERENCE; NONCOMPETITION
a. During employment with the Company and for a period of one
year (the "Restrictive Period") thereafter (regardless of the
reason for termination) Employee agrees he will not, directly
or indirectly, in any way for his own account, as employee,
stockholder, partner, or otherwise, or for the account of any
other person, corporation, or entity: (i) request or cause any
of the Company's suppliers, customers or vendors to cancel or
terminate any existing or continuing business relationship
with the Company; (ii) solicit, entice, persuade, induce,
request or otherwise cause any employee, officer or agent of
the Company to refrain from rendering services to the Company
or to terminate his or her relationship, contractual or
otherwise, with the Company; or (iii) induce or attempt to
influence any customer or vendor to cease or refrain from
doing business or to decline to do business with the Company
or any of its affiliated distributors or vendors.
b. The Employee agrees that, during the Restrictive Period, the
Employee will not, directly or indirectly, accept employment
with, provide services to or consult with, or establish or
acquire any interest in, any business, firm, person,
partnership, corporation or other entity which engages in any
business or activity that is the same as or competitive with
the business conducted by the Company in any state of the
United States of America and in any foreign country in which
any customer to whom the Company is providing services or
technology is located.
8. FORFEITURE FOR BREACH; INJUNCTIVE RELIEF.
a. Any breach of the covenants made in Sections 6 and 7 hereof
shall result in the forfeiture of the Employee's right to any
and all payments which may be required to be made under this
Agreement following such breach and shall relieve the Company
of any obligation to make such payments.
b. The Employee acknowledges that his compliance with the
covenants in Sections 6 and 7 hereof is necessary to protect
the good will and other proprietary interests of
<PAGE>
the Company and that, in the event of any violation by the
Employee of the provisions of Section 6 or 7 hereof, the
Company will sustain serious, irreparable and substantial
harm to its business, the extent of which will be difficult
to determine and impossible to remedy by an action at law
for money damages. Accordingly, the Employee agrees that, in
the event of such violation or threatened violation by the
Employee, the Company shall be entitle to an injunction
before trial from any court of competent jurisdiction as a
matter of course and upon the posting of not more than a
nominal bond in addition to all such other legal and
equitable remedies as may be available to the Company.
c. The rights and remedies of the Company as provided in this
Section 8 shall be cumulative and concurrent and may be
pursued separately, successively or together against Employee,
at the sole discretion of the Company, and may be exercised as
often as occasion therefor shall arise. The failure to
exercise any right or remedy shall in no event be construed as
a waiver or release thereof.
d. The Employee agrees to reimburse the Company for any expenses
incurred by it in enforcing the provisions of Sections 6 and 7
hereof if the Company prevails in that enforcement.
9. INVENTIONS
Employee agrees to promptly disclose to the Company each discovery,
improvement, or invention conceived, made, or reduced to practice
(whether during working hours or otherwise) during the term of
employment. Employee agrees to grant to the Company the entire interest
in all of such discoveries, improvements, and inventions and to sign
all patent/copyright applications or other documents needed to
implement the provisions of this paragraph without additional
consideration. Employee further agrees that all works of authorship
subject to statutory copyright protection developed jointly or solely,
while employed shall be considered a work made for hire and any
copyright thereon shall belong to the Company. Any invention,
discovery, or improvement conceived, made, or disclosed, during the one
year period following the termination of employment with the Company
shall be deemed to have been made, conceived, or discovered during
employment with the Company.
Employee acknowledges that the only discoveries, improvements, and
other inventions made prior to the date hereof which have not been
filed in the United States Patent Office are attached as Exhibit A.
10. NO CURRENT CONFLICT
Employee hereby assures the Company that he is not currently restricted
by any existing employment or non-compete agreement that would conflict
with the terms of this Agreement.
<PAGE>
11. TERM; TERMINATION AND TERMINATION BENEFITS
a. Employment is "at will" which means that either the Company or
Employee may terminate at any time, with or without cause or
good reason, upon written notice given at least 30 days prior
to termination.
b. This Agreement shall terminate upon the death of the Employee.
In addition, if, as a result of a mental or physical
condition which, in the reasonable opinion of a medical
doctor selected by the Company's board of directors, can be
expected to be permanent or to be of an indefinite duration
and which renders the Employee unable to carry out the job
responsibilities held by, or the tasks assigned to, the
Employee immediately prior to the time the disabling
condition was incurred, or which entitles the Employee to
receive disability payments under any long-term disability
insurance policy which covers the Employee for which the
premiums are reimbursed by the Company (a "Disability"), the
Employee shall have been absent from his duties hereunder on
a full-time basis for 120 consecutive days, or 180 days
during any twelve month period, and within thirty (30) days
after written notice (which may occur before or after the
end of such 120 or 180 day period), by the Company to
Employee of the Company's intent to terminate the Employee's
employment by reason of such Disability, the Employee shall
not have returned to the performance of his duties
hereunder, the Employee's employment hereunder shall,
without further notice, terminate at the end of said
thirty-day notice.
c. The Company may also terminate the Employee's employment under
this Agreement for Cause. For purposes of this Agreement the
Company shall have "Cause" to terminate the Employee's
employment if the Employee, in the reasonable judgment of
the Company, (i) fails to perform any reasonable directive
of the Company that may be given from time to time for the
conduct of the Company's business; (ii) materially breaches
any of his commitments, duties or obligations under this
Agreement; (iii) embezzles or converts to his own use any
funds of the Company or its Affiliates or any business
opportunity of the Company of its Affiliates; (iv) destroys
or converts to his own use any property of the Company or
its Affiliates, without the Company's consent; (v) is
convicted of, or indicted for, or enters a guilty plea or
plea of no contest with respect to, a felony; (vi) is
adjudicated an incompetent or (vii) violates any federal,
state, local or other law applicable to the business of the
Company or engages in any conduct which, in the reasonable
judgment of the Company, is injurious to the business or
interests of the Company.
d. Upon any termination of this Agreement, the Company shall have
no further obligation to Employee other than for Annual
Salary earned through the date of termination, and no
severance pay or other benefits of any kind shall be
payable; provided, however, that in the event the Company
terminates this Agreement
<PAGE>
other than for Cause or as a result of the death or
Disability of the Employee, the company will provide for a
one year severance package which will include base salary
and benefits. The Company must give the Employee written
notice of the Employee's breach under sections 11.c.(i.),
11.c.(ii), and 11.c(vii) and 15 days to cure before the
Employee is given notice of termination as required under
Section 11.a.
e. Notwithstanding any contrary provision contained in this
Employment Agreement, in the event that either (a) there is
a "Change of Control" (as hereafter defined) and neither the
Company nor the Buyer offers the Executive a position with
comparable responsibilities, authority, location or
compensation, or (b) after the date of the Change in Control
but before the first anniversary thereof, the Executive's
responsibilities, authority, location, or compensation are
not acceptable to the Executive the Executive may elect to
resign and receive severance equal to one year's annual
salary and applicable prorated bonus, hereunder, payable in
one lump sum in accordance with the Company's policy.
In addition, the Executive will continue to receive (subject
to payment of any applicable premium co-pay) standard health,
dental, disability, life and accident insurance benefits for
the one year period following the termination of employment.
The Executive must provide written notice of such election not
less than sixty days following the date of the Change of
Control or, if the Executive's new position is changed within
the time period and in the manner described above, within
thirty days following such event.
The term "Change of Control", as utilized herein, refers to:
(i) A change of control of a nature that would be
required to be reported in the Company's proxy
statement under the Securities Exchange Act of
1934, as amended;
(ii) The approval by the Board of Directors of a sale,
not in the ordinary course of business, of all or
substantially all of the Company's assets and
business to an unrelated third party and the
consummation of such transaction; or
(iii) The approval by the Board of Directors of any
merger, consolidation, or like business combination
or reorganization of the Company, the consummation
of which would result in the occurrence of any
event described in clause (i) or (ii) above, and
the consummation of such transaction.
<PAGE>
Except as expressly modified and amended hereby, the Employment Agreement and
its terms and provisions are hereby ratified, confirmed and approved in all
respects.
12. MISCELLANEOUS
a. This Agreement and any disputes arising herefrom shall be
governed by Pennsylvania law.
b. In the event that any provision of this Agreement is held to
be invalid or unenforceable for any reason, including without
limitation the geographic or business scope or duration
thereof, this Agreement shall be construed as if such
provision had been more narrowly drawn so as not to be invalid
or unenforceable.
c. This Agreement supersedes all prior agreements, arrangements,
and understandings, written or oral, relating to the subject
matter.
d. The failure of either party at any time or times to require
performance of any provision hereof shall in no way affect the
right at a later time to enforce the same. No waiver by either
party of any condition or of the breach by the other of any
term or covenant contained in this Agreement shall be
effective unless in writing and signed by the aggrieved party.
A waiver by a party hereto in any one or more instances shall
not be deemed or construed as a further or continuing waiver
of any such condition or breach or a waiver of any other
condition, or of the breach of any other term or covenant set
forth in this Agreement.
e. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
given when delivered in person, sent by certified mail,
postage prepaid, or delivered by a nationally recognized
overnight delivery service addressed, if to the Company at 30
S. 17th Street, 8th Floor, Philadelphia, PA 19103 Attn:
President and if to the Employee, at the address of his
personal residence as maintained in the Company's records.
For Employee: For the Company:
/s/ Joseph Esposito /s/ Joel Morganroth
- --------------------------- --------------------------
Date: 1/1/00 Date: 1/1/00
---------------------- ---------------------
<PAGE>
[LOGO]
eResearchTechnololgy
Enabling the Clinical Advantage
A Wholly Owned Subsidiary of Premier Research Worldwide, Ltd
MANAGEMENT EMPLOYMENT AGREEMENT
The following agreement is hereby entered into between, Bruce Johnson
(hereinafter known as Employee) and eResearchTechnology (together with its
affiliated corporations hereinafter known as the "Company") and having its
principal offices at 30 S. 17th Street, Philadelphia, PA 19103
1. DUTIES AND RESPONSIBILITIES
Employee agrees to hold the position of Chief Financial Officer and Sr.
Vice President and shall be directly responsible to Audit Committee.
2. BEST EFFORTS
Employee agrees to devote his best efforts to his employment with the
Company, on a full-time (no less than 40 hours/week) basis. He further
agrees not to use the facilities, personnel or property of the Company
for personal or private business benefit.
3. ETHICAL CONDUCT
Employee will conduct himself in a professional and ethical manner at
all times and will comply with all company policies as well as all
State and Federal regulations and laws as they may apply to the
services, products, and business of the Company.
4. TERM OF THE AGREEMENT
This agreement will be for a period of one year, commencing January 27,
2000 and will continue from year to year unless terminated.
5. COMPENSATION
a. Salary shall be $150,000/year payable in equal installments as
per the company's payroll policy. Salary shall be considered
on an annual basis and adjusted based on performance.
b. Benefits shall be the standard benefits of the Company as they
shall exist from time to time, except that a four week
vacation allowance will be provided for the calendar year 2000
and thereafter.
c. This position qualifies for the executive bonus plan of the
company in which your bonus will be $75,000 if the company
meets the Board approved budget for 2000.
<PAGE>
However, even if the company does not perform to this level,
you will receive a minimum bonus of $25,000 payable in
January 2001 if you are an employee at that time.
6. NON-DISCLOSURE
Employee acknowledges that employment with the Company requires him/her
to have access to confidential information and material belonging to
the Company, including customer lists, contracts, proposals, operating
procedures, trade secrets and business methods and systems, which have
been developed at great expense by the Company and which Employee
recognizes to be unique assets of the Company's business. Upon
termination of employment for any reason, Employee agrees to return to
the Company any such confidential information and material in his
possession with no copies thereof retained. Employee further agrees,
whether during employment with the Company or any time after the
termination thereof (regardless of the reason for such termination), he
will not disclose nor use in any manner, any confidential or
proprietary material relating to the business, operations, or prospects
of the Company except as authorized in writing by the Company or
required during the performance of his duties.
7. BUSINESS INTERFERENCE; NONCOMPETITION
a. During employment with the Company and for a period of one
year (the "Restrictive Period") thereafter (regardless of the
reason for termination) Employee agrees he will not, directly
or indirectly, in any way for his own account, as employee,
stockholder, partner, or otherwise, or for the account of any
other person, corporation, or entity: (i) request or cause any
of the Company's suppliers, customers or vendors to cancel or
terminate any existing or continuing business relationship
with the Company; (ii) solicit, entice, persuade, induce,
request or otherwise cause any employee, officer or agent of
the Company to refrain from rendering services to the Company
or to terminate his or her relationship, contractual or
otherwise, with the Company; or (iii) induce or attempt to
influence any customer or vendor to cease or refrain from
doing business or to decline to do business with the Company
or any of its affiliated distributors or vendors.
b. The Employee agrees that, during the Restrictive Period, the
Employee will not, directly or indirectly, accept employment
with, provide services to or consult with, or establish or
acquire any interest in, any business, firm, person,
partnership, corporation or other entity which engages in any
business or activity that is the same as or competitive with
the business conducted by the Company in any state of the
United States of America and in any foreign country in which
any customer to whom the Company is providing services or
technology is located.
<PAGE>
8. FORFEITURE FOR BREACH; INJUNCTIVE RELIEF.
a. Any breach of the covenants made in Sections 6 and 7 hereof
shall result in the forfeiture of the Employee's right to any
and all payments which may be required to be made under this
Agreement following such breach and shall relieve the Company
of any obligation to make such payments.
b. The Employee acknowledges that his compliance with the
covenants in Sections 6 and 7 hereof is necessary to protect
the good will and other proprietary interests of the Company
and that, in the event of any violation by the Employee of the
provisions of Section 6 or 7 hereof, the Company will sustain
serious, irreparable and substantial harm to its business, the
extent of which will be difficult to determine and impossible
to remedy by an action at law for money damages. Accordingly,
the Employee agrees that, in the event of such violation or
threatened violation by the Employee, the Company shall be
entitle to an injunction before trial from any court of
competent jurisdiction as a matter of course and upon the
posting of not more than a nominal bond in addition to all
such other legal and equitable remedies as may be available
to the Company.
c. The rights and remedies of the Company as provided in this
Section 8 shall be cumulative and concurrent and may be
pursued separately, successively or together against Employee,
at the sole discretion of the Company, and may be exercised as
often as occasion therefor shall arise. The failure to
exercise any right or remedy shall in no event be construed as
a waiver or release thereof.
d. The Employee agrees to reimburse the Company for any expenses
incurred by it in enforcing the provisions of Sections 6 and 7
hereof if the Company prevails in that enforcement.
9. INVENTIONS
Employee agrees to promptly disclose to the Company each discovery,
improvement, or invention conceived, made, or reduced to practice
(whether during working hours or otherwise) during the term of
employment. Employee agrees to grant to the Company the entire interest
in all of such discoveries, improvements, and inventions and to sign
all patent/copyright applications or other documents needed to
implement the provisions of this paragraph without additional
consideration. Employee further agrees that all works of authorship
subject to statutory copyright protection developed jointly or solely,
while employed shall be considered a work made for hire and any
copyright thereon shall belong to the Company. Any invention,
discovery, or improvement conceived, made, or disclosed, during the one
year period following the termination of employment with the Company
shall be deemed to have been made, conceived, or discovered during
employment with the Company.
<PAGE>
Employee acknowledges that the only discoveries, improvements, and
other inventions made prior to the date hereof which have not been
filed in the United States Patent Office are attached as Exhibit A.
10. NO CURRENT CONFLICT
Employee hereby assures the Company that he is not currently restricted
by any existing employment or non-compete agreement that would conflict
with the terms of this Agreement.
11. TERM; TERMINATION AND TERMINATION BENEFITS
a. Employment is "at will" which means that either the Company or
Employee may terminate at any time, with or without cause or
good reason, upon written notice given at least 30 days prior
to termination.
b. This Agreement shall terminate upon the death of the Employee.
In addition, if, as a result of a mental or physical condition
which, in the reasonable opinion of a medical doctor selected
by the Company's board of directors, can be expected to be
permanent or to be of an indefinite duration and which renders
the Employee unable to carry out the job responsibilities held
by, or the tasks assigned to, the Employee immediately prior
to the time the disabling condition was incurred, or which
entitles the Employee to receive disability payments under any
long-term disability insurance policy which covers the
Employee for which the premiums are reimbursed by the Company
(a "Disability"), the Employee shall have been absent from his
duties hereunder on a full-time basis for 120 consecutive
days, or 180 days during any twelve month period, and within
thirty (30) days after written notice (which may occur before
or after the end of such 120 or 180 day period), by the
Company to Employee of the Company's intent to terminate the
Employee's employment by reason of such Disability, the
Employee shall not have returned to the performance of his
duties hereunder, the Employee's employment hereunder shall,
without further notice, terminate at the end of said
thirty-day notice.
c. The Company may also terminate the Employee's employment under
this Agreement for Cause. For purposes of this Agreement the
Company shall have "Cause" to terminate the Employee's
employment if the Employee, in the reasonable judgment of the
Company, (i) fails to perform any reasonable directive of the
Company that may be given from time to time for the conduct of
the Company's business; (ii) materially breaches any of his
commitments, duties or obligations under this Agreement;
(iii) embezzles or converts to his own use any funds of the
Company or its Affiliates or any business opportunity of the
Company of its Affiliates; (iv) destroys or converts to his
own use any property of the Company or its Affiliates, without
the Company's consent; (v) is convicted of, or indicted for,
or enters a guilty plea or plea of no contest with respect to,
a felony; (vi) is adjudicated an incompetent or
(vii) violates any federal, state, local
<PAGE>
or other law applicable to the business of the Company or
engages in any conduct which, in the reasonable judgment of
the Company, is injurious to the business or interests of the
Company.
d. Upon any termination of this Agreement, the Company shall have
no further obligation to Employee other than for Annual Salary
earned through the date of termination, and no severance pay
or other benefits of any kind shall be payable; provided,
however, that in the event the Company terminates this
Agreement other than for Cause or as a result of the death or
Disability of the Employee, the company will provide for a six
months severance package, which will include base salary and
benefits, after you have been employed for six months. The
Company must give the Employee written notice of the
Employee's breach under sections 11.c.(i.), 11.c.(ii), and
11.c.(vii) and 15 days to cure before the Employee is given
notice of termination as required under Section 11.a.
e. Notwithstanding any contrary provision contained in this
Employment Agreement, in the event that either (a) there is a
"Change of Control" (as hereafter defined) and neither the
Company nor the Buyer offers the Executive a position with
comparable responsibilities, authority, location or
compensation, or (b) after the date of the Change in Control
but before the first anniversary thereof, the Executive's
responsibilities, authority, location, or compensation are not
acceptable to the Executive the Executive may elect to resign
and receive severance equal to six month's annual salary and
applicable prorated bonus, hereunder, payable in one lump sum
in accordance with the Company's policy.
In addition, the Executive will continue to receive (subject
to payment of any applicable premium co-pay) standard health,
dental, disability, life and accident insurance benefits for
the six month period following the termination of employment.
The Executive must provide written notice of such election not
less than sixty days following the date of the Change of
Control or, if the Executive's new position is changed within
the time period and in the manner described above, within
thirty days following such event.
The term "Change of Control", as utilized herein, refers to:
(i) A change of control of a nature that would be
required to be reported in the Company's proxy
statement under the Securities Exchange Act of
1934, as amended;
(ii) The approval by the Board of Directors of a sale,
not in the ordinary course of business, of all or
substantially all of the Company's assets and
business to an unrelated third party and the
consummation of such transaction; or
(iii) The approval by the Board of Directors of any
merger, consolidation, or like business combination
or reorganization of the Company, the consummation of
which would result in the occurrence of any event
described in clause (i) or (ii) above, and the
consummation of such transaction.
<PAGE>
Except as expressly modified and amended hereby, the Employment Agreement and
its terms and provisions are hereby ratified, confirmed and approved in all
respects.
12. MISCELLANEOUS
a. This Agreement and any disputes arising herefrom shall be
governed by Pennsylvania law.
b. In the event that any provision of this Agreement is held to
be invalid or unenforceable for any reason, including without
limitation the geographic or business scope or duration
thereof, this Agreement shall be construed as if such
provision had been more narrowly drawn so as not to be invalid
or unenforceable.
c. This Agreement supersedes all prior agreements, arrangements,
and understandings, written or oral, relating to the subject
matter.
d. The failure of either party at any time or times to require
performance of any provision hereof shall in no way affect the
right at a later time to enforce the same. No waiver by either
party of any condition or of the breach by the other of any
term or covenant contained in this Agreement shall be
effective unless in writing and signed by the aggrieved party.
A waiver by a party hereto in any one or more instances shall
not be deemed or construed as a further or continuing waiver
of any such condition or breach or a waiver of any other
condition, or of the breach of any other term or covenant set
forth in this Agreement.
e. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
given when delivered in person, sent by certified mail,
postage prepaid, or delivered by a nationally recognized
overnight delivery service addressed, if to the Company at 30
S. 17th Street, 8th Floor, Philadelphia, PA 19103 Attn:
President and if to the Employee, at the address of his
personal residence as maintained in the Company's records.
For Employee: For the Company:
/s/ Bruce Johnson /s/ Joseph Esposito
- ---------------------------- -----------------------------
Date: 1/27/00 Date: 1/27/00
----------------------- ------------------------
<PAGE>
[LOGO]
eResearchTechnology
Enabling the Clincial Advantage
A Wholly Owned Subsidiary of Premier Research Worldwide, Ltd
MANAGEMENT EMPLOYMENT AGREEMENT
The following agreement is hereby entered into between Vincent W. Renz, Jr.
(hereinafter known as Employee) and eResearchTechnology (together with its
affiliated corporations hereinafter known as the "Company") and having its
principal offices at 30 S. 17th Street, Philadelphia, PA 19103
1. DUTIES AND RESPONSIBILITIES
Employee agrees to hold the position of Sr. VP Technology and
Consulting and shall be directly responsible to President and CEO.
2. BEST EFFORTS
Employee agrees to devote his best efforts to his employment with the
Company, on a full-time (no less than 40 hours/week) basis. He further
agrees not to use the facilities, personnel or property of the Company
for personal or private business benefit.
3. ETHICAL CONDUCT
Employee will conduct himself in a professional and ethical manner at
all times and will comply with all company policies as well as all
State and Federal regulations and laws as they may apply to the
services, products, and business of the Company.
4. TERM OF THE AGREEMENT
This agreement will be for a period of one year, commencing January 1,
2000 and will continue from year to year unless terminated.
5. COMPENSATION
a. Salary shall be $150,000/year payable in equal installments as
per the company's payroll policy. Salary shall be considered on
an annual basis and adjusted based on performance.
b. Benefits shall be the standard benefits of the Company as they
shall exist from time to time.
c. Car allowance of $500 per month.
<PAGE>
6. NON-DISCLOSURE
Employee acknowledges that employment with the Company requires him/her
to have access to confidential information and material belonging to
the Company, including customer lists, contracts, proposals, operating
procedures, trade secrets and business methods and systems, which have
been developed at great expense by the Company and which Employee
recognizes to be unique assets of the Company's business. Upon
termination of employment for any reason, Employee agrees to return to
the Company any such confidential information and material in his
possession with no copies thereof retained. Employee further agrees,
whether during employment with the Company or any time after the
termination thereof (regardless of the reason for such termination), he
will not disclose nor use in any manner, any confidential or
proprietary material relating to the business, operations, or prospects
of the Company except as authorized in writing by the Company or
required during the performance of his duties.
7. BUSINESS INTERFERENCE; NONCOMPETITION
a. During employment with the Company and for a period of one year
(the "Restrictive Period") thereafter (regardless of the reason
for termination) Employee agrees he will not, directly or
indirectly, in any way for his own account, as employee,
stockholder, partner, or otherwise, or for the account of any
other person, corporation, or entity: (i) request or cause any of
the Company's suppliers, customers or vendors to cancel or
terminate any existing or continuing business relationship with
the Company; (ii) solicit, entice, persuade, induce, request or
otherwise cause any employee, officer or agent of the Company to
refrain from rendering services to the Company or to terminate
his or her relationship, contractual or otherwise, with the
Company; or (iii) induce or attempt to influence any customer or
vendor to cease or refrain from doing business or to decline to
do business with the Company or any of its affiliated
distributors or vendors.
b. The Employee agrees that, during the Restrictive Period, the
Employee will not, directly or indirectly, accept employment
with, provide services to or consult with, or establish or
acquire any interest in, any business, firm, person, partnership,
corporation or other entity which engages in any business or
activity that is the same as or competitive with the business
conducted by the Company in any state of the United States of
America and in any foreign country in which any customer to whom
the Company is providing services or technology is located.
8. FORFEITURE FOR BREACH; INJUNCTIVE RELIEF.
a. Any breach of the covenants made in Sections 6 and 7 hereof shall
result in the forfeiture of the Employee's right to any and all
payments which may be required to be made under this Agreement
following such breach and shall relieve the Company of any
obligation to make such payments.
b. The Employee acknowledges that his compliance with the covenants
in Sections 6 and 7 hereof is necessary to protect the good will
and other proprietary interests of the Company and that, in the
event of any violation by the Employee of the provisions of
Section 6 or 7 hereof, the Company will sustain serious,
irreparable and substantial harm to its business, the extent of
which will be difficult to
<PAGE>
determine and impossible to remedy by an action at law for money
damages. Accordingly, the Employee agrees that, in the event of
such violation or threatened violation by the Employee, the
Company shall be entitle to an injunction before trial from any
court of competent jurisdiction as a matter of course and upon
the posting of not more than a nominal bond in addition to all
such other legal and equitable remedies as may be available to
the Company.
c. The rights and remedies of the Company as provided in this
Section 8 shall be cumulative and concurrent and may be pursued
separately, successively or together against Employee, at the
sole discretion of the Company, and may be exercised as often as
occasion therefor shall arise. The failure to exercise any right
or remedy shall in no event be construed as a waiver or release
thereof.
d. The Employee agrees to reimburse the Company for any expenses
incurred by it in enforcing the provisions of Sections 6 and 7
hereof if the Company prevails in that enforcement.
9. INVENTIONS
Employee agrees to promptly disclose to the Company each discovery,
improvement, or invention conceived, made, or reduced to practice
(whether during working hours or otherwise) during the term of
employment. Employee agrees to grant to the Company the entire interest
in all of such discoveries, improvements, and inventions and to sign
all patent/copyright applications or other documents needed to
implement the provisions of this paragraph without additional
consideration. Employee further agrees that all works of authorship
subject to statutory copyright protection developed jointly or solely,
while employed shall be considered a work made for hire and any
copyright thereon shall belong to the Company. Any invention,
discovery, or improvement conceived, made, or disclosed, during the one
year period following the termination of employment with the Company
shall be deemed to have been made, conceived, or discovered during
employment with the Company.
Employee acknowledges that the only discoveries, improvements, and
other inventions made prior to the date hereof which have not been
filed in the United States Patent Office are attached as Exhibit A.
10. NO CURRENT CONFLICT
Employee hereby assures the Company that he is not currently restricted
by any existing employment or non-compete agreement that would conflict
with the terms of this Agreement.
11. TERM; TERMINATION AND TERMINATION BENEFITS
<PAGE>
a. Employment is "at will" which means that either the Company or
Employee may terminate at any time, with or without cause or good
reason, upon written notice given at least 30 days prior to
termination.
b. This Agreement shall terminate upon the death of the Employee. In
addition, if, as a result of a mental or physical condition
which, in the reasonable opinion of a medical doctor selected by
the Company's board of directors, can be expected to be permanent
or to be of an indefinite duration and which renders the Employee
unable to carry out the job responsibilities held by, or the
tasks assigned to, the Employee immediately prior to the time the
disabling condition was incurred, or which entitles the Employee
to receive disability payments under any long-term disability
insurance policy which covers the Employee for which the premiums
are reimbursed by the Company (a "Disability"), the Employee
shall have been absent from his duties hereunder on a full-time
basis for 120 consecutive days, or 180 days during any twelve
month period, and within thirty (30) days after written notice
(which may occur before or after the end of such 120 or 180 day
period), by the Company to Employee of the Company's intent to
terminate the Employee's employment by reason of such Disability,
the Employee shall not have returned to the performance of his
duties hereunder, the Employee's employment hereunder shall,
without further notice, terminate at the end of said thirty-day
notice.
c. The Company may also terminate the Employee's employment under
this Agreement for Cause. For purposes of this Agreement the
Company shall have "Cause" to terminate the Employee's employment
if the Employee, in the reasonable judgment of the Company, (i)
fails to perform any reasonable directive of the Company that may
be given from time to time for the conduct of the Company's
business; (ii) materially breaches any of his commitments, duties
or obligations under this Agreement; (iii) embezzles or converts
to his own use any funds of the Company or its Affiliates or any
business opportunity of the Company of its Affiliates; (iv)
destroys or converts to his own use any property of the Company
or its Affiliates, without the Company's consent; (v) is
convicted of, or indicted for, or enters a guilty plea or plea of
no contest with respect to, a felony; (vi) is adjudicated an
incompetent or (vii) violates any federal, state, local or other
law applicable to the business of the Company or engages in any
conduct which, in the reasonable judgment of the Company, is
injurious to the business or interests of the Company.
d. Upon any termination of this Agreement, the Company shall have no
further obligation to Employee other than for Annual Salary
earned through the date of termination, and no severance pay or
other benefits of any kind shall be payable; provided, however,
that in the event the Company terminates this Agreement other
than for Cause or as a result of the death or Disability of the
Employee, the company will provide for a six month's severance
package which will include base salary and benefits. The Company
must give the Employee written notice of the Employee's breach
under sections 11.c.(i.), 11.c.(ii), and 11.c.(vii) and 15
<PAGE>
days to cure before the employee is given notice of termination
as required under Section 11.a.
e. Notwithstanding any contrary provision contained in this
Employment Agreement, in the event that either (a) there is a
"Change of Control" (as hereafter defined) and neither the
Company nor the Buyer offers the Executive a position with
comparable responsibilities, authority, location or compensation,
or (b) after the date of the Change in Control but before the
first anniversary thereof, the Executive's responsibilities,
authority, location, or compensation are not acceptable to the
Executive the Executive may elect to resign and receive severance
equal to six month's annual salary and applicable prorated bonus,
hereunder, payable in one lump sum in accordance with the
Company's policy.
In addition, the Executive will continue to receive (subject to
payment of any applicable premium co-pay) standard health,
dental, disability, life and accident insurance benefits for the
six month period following the termination of employment.
The Executive must provide written notice of such election not
less than sixty days following the date of the Change of Control
or, if the Executive's new position is changed within the time
period and in the manner described above, within thirty days
following such event.
The term "Change of Control", as utilized herein, refers to:
(i) A change of control of a nature that would be
required to be reported in the Company's proxy
statement under the Securities Exchange Act of
1934, as amended;
(ii) The approval by the Board of Directors of a sale,
not in the ordinary course of business, of all or
substantially all of the Company's assets and
business to an unrelated third party and the
consummation of such transaction; or
(iii) The approval by the Board of Directors of any
merger, consolidation, or like business combination
or reorganization of the Company, the consummation
of which would result in the occurrence of any
event described in clause (i) or (ii) above, and
the consummation of such transaction.
Except as expressly modified and amended hereby, the Employment Agreement and
its terms and provisions are hereby ratified, confirmed and approved in all
respects.
12. MISCELLANEOUS
<PAGE>
a. This Agreement and any disputes arising herefrom shall be
governed by Pennsylvania law.
b. In the event that any provision of this Agreement is held to be
invalid or unenforceable for any reason, including without
limitation the geographic or business scope or duration thereof,
this Agreement shall be construed as if such provision had been
more narrowly drawn so as not to be invalid or unenforceable.
c. This Agreement supersedes all prior agreements, arrangements, and
understandings, written or oral, relating to the subject matter.
d. The failure of either party at any time or times to require
performance of any provision hereof shall in no way affect the
right at a later time to enforce the same. No waiver by either
party of any condition or of the breach by the other of any term
or covenant contained in this Agreement shall be effective unless
in writing and signed by the aggrieved party. A waiver by a party
hereto in any one or more instances shall not be deemed or
construed as a further or continuing waiver of any such condition
or breach or a waiver of any other condition, or of the breach of
any other term or covenant set forth in this Agreement.
e. Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been given when
delivered in person, sent by certified mail, postage prepaid, or
delivered by a nationally recognized overnight delivery service
addressed, if to the Company at 30 S. 17th Street, 8th Floor,
Philadelphia, PA 19103 Attn: President and if to the Employee, at
the address of his personal residence as maintained in the
Company's records.
For Employee: For the Company:
/s/ Vincent W. Renz, Jr. /s/ J. Esposito
- ------------------------------ ------------------------------
Vincent W. Renz, Jr. J. Esposito
Date: 3/17/00 Date: 1/1/00
------------------------ ------------------------
<PAGE>
[LOGO]
eResearchTechnology
Enabling the Clincial Advantage
A Wholly Owned Subsidiary of Premier Research Worldwide, Ltd
MANAGEMENT EMPLOYMENT AGREEMENT
The following agreement is hereby entered into between Robert Brown (hereinafter
known as Employee) and eResearchTechnology (together with its affiliated
corporations hereinafter known as the "Company") and having its principal
offices at 30 S. 17th Street, Philadelphia, PA 19103
1. DUTIES AND RESPONSIBILITIES
Employee agrees to hold the position of Sr. VP Diagnostic Technology
and Services and shall be directly responsible to President and CEO.
2. BEST EFFORTS
Employee agrees to devote his best efforts to his employment with the
Company, on a full-time (no less than 40 hours/week) basis. He further
agrees not to use the facilities, personnel or property of the Company
for personal or private business benefit.
3. ETHICAL CONDUCT
Employee will conduct himself in a professional and ethical manner at
all times and will comply with all company policies as well as all
State and Federal regulations and laws as they may apply to the
services, products, and business of the Company.
4. TERM OF THE AGREEMENT
This agreement will be for a period of one year, commencing January 1,
2000 and will continue from year to year unless terminated.
5. COMPENSATION
a. Salary shall be $150,000/year payable in equal installments as
per the company's payroll policy. Salary shall be considered on
an annual basis and adjusted based on performance.
b. Benefits shall be the standard benefits of the Company as they
shall exist from time to time.
<PAGE>
c. Annual bonus, based upon achieving 100% of targeted corporate and
department goals to be defined, of $100,000. (60% of the
department bonus willb e payable quarterly in four (4) equal
installments and 40% payable annually based on corporate
performance.)
d. Draw of $3,000 per month, for one year, against
commissions/bonuses earned. In the event draw balance is greater
than zero at the end of fiscal year, it will automatically revert
to zero.
e. Car allowance of $500 per month.
6. NON-DISCLOSURE
Employee acknowledges that employment with the Company requires him/her
to have access to confidential information and material belonging to
the Company, including customer lists, contracts, proposals, operating
procedures, trade secrets and business methods and systems, which have
been developed at great expense by the Company and which Employee
recognizes to be unique assets of the Company's business. Upon
termination of employment for any reason, Employee agrees to return to
the Company any such confidential information and material in his
possession with no copies thereof retained. Employee further agrees,
whether during employment with the Company or any time after the
termination thereof (regardless of the reason for such termination), he
will not disclose nor use in any manner, any confidential or
proprietary material relating to the business, operations, or prospects
of the Company except as authorized in writing by the Company or
required during the performance of his duties.
7. BUSINESS INTERFERENCE; NONCOMPETITION
a. During employment with the Company and for a period of one year
(the "Restrictive Period") thereafter (regardless of the reason
for termination) Employee agrees he will not, directly or
indirectly, in any way for his own account, as employee,
stockholder, partner, or otherwise, or for the account of any
other person, corporation, or entity: (i) request or cause any of
the Company's suppliers, customers or vendors to cancel or
terminate any existing or continuing business relationship with
the Company; (ii) solicit, entice, persuade, induce, request or
otherwise cause any employee, officer or agent of the Company to
refrain from rendering services to the Company or to terminate
his or her relationship, contractual or otherwise, with the
Company; or (iii) induce or attempt to influence any customer or
vendor to cease or refrain from doing business or to decline to
do business with the Company or any of its affiliated
distributors or vendors.
<PAGE>
b. The Employee agrees that, during the Restrictive Period, the
Employee will not, directly or indirectly, accept employment
with, provide services to or consult with, or establish or
acquire any interest in, any business, firm, person, partnership,
corporation or other entity which engages in any business or
activity that is the same as or competitive with the business
conducted by the Company in any state of the United States of
America and in any foreign country in which any customer to whom
the Company is providing services or technology is located.
8. FORFEITURE FOR BREACH; INJUNCTIVE RELIEF.
a. Any breach of the covenants made in Sections 6 and 7 hereof shall
result in the forfeiture of the Employee's right to any and all
payments which may be required to be made under this Agreement
following such breach and shall relieve the Company of any
obligation to make such payments.
b. The Employee acknowledges that his compliance with the covenants
in Sections 6 and 7 hereof is necessary to protect the good will
and other proprietary interests of the Company and that, in the
event of any violation by the Employee of the provisions of
Section 6 or 7 hereof, the Company will sustain serious,
irreparable and substantial harm to its business, the extent of
which will be difficult to determine and impossible to remedy by
an action at law for money damages. Accordingly, the Employee
agrees that, in the event of such violation or threatened
violation by the Employee, the Company shall be entitle to an
injunction before trial from any court of competent jurisdiction
as a matter of course and upon the posting of not more than a
nominal bond in addition to all such other legal and equitable
remedies as may be available to the Company.
c. The rights and remedies of the Company as provided in this
Section 8 shall be cumulative and concurrent and may be pursued
separately, successively or together against Employee, at the
sole discretion of the Company, and may be exercised as often as
occasion therefor shall arise. The failure to exercise any right
or remedy shall in no event be construed as a waiver or release
thereof.
d. The Employee agrees to reimburse the Company for any expenses
incurred by it in enforcing the provisions of Sections 6 and 7
hereof if the Company prevails in that enforcement.
<PAGE>
9. INVENTIONS
Employee agrees to promptly disclose to the Company each discovery,
improvement, or invention conceived, made, or reduced to practice
(whether during working hours or otherwise) during the term of
employment. Employee agrees to grant to the Company the entire interest
in all of such discoveries, improvements, and inventions and to sign
all patent/copyright applications or other documents needed to
implement the provisions of this paragraph without additional
consideration. Employee further agrees that all works of authorship
subject to statutory copyright protection developed jointly or solely,
while employed shall be considered a work made for hire and any
copyright thereon shall belong to the Company. Any invention,
discovery, or improvement conceived, made, or disclosed, during the one
year period following the termination of employment with the Company
shall be deemed to have been made, conceived, or discovered during
employment with the Company.
Employee acknowledges that the only discoveries, improvements, and
other inventions made prior to the date hereof which have not been
filed in the United States Patent Office are attached as Exhibit A.
10. NO CURRENT CONFLICT
Employee hereby assures the Company that he is not currently restricted
by any existing employment or non-compete agreement that would conflict
with the terms of this Agreement.
11. TERM; TERMINATION AND TERMINATION BENEFITS
a. Employment is "at will" which means that either the Company or
Employee may terminate at any time, with or without cause or good
reason, upon written notice given at least 30 days prior to
termination.
b. This Agreement shall terminate upon the death of the Employee. In
addition, if, as a result of a mental or physical condition
which, in the reasonable opinion of a medical doctor selected by
the Company's board of directors, can be expected to be permanent
or to be of an indefinite duration and which renders the Employee
unable to carry out the job responsibilities held by, or the
tasks assigned to, the Employee immediately prior to the time the
disabling condition was incurred, or which entitles the Employee
to receive disability payments under any long-term disability
insurance policy which covers the Employee for which the premiums
are reimbursed by the Company (a "Disability"), the Employee
shall have been absent from his duties hereunder on a full-time
basis for 120 consecutive days, or 180 days
<PAGE>
during any twelve month period, and within thirty (30) days after
written notice (which may occur before or after the end of such
120 or 180 day period), by the Company to Employee of the
Company's intent to terminate the Employee's employment by reason
of such Disability, the Employee shall not have returned to the
performance of his duties hereunder, the Employee's employment
hereunder shall, without further notice, terminate at the end of
said thirty-day notice.
c. The Company may also terminate the Employee's employment under
this Agreement for Cause. For purposes of this Agreement the
Company shall have "Cause" to terminate the Employee's employment
if the Employee, in the reasonable judgment of the Company, (i)
fails to perform any reasonable directive of the Company that may
be given from time to time for the conduct of the Company's
business; (ii) materially breaches any of his commitments, duties
or obligations under this Agreement; (iii) embezzles or converts
to his own use any funds of the Company or its Affiliates or any
business opportunity of the Company of its Affiliates; (iv)
destroys or converts to his own use any property of the Company
or its Affiliates, without the Company's consent; (v) is
convicted of, or indicted for, or enters a guilty plea or plea of
no contest with respect to, a felony; (vi) is adjudicated an
incompetent or (vii) violates any federal, state, local or other
law applicable to the business of the Company or engages in any
conduct which, in the reasonable judgment of the Company, is
injurious to the business or interests of the Company.
d. Upon any termination of this Agreement, the Company shall have no
further obligation to Employee other than for Annual Salary
earned through the date of termination, and no severance pay or
other benefits of any kind shall be payable; provided, however,
that in the event the Company terminates this Agreement other
than for Cause or as a result of the death or Disability of the
Employee, the company will provide for a six months severance
package which will include base salary and benefits. The Company
must give the Employee written notice of the Employee's breach
under sections 11.c.(I), and 11.c.(ii), and 11.c.(Vii) and 15
days to cure before the Employee is given notice of termination
as required under Section 11.1a
e. Notwithstanding any contrary provision contained in this
Employment Agreement, in the event that either (a) there is a
"Change of Control" (as hereafter defined) and neither the
Company nor the Buyer offers the Executive a position with
comparable responsibilities, authority, location or compensation,
or (b) after the date of the Change in Control but before the
first anniversary thereof, the Executive's responsibilities,
authority, location, or compensation are not acceptable to the
Executive the Executive may elect to resign and receive severance
equal to six month's annual salary and applicable prorated bonus,
hereunder, payable in one lump sum in accordance with the
Company's policy.
<PAGE>
In addition, the Executive will continue to receive (subject to
payment of any applicable premium co-pay) standard health,
dental, disability, life and accident insurance benefits for the
six month period following the termination of employment.
The Executive must provide written notice of such election not
less than sixty days following the date of the Change of Control
or, if the Executive's new position is changed within the time
period and in the manner described above, within thirty days
following such event.
The term "Change of Control", as utilized herein, refers to:
(i) A change of control of a nature that would be
required to be reported in the Company's proxy
statement under the Securities Exchange Act of
1934, as amended;
(ii) The approval by the Board of Directors of a sale,
not in the ordinary course of business, of all or
substantially all of the Company's assets and
business to an unrelated third party and the
consummation of such transaction; or
(iii) The approval by the Board of Directors of any
merger, consolidation, or like business combination
or reorganization of the Company, the consummation
of which would result in the occurrence of any
event described in clause (i) or (ii) above, and
the consummation of such transaction.
Except as expressly modified and amended hereby, the Employment
Agreement and its terms and provisions are hereby ratified, confirmed
and approved in all respects.
12. MISCELLANEOUS
a. This Agreement and any disputes arising herefrom shall be
governed by Pennsylvania law.
b. In the event that any provision of this Agreement is held to be
invalid or unenforceable for any reason, including without
limitation the geographic or business scope or duration thereof,
this Agreement shall be construed as if such provision had been
more narrowly drawn so as not to be invalid or unenforceable.
c. This Agreement supersedes all prior agreements, arrangements, and
understandings, written or oral, relating to the subject matter.
d. The failure of either party at any time or times to require
performance of any provision hereof shall in no way affect the
right at a later time to enforce the same. No waiver by either
party of any condition or of the breach by the other of any
term or covenant contained in this
<PAGE>
Agreement shall be effective unless in writing and signed by the
aggrieved party. A waiver by a party hereto in any one or more
instances shall not be deemed or construed as a further or
continuing waiver of any such condition or breach or a waiver of
any other condition, or of the breach of any other term or
covenant set forth in this Agreement.
e. Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been given when
delivered in person, sent by certified mail, postage prepaid, or
delivered by a nationally recognized overnight delivery service
addressed, if to the Company at 30 S. 17th Street, 8th Floor,
Philadelphia, PA 19103 Attn: President and if to the Employee, at
the address of his personal residence as maintained in the
Company's records.
For Employee: For the Company:
/s/ Robert Brown /s/ Joseph Esposito
- ----------------------------- ------------------------------
Robert Brown Joseph Esposito
Date: 1/1/00 Date: 1/1/00
------------------------ ------------------------------
<PAGE>
Exhibit 10.38
VOTING AGREEMENT
This Voting Agreement (this "Agreement") is made and entered into as of
this 24th day of March, 2000 by and between ERESEARCHTECHNOLOGY, INC., a
Delaware corporation ("eRT"), and PREMIER RESEARCH WORLDWIDE, LTD., a Delaware
corporation ("PRWW").
R E C I T A L S
eRT is preparing to file with the Securities Exchange Commission a Form
S-1 Registration Statement (the "Offering"). Following completion of the
Offering, PRWW will own at least a majority of the outstanding Common Stock, par
value $0.01 per share, of eRT, regardless of whether or not the Underwriters'
over-allotment option is exercised in whole or in part. In connection with the
Offering, PRWW and eRT have agreed to enter into this Agreement with respect to
and so as to ensure the election of at least three (3) independent directors of
eRT.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. After the completion of the Offering, PRWW agrees that it will vote
all of its shares of Common Stock at any meeting at which (or in any stockholder
action taken by written consent in lieu of a meeting in which) directors are
elected in favor of those nominees for election as eRT directors who are
nominated by the eRT Board of Directors and who are not affiliates of PRWW,
employees of PRWW or directors of PRWW ("Independent Directors") so that if such
nominees were elected there would be at least three (3) Independent Directors
who are members of the Board of Directors of eRT.
2. This Agreement will automatically terminate on that date upon which
PRWW beneficially owns shares of capital stock of eRT entitled to cast 30% or
less of all votes entitled to be cast for the election of directors at a meeting
at which stockholders holding all outstanding voting shares of eRT were present
and voting.
3. Miscellaneous:
a. Each party covenants that at any time, and from time to
time, it will execute such additional instruments and take such additional
actions as may be reasonably necessary or reasonably requested by the other
party to confirm or otherwise carry out the intent and purposes of this
Agreement.
b. The parties mutually agree that if a violation of Section 1
of this Agreement occurs, such violation or threatened violation will cause
irreparable injury to eRT and the remedy at law for any such violation or
threatened violation will be
<PAGE>
inadequate. PRWW therefore agrees that eRT shall be entitled to appropriate
equitable relief, including but not limited to specific performance, in addition
to any other remedy that might be available at law or in equity.
c. This Agreement may be modified or amended from time to time
only by a written instrument executed by the parties hereto.
d. This Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and assigns.
e. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Pennsylvania, without regard to its
conflicts of law rule.
f. This Agreement embodies the entire understanding between
the parties hereto with respect to subject matters covered hereby and supersedes
any prior agreement or understanding between the parties with respect to such
matters.
g. This Agreement may be executed in multiple counterpart
copies, each of which shall be considered an original and all of which shall
constitute one and the same instrument.
h. This Agreement is not assignable.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
ERESEARCHTECHNOLOGY, INC.,
a Delaware corporation
By: /s/ Joseph Esposito
-----------------------------
Name:
-----------------------
Title:
-----------------------
PREMIER RESEARCH WORLDWIDE,
LTD., a Delaware corporation
By: /s/ Joel Morganroth
-----------------------------
Name:
-----------------------
Title:
-----------------------
<PAGE>
TAX SHARING AGREEMENT
---------------------
TAX SHARING AGREEMENT (the "Agreement") dated as of January 1, 2000
between Premier Research Worldwide, Ltd. ("PRWW") and eResearch Technology, Inc.
("ERT").
Whereas, PRWW and ERT have joined in the filing of a consolidated
federal income tax return for a group of affiliated companies of which PRWW is
the common parent and ERT is a member (the "PRWW Consolidated Group"); and
Whereas, PRWW and ERT wish to provide for the payment of tax
liabilities and entitlement to refunds, allocate responsibility and provide for
cooperation in the filing of tax returns, provide for the realization and
payment of tax benefits arising out of adjustments to the tax returns of the
parties, and to provide for certain other matters;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and intending to be legally bound, PRWW and ERT agree as follows:
1. Definitions.
For purposes of this Agreement:
(a) "Taxes" means all federal, state, local, foreign and other
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property (including,
without limitation, real property taxes and any assessments, special or
otherwise), windfall profits, customs, duties or other taxes, fees, assessments
or charges of any kind whatever, together with any interest and any penalties,
additions to tax or additional amounts with respect thereto (and "Tax" means any
one of the foregoing Taxes).
(b) "Returns" means all returns, declarations, reports,
statements and other documents required under a Tax Law (as hereinafter defined)
either (i) to be filed with a Governmental Authority (as hereinafter defined) in
respect of Taxes; or (ii) to be provided to a person other than a Governmental
Authority (and "Return" means any one of the foregoing Returns).
(c) "Code" means the Internal Revenue Code of 1986, as
amended. All citations to the Code, or to the Treasury Regulations promulgated
thereunder, shall include any amendments or any substitute or successor
provisions thereto.
<PAGE>
(d) "Section" means a section of this Agreement, unless
indicated otherwise.
(e) "Governmental Authority" means the government of the
United States or any foreign country or any state, province, municipality or
other political subdivision of the United States or any foreign identity, or any
agency, department, board, instrumentality, authority or commission (including
regulatory and administrative bodies) of any of the foregoing.
(f) "Tax Law" means a statute, regulation or administrative
rule enacted or promulgated for the determination, imposition, assessment or
collection of any Tax.
(g) "Separate Tax Liability" means the amount, if any, in
excess of (i) the "Tax Liability" (as herein defined) of the PRWW Consolidated
Group for a taxable year determined by including ERT and its subsidiaries as
members of that group as required under applicable Tax Law over (ii) the amount
of Tax Liability of the PRWW Consolidated Group for such year determined as if
ERT and its subsidiaries were not members of the group. If the amount calculated
in subsection (ii) of this Section (1)(g) exceeds the amount calculated in
subsection (i) of this Section (1)(g), such excess shall be a "Separate Tax
Benefit."
(h) "Tax Liability" means taxable income reduced by any loss
carryforwards and dividends received deduction multiplied by the applicable Tax
rate under federal Tax Law, less any credits, plus the Alternative Minimum Tax
(as defined in Section 55 of the Code), plus or minus any additional adjustments
required to compute the final Tax Liability under federal Tax Law.
(i) "Accounting Firm" means (i) the nationally recognized
accounting firm that is the principal independent auditor of both PRWW and ERT
at the time of a dispute governed by Section 7 hereof; or (ii) if the firm
described in clause (i) is unwilling or unable to serve under Section 7, the
nationally recognized accounting firm appointed by the firm described in clause
(i); or (iii) if PRWW and ERT do not use the same accounting firm as their
principal independent auditor, then the nationally recognized accounting firm
jointly selected by the principal independent auditors of PRWW and ERT at the
time of a dispute governed by Section 7 hereof.
(j) "Disaffiliation" means any event that results in ERT no
longer being a member of the PRWW Consolidated Group.
(k) "Disaffiliation Date" means the date on which
Disaffiliation occurs.
- 2 -
<PAGE>
2. Returns and Payments.
(a)(i) Filing of Returns. PRWW shall timely prepare and file,
or cause to be timely prepared and filed, all consolidated Returns of PRWW that
include ERT and its subsidiaries. ERT and PRWW agree that they will treat the
Disaffiliation Date as the last day of a taxable period with respect to ERT and
its subsidiaries for any consolidated Taxes and will file all Tax Returns with
respect to such Taxes accordingly, unless such treatment is not permitted under
the applicable Tax Law. The preparation and filing of all Tax Returns with
respect to ERT and its subsidiaries for periods beginning after the
Disaffiliation Date are the sole responsibility of ERT. ERT agrees to cooperate
with PRWW in the preparation of any consolidated Returns of PRWW that include
ERT and its subsidiaries, or any portion thereof, and, at ERT's expense, to
provide PRWW at least 60 days before the applicable Return is required to be
filed (including extensions) with tax return packages and such other information
as PRWW shall reasonably request for the preparation of such Returns.
(ii) Payments. PRWW shall timely remit or cause to be
remitted, all Taxes payable with respect to Returns which PRWW is obligated to
prepare and file pursuant to Section 2(a)(i) and, except as otherwise provided
herein, shall be liable for all such Taxes and shall be entitled to any refund
of, or credit for, such Taxes. ERT agrees to pay to PRWW, with respect to any
Return filed by PRWW pursuant to Section 2(a)(i), an amount equal to the
Separate Tax Liability, if any, determined for the taxable year for which such
Return is filed. PRWW agrees to pay to ERT, with respect to any Return filed by
PRWW pursuant to Section 2(a)(i), an amount equal to the Separate Tax Benefit,
if any, determined for the taxable year for which such Return is filed. For all
tax periods beginning prior to the Disaffiliation Date, ERT will remit quarterly
estimated Tax payments to PRWW as though ERT and its subsidiaries were filing
their own separate federal income tax returns. The calculation of such estimates
shall be provided by ERT and submitted to PRWW for its approval (which shall not
be unreasonably withheld) at least 15 days prior to the date estimated Tax
payments would have otherwise been due. ERT will remit such quarterly estimated
payments to PRWW no later than five days before the PRWW Consolidated Group's
estimated Tax payments are due. No later than five days after ERT has received
from PRWW a final calculation of ERT's Separate Tax Liability under this Section
2(a)(ii) based on completed Tax Returns for the relevant taxable year, ERT will
pay to PRWW the excess, if any, of ERT's Separate Tax Liability over the sum of
all prior payments, if any, made by ERT to PRWW with respect to such year. If
such final calculation under this Section 2(a)(ii) demonstrates that ERT's
estimated payments exceed the Separate Tax Liability or that ERT has a Separate
Tax Benefit, the excess plus any Separate Tax Benefit will be credited to ERT's
Tax liability for the subsequent tax year, or if the subsequent tax year is a
year beginning after the Disaffiliation Date, PRWW will pay such excess or
Separate Tax Benefit to ERT no later than 30 days after filing all Tax Returns
related to periods beginning before the Disaffiliation Date. All payments
required under this Section 2(a)(ii) will be paid by ERT to PRWW or by PRWW to
ERT, as the case may be, regardless of whether ERT is a member of the PRWW
Consolidated Group.
- 3 -
<PAGE>
(iii) Subsequent Adjustments. If the items used to determine
the Separate Tax Liability or Separate Tax Benefit under Section 2(a)(ii) are
adjusted by reason of an amended return, claim for refund, examination by a
Governmental Authority, or the final decision of any court, the amount due from
or to ERT under Section 2(a)(ii) shall be recomputed using the adjusted Separate
Tax Liability or adjusted Separate Tax Benefit. ERT agrees to pay to PRWW any
additional amount owed including statutory interest at the rate applicable to
underpayments of the PRWW Consolidated Group (with full credit given for any
prior payments for the year), and PRWW agrees to pay to ERT any overpayment made
by ERT including statutory interest at the rate applicable to overpayments of
the PRWW Consolidated Group.
Payments to be made by PRWW to ERT pursuant to this Section
2(a)(iii) shall be made, in the case of a refund, within 30 days after PRWW has
received such refund. In the case of a credit, such payments by PRWW to ERT
shall be made within 30 days after PRWW has received written notification from a
Governmental Authority reflecting adjustments for such credit to a Return of the
PRWW Consolidated Group. Payments to be made by ERT to PRWW shall be made, in
the case of any additional Tax, no later than five days before the due date of
any required Tax payment by PRWW. In the case of a reduction in credit of Tax,
such payment by ERT to PRWW shall be made within 30 days after PRWW has received
written notification from a Governmental Authority reflecting an adjustment for
such reduction to a Return of the PRWW Consolidated Group.
Notwithstanding anything in this Section 2(a)(iii), the
treatment of carrybacks of net operating losses, net capital losses and tax
credits shall be governed by Section 2(a)(iv). All additional payments required
under this Section 2(a)(iii) will be paid by ERT to PRWW or by PRWW to ERT, as
the case may be, regardless of whether ERT is a member of the PRWW Consolidated
Group.
(iv) Carrybacks. Where permitted by applicable Tax Law,
PRWW shall be allowed, if it so chooses, to carry back any consolidated net
operating loss, consolidated net capital loss or consolidated tax credit, as
defined in Treasury Regulation Sections 1.1502-21(e), 1.1502-22(b) and
1.1502-79(c) and (d) respectively, ("Consolidated Carryback Item") that arises
in any taxable year beginning before the Disaffiliation Date, to a taxable year
of any consolidated Return filed by PRWW. If a Consolidated Carryback Item is
carried back to a taxable year of any consolidated Return filed by PRWW, and is
absorbed or used in whole or in part in such year, PRWW shall pay ERT an amount
equal to the excess, if any, of the amount of such refund, credit or tax
reduction (net of any income taxes payable thereon) determined by including ERT
as a member of the PRWW Consolidated Group, over the amount of such items
determined by excluding ERT from the PRWW Consolidated Group, provided however,
that such excess shall be reduced by any amount due PRWW from ERT under Section
2(a)(ii) and (iii). Amounts due pursuant to this paragraph shall be paid in full
within 30 days after PRWW receives a refund or credit, or otherwise realizes the
benefit of the adjustment if no refund or credit is payable.
- 4 -
<PAGE>
If a refund, credit or tax reduction attributable to a Consolidated
Carryback Item is later reduced (for example, as a result of a reduction in the
amount of a Consolidated Carryback Item caused by an audit adjustment), ERT
shall pay to PRWW an amount equal to the extent that such reduction is
attributable to ERT (determined in the same manner as in the immediately
preceeding paragraph) including statutory interest at a rate applicable to
underpayments of the PRWW Consolidated Group. Any such payment shall be made to
PRWW no later than five days before the due date of any required Tax payment by
PRWW or, if no payment is due, within 30 days after the final determination of
the amount of the reduction in such benefit.
Where permitted by applicable Tax Law, ERT and its subsidiaries shall
be allowed, if they so choose, to carry back any net operating loss, net capital
loss or tax credit ("ERT Carryback Item") that arises in any taxable year
beginning after the Disaffiliation Date, to a taxable year of any consolidated
Return filed by PRWW. If an ERT Carryback Item is carried back to a taxable year
of any consolidated Return filed by PRWW, and is absorbed or used in whole or in
part in such year, PRWW shall pay ERT an amount equal to any refund, credit or
tax reduction attributable to such ERT Carryback Item, provided that such refund
is received by PRWW or PRWW realizes the benefit of any credit or tax reduction.
The amount of any such refund, credit or tax reduction attributable to the ERT
Carryback Item shall be equal to the difference between the amount of such
refund, credit or tax reduction (net of any income taxes payable thereon) with
and without the ERT Carryback Item and shall be reduced by any amount due PRWW
from ERT under Section 2(a)(ii) and (iii). Amounts due pursuant to this
paragraph shall be paid in full within 30 days after PRWW receives a refund or
credit, or otherwise realizes the benefit of the adjustment if no refund or
credit is payable.
If a refund, credit or tax reduction attributable to an ERT
Carryback Item is later reduced (for example, as a result of a reduction in the
amount of an ERT Carryback Item caused by an audit adjustment), ERT shall pay to
PRWW the amount of such reduction including statutory interest at a rate
applicable to underpayments of the PRWW Consolidated Group. Any such payment
shall be made to PRWW no later than five days before the due date of any
required Tax payment by PRWW or, if no payment is due, within 30 days after the
final determination of the amount of the reduction in such benefit.
PRWW shall be responsible for preparing and filing (or
arranging for the preparation and filing of) any Returns required to carry back
an ERT Carryback Item to a taxable year of PRWW. ERT shall reimburse PRWW for
the reasonable out-of-pocket cost of preparation of any such Returns. ERT shall
indemnify PRWW for any penalty or interest incurred by PRWW that is attributable
to ERT Carryback Items.
ERT may choose at its own discretion to carry back an ERT
Carryback Item to taxable years in respect of any Return not originally filed by
PRWW pursuant to Section 2(a)(i). ERT shall be entitled to any refund, or the
benefit of any credit or tax reduction, resulting from such carryback and shall
be responsible for preparing and timely filing any Returns with respect to such
carryback.
- 5 -
<PAGE>
(v) State Taxes. To the extent appropriate, rules similar to
the other provisions of Section 2 shall be applied to the filing of state
franchise or income tax Returns and the payment of state franchise or income tax
liabilities to which ERT and PRWW are subject and which are required to be
determined on a unitary, combined or consolidated basis.
(b)(i) Filing of Other Returns. ERT shall timely prepare and
file, or cause to be timely prepared and filed, all Returns of ERT and its
subsidiaries required to be filed before, on or after the Disaffiliation Date,
other than those Returns required to be filed by PRWW pursuant to Section
2(a)(i).
(ii) Payments. ERT shall be liable for, and shall timely pay,
or cause to be paid, all Taxes with respect to Returns which ERT is obligated to
prepare and file pursuant to Section 2(b)(i) and shall be liable for all Taxes
with respect to any other Returns filed by, or in respect of, ERT and its
subsidiaries, other than any Returns filed by PRWW pursuant to Section 2(a)(i),
and shall be entitled to any refund of, or credit for, such Taxes. PRWW shall
not be liable for any Taxes payable with respect to such Returns of ERT and its
subsidiaries.
3. Disaffiliation of ERT.
Except for Section 2(a)(iv) regarding Carrybacks, this Agreement shall
have no application and PRWW, the PRWW Consolidated Group or ERT shall have no
obligation to each under this Agreement with respect to any taxable period that
begins after the Disaffiliation Date; provided, that this Agreement shall apply
to any final short taxable period of ERT. After the filing of all Tax Returns
related to periods beginning before the Disaffiliation Date, ERT will be
informed of the amount of consolidated carryovers as of the end of such taxable
year or period that are attributable to ERT, as provided by applicable Tax Law.
4. Record Retention.
After the Disaffiliation Date, PRWW and ERT shall each make available
to the other, as reasonably requested, and to any Governmental Authority that is
duly authorized to request information, records or documents, all information,
records or documents of PRWW and ERT and its subsidiaries for all periods prior
to or including the Disaffiliation Date and shall preserve all such information,
records and documents until the expiration of any applicable statute of
limitations including extensions thereof, provided that notice of any such
extension is given to the party which did not grant the extension.
- 6 -
<PAGE>
5. Audits and Contests.
PRWW shall, at its expense, have the right to control on the taxpayer's
behalf any Tax audit and any administrative or court proceeding concerning Taxes
for which PRWW is responsible for filing a Return under Section 2(a)(i) and to
concede, compromise or contest any assessment or assertion of liability with
respect to any such Taxes, provided, however, that ERT will be entitled to
participate in any such audit or proceeding concerning Taxes for which ERT is
liable under Section 2 and PRWW shall not concede, compromise or contest any
assessment or assertion of liability with respect to any such Taxes for which
ERT is liable under Section 2 without the consent of ERT (which consent shall
not be unreasonably withheld).
ERT shall, at its expense, have the right to control on the taxpayer's
behalf any Tax audit and any administrative or court proceeding concerning Taxes
for which ERT is responsible for filing a Return under Section 2(b)(i) and to
concede, compromise or contest any assessment or assertion of liability with
respect to any such Taxes.
6. Duty to Cooperate.
PRWW and ERT shall provide reasonable cooperation to each other in
connection with (i) the preparation or filing of any Return, Tax election, Tax
consent or certification, or any claim for refund, (ii) any determination of
liability for Taxes, and (iii) any audit, examination or other proceeding in
respect of Taxes of PRWW. Such cooperation shall include making available, on a
reasonable basis, employees of PRWW or ERT, as the case may be, whose out-
of-pocket costs, if any, such as travel and lodging, shall be reimbursed by the
party to which such employees are made available.
7. Dispute Resolution.
In the event of a dispute concerning this Agreement, the parties shall,
in good faith, attempt to resolve such dispute. If the dispute is not resolved
then the parties shall submit such dispute to the Accounting Firm whose decision
shall be binding on the parties. The Accounting Firm's fee shall be borne
equally by PRWW and ERT.
8. Notices.
All notices and other communications required or permitted hereunder
shall be in writing and shall be given by hand delivery, telecopier, commercial
courier service with guaranteed one-day delivery, or prepaid first class mail
to the following addresses:
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<PAGE>
If to PRWW:
Premier Research Worldwide, Ltd.
Attention: Chairman
30 South 17th Street
Philadelphia, PA 19103
If to ERT:
eResearchTechnology, Inc.
Attention: President and Chief Executive Officer
30 South 17th Street
Philadelphia, PA 19103
9. Successors.
This Agreement shall be binding on and inure to the benefit of any
successor, by merger, acquisition of assets or otherwise, to any of the parties
hereto (including but not limited to any successor of PRWW or ERT succeeding to
the tax attributes of either under Section 381 of the Code), to the same extent
as if the successor had been an original party to this Agreement.
10. Amendments.
This Agreement shall not be modified, amended, supplemented or
terminated except in writing executed by both parties hereto.
11. Governing Law.
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Pennsylvania.
Premier Research Worldwide, Ltd.
By: /s/ Joel Morganroth
------------------------
Joel Morganroth, M.D.
Chairman and Chief Executive Officer
eResearch Technology, Inc.
By: /s/ Joseph A. Esposito
---------------------------
Joseph A. Esposito,
President and Chief Executive Officer
- 8 -
<PAGE>
SERVICES AND SUPPORT AGREEMENT
This Services and Support Agreement (the "Agreement") is made as of the
1st day of January, 2000 by and between Premier Research Worldwide, Ltd., a
Delaware corporation ("Premier") and eResearch Technology, Inc., a Delaware
corporation ("eRT").
WHEREAS, Premier owns 100% of the outstanding capital stock of eRT; and
WHEREAS, Premier has contributed to eRT all of Premier's technology and
operating business subject to the liabilities thereof; and
WHEREAS, the parties recognize that it is to their material advantage
to centralize certain administrative and financial services and that such
centralized services will be most efficiently administered by eRT.
NOW, THEREFORE, is consideration of the premises and the mutual
covenants contained herein, and intending to be legally bound, the parties
hereto agree as follows:
1. Services to Be Provided by eRT. Beginning on the date of this
Agreement, eRT through its corporate staff will provide or otherwise make
available to Premier certain general corporate services, including, but not
limited to the following:
1.1 Management Support. eRT will provide management support to
Premier, including reasonable access to key management personnel of eRT for
consultation and advice regarding strategic business planning, corporate
development, acquisitions and technology. eRT will also provide assistance to
develop and implement policies and procedures related to human resources and
employee training.
1.2 Risk Management. eRT will assist Premier in the
maintenance of an appropriate risk management program. eRT shall arrange for and
pay the premium cost of liability, property, casualty, and other normal business
insurance coverage (subject to allocation of such premium pursuant to Section
6.2 hereof), provide a centralized insurance purchasing service for such
insurance coverage and manage all insurance claims under Premier's insurance
policies.
1.3 Financial Services. eRT shall provide to Premier the
financial services listed in Exhibit I to this Agreement.
1.4 Securities. eRT will provide services and assistance to
enable Premier to comply with its reporting obligations under the Securities
Exchange Act of 1934 (the "1934 Act"), and the rules and regulations of the
Nasdaq Stock Market. Such assistance will include preparation of Forms 10-K,
10-Q and 8-K under the 1934 Act. eRT will provide necessary
<PAGE>
resources to enable Premier to make EDGAR filings with the SEC. eRT shall
provide internal audit support services for such filings and reports, including
accounting staff as required. Accounting and financial reporting policies and
procedures will be established by the Chief Financial Officer of eRT (the "eRT
CFO"). The parties acknowledge that Premier is a reporting company under the
1934 Act and that eRT may in the future become such a reporting company. Because
of eRT's status as a wholly-owned subsidiary of eRT, the parties also
acknowledge that each party has a material interest in the financial statements
and reports of the other to insure that accounting matters are treated
consistently between the parties. Therefore, before financial statements of
either party are released publicly or are included in a filing with the SEC or
the Nasdaq Stock Market, such financial statements will be furnished to the eRT
CFO and to Premier's Chief Financial Officer for review and comment. All public
releases of financial information will be authorized in advance by both parties'
Chief Financial Officer. eRT will administer a program to promote compliance by
the officers and directors of Premier with their reporting requirements under
Section 13 and 16 of the 1934 Act. eRT shall prepare documents necessary for
officer and director compliance under Section 16 of the 1934 Act, including
Forms 3, 4, 5, 13G and 13D. eRT shall maintain detailed records and SEC receipts
of all such filings and shall administer periodic reminders to Section 16
officers and directors. eRT shall periodically provide information to officers
and directors of Premier with respect to their responsibilities under Section 16
of the Act.
1.5 Corporate Record Keeping. eRT shall maintain detailed
records of Premier's historical and current financial data. In addition, eRT
shall assist in preparing the minutes of meetings of the boards of directors and
shareholders, and shall maintain records pertaining to stock offerings,
acquisition transactions, and annual meetings.
1.6 Annual Stockholders Meetings and Proxy Statement
Preparation. eRT shall provide assistance to conduct the annual meeting of
Premier stockholders. eRT shall assist in the preparation of the notice of the
annual meeting, proxies and proxy statements related thereto, the solicitation
of proxies, and the filing of any preliminary or definitive proxy statements
with the SEC. eRT shall assist Premier in design, preparation, drafting and
distribution of its annual reports to stockholders. Preparation and distribution
costs related to the proxy materials for the annual meeting shall be paid by
Premier.
1.7 Stock Plan Administration Services. Subject to the
direction of the administrative committees of Premier compensation stock plans,
shall administer Premier's stock option plans. eRT shall maintain records of
grant dates, shares covered by option grants, vesting schedules, expiration
dates and other information necessary for proper administration of the Premier
compensatory stock plans. eRT shall also prepare stock option grant agreements
and stock option exercise notices.
1.8 Investor and Media Relations. eRT shall prepare quarterly
stock reports, track outstanding shares, communicate appropriate information to
transfer agents, provide for missing stock certificates and perform general
services pertaining to the investor relations. eRT shall upon request provide
stock status reports including stockholder statistics, earnings
- 2 -
<PAGE>
estimates, shares held by institutions and any other reports that can be
reasonably created using Premier data maintained by eRT. eRT shall assist
Premier to manage investor and media relations and to prepare press releases.
eRT shall assist Premier in its relationship with investment analysts and
institutional holders of Premier stock. eRT will also assist eRT regarding
presentations at financial conferences.
1.9 Tax Matters. eRT will assist Premier to prepare and file
state and federal income tax returns and will consult with Premier regarding tax
planning matters.
1.10 Other Services. Other routine services in addition to
those enumerated in subsections 1.1 through 1.9 shall be provided by eRT as
reasonably requested by Premier. Such other services shall include human
resources support, publications support, corporate training programs, video
teleconferencing, data and voice communications and trade show support.
2. Cooperation. Premier shall corporate with eRT in providing
information and data reasonably requested by eRT to perform its services
hereunder. The parties shall exert best efforts to coordinate with each other in
such a manner to enable eRT to furnish the services required hereunder.
3. Credit Support Services. Premier agrees to provide credit support
for eRT as eRT may reasonably require for its business and operations, subject
to a maximum financial commitment by Premier to eRT at any time of $10 million.
eRT shall reconcile on a quarterly basis cash provided by Premier and used by
eRT and shall calculate an average daily balance for such advances during each
such quarter. eRT shall be obligated to repay all such advances together with
interest on the average daily balance for each quarterly period at the prime
rate of interest as published from time to time in The Wall Street Journal.
4. Transition Support Services. Premier agrees to allow eRT to use
Premier's bank accounts and financial management and other administrative
services and systems for a reasonable period following the effective date of
this Agreement for eRT's own cash management and financial services
requirements. eRT shall use reasonable commercial efforts to establish such
accounts and systems for itself as promptly a practicable after the date hereof.
5. Insurance Programs. The parties acknowledge that Premier has in
force insurance programs that provide eRT coverage under general liability,
property and casualty, errors and omissions, umbrella liability, workers'
compensation, directors and officers liability and medical and other employee
benefit insurance programs. eRT shall evaluate the merits of having such
insurance policies transferred to eRT, continuing eRT's cover under the current
Premier programs or obtaining separate coverage for eRT. Pending such
determination, Premier agrees that eRT shall continue maintaining such coverage
in accordance with the provisions of Section 1.2 hereof for the benefit of both
Premier and eRT, subject to allocation of premiums therefor in accordance with
Section 6.2 hereof.
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<PAGE>
6. Compensation for Services.
6.1 In consideration for the services to be provided by eRT to
Premier hereunder, Premier shall provide the credit support and transition
support services specified in Section 3-4 hereof and shall pay eRT the following
amounts:
(a) 6.25% of the salary of eRT's President and
Chief Executive Officer;
(b) 25% of the salary of eRT's Chief Financial
Officer; and
(c) a fee of $10,000 per month.
eRT shall invoice Premier monthly for such charges.
6.2 For any period during the term hereof that eRT is included
in any Premier insurance programs or policies, eRT's Chief Financial Officer
shall recommend an allocation of the premium between eRT and Premier, which
allocation shall be subject to review and approval by the Boards of Directors of
each party or any authorized committee thereof. Promptly after agreement on such
allocation, eRT shall prepare an invoice from Premier to eRT for eRT's allocated
portion of such premiums.
6.3 All invoices delivered hereunder shall be due and payable
within 30 days of the invoice date.
6.4 In the event eRT is required to commit personnel on other
resources in the performance of its obligations hereunder that are
disproportionate to the projected fees set forth in Section 6.1 hereof, the
parties agree to negotiate in good faith to adjust the monthly fee payable
pursuant to Section 6.1(c) hereof or to consider in good faith payment by
Premier to eRT of a supplemental fee in addition to the scheduled monthly fee.
6.5 eRT will require third parties with which it contracts on
behalf of Premier hereunder, including without limitation accounting, legal and
other professional service firms, insurance companies and other vendors, to
invoice Premier for their respective charges. Premier acknowledges and agrees
that eRT will cause such invoices to be paid on Premier's behalf in accordance
with the invoice terms.
7. Office Space. eRT agrees to make available appropriate office space
to Premier's Chairman and Chief Executive Officer.
8. Premier's Directors and Officers. Nothing contained herein will be
construed to relieve the directors and officers of Premier from the performance
of their respective duties or to limit the exercise of their powers in
accordance with the charter or by-laws of Premier or in accordance with any
applicable statute or regulation.
- 4 -
<PAGE>
9. Liabilities. In furnishing Premier with management advice and other
services as herein provided, neither eRT nor any of its officers, directors or
agents shall be liable to Premier or its creditors or shareholders for errors of
judgment or for anything except willful malfeasance, bad faith or gross
negligence in the performance of their duties or reckless disregard of their
obligations and duties under the terms of this Agreement. The provisions of this
Agreement are for the sole benefit of Premier and eRT and will not, except to
the extent otherwise expressly stated herein, inure to the benefit of any third
party.
10. Status. eRT shall be deemed to be an independent contractor, and
except as expressly provided or authorized in this Agreement, shall have no
authority to act for or represent Premier.
11. Notices. All notices, billings, requests, demands, approvals,
consents, and other communications which are required or may be given under this
Agreement shall be in writing and will be deemed to have been duly given if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid to the parties at their respective addresses set
forth below:
If to Premier:
Premier Research Worldwide, Ltd.
30 South 17th Street
Philadelphia, PA 19103
Attention: Chairman
If to eRT:
eResearch Technology, Inc.
30 South 17th Street
Philadelphia, PA 19103
Attention: President and Chief Executive Officer
12. No Assignment. This Agreement shall not be assignable except with
the prior written consent of the other party to this Agreement.
13. Applicable Law. This Agreement shall be governed by and construed
under the laws of the Commonwealth of Pennsylvania applicable to contracts made
and to be performed therein.
14. Paragraph Titles. The paragraph titles used in this Agreement are
for convenience of reference only and will not be considered in the
interpretation or construction of any of the provisions thereof.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument by their duly authorized officers as of the date
first above written.
PREMIER RESEARCH WORLDWIDE, LTD.
By:/s/ Joel Morganroth
------------------------------------------
Joel Morganroth, M.D.
Chairman and Chief Executive Officer
eRESEARCH TECHNOLOGY, INC.
By: /s/ Joseph A. Esposito
------------------------------------------
Joseph A. Esposito
President and Chief Executive Officer
- 6 -
<PAGE>
EXHIBIT I
FINANCIAL SERVICES PROVIDED TO PREMIER
Banking Services Administration
Select banks and establish accounts
Administer cash balances
Administer outstanding indebtedness
Administer any debt covenant compliance issues
Maintain a cash collections and disbursement system
Arrange letters of credit and cash transfers
Manage any foreign currency exchange needs
Financial Management and Information
Cash management
Pension fund management
Leasing management services
Customer financing
Information on financial markets and products
Information on foreign currency, risk assessment and hedge strategies
Arrange Credit Support
Insurance performance and bid bonds
Letters of credit
Corporate guarantees
Investment Banking Services
Advice and support for equity and debt financing
Manage relationships with debt rating agencies
Analysis, negotiations, advice and support for mergers and acquisitions
<PAGE>
eResearch Technology, Inc.
SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
March 24, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
1. Purchase and Sale of Stock...................................................................................1
1.1 Authorization of the Shares.........................................................................1
1.2 Sale and Issuance of Series A Preferred Stock.......................................................1
1.3 Filing of Certificate of Designation................................................................1
1.4 Closing Date........................................................................................1
2. Representations and Warranties of the Company................................................................1
2.1 Organization, Good Standing and Qualification.......................................................1
2.2 Capitalization and Voting Rights....................................................................2
2.3 Subsidiaries; Investments...........................................................................2
2.4 Authorization.......................................................................................3
2.5 Governmental Consents...............................................................................3
2.6 Litigation..........................................................................................3
2.7 Proprietary Information and Inventions Agreements...................................................3
2.8 Title to Property and Assets........................................................................4
2.9 Financial Statements; Liabilities...................................................................4
2.10 Material Contracts and Other Commitments............................................................4
2.11 Proprietary Rights..................................................................................4
2.12 Compliance with Other Instruments...................................................................5
2.13 Related Party Transactions..........................................................................5
2.14 Licenses; Permits...................................................................................5
2.15 Registration Rights.................................................................................6
2.16 Corporate Documents.................................................................................6
2.17 Changes.............................................................................................6
2.18 Tax Returns, Payments and Elections.................................................................7
2.19 Insurance...........................................................................................7
2.20 Minute Books........................................................................................7
2.21 Employee Matters....................................................................................7
2.22 Millennium Compliance...............................................................................7
2.23 Disclosure..........................................................................................7
3. Representations and Warranties of Parent.....................................................................7
3.1 Organization, Good Standing and Qualification.......................................................8
3.2 Authorization.......................................................................................8
3.3 Governmental Consents...............................................................................8
4. Investment Representations, Warranties and Covenants of Purchaser............................................8
4.1 Authorization.......................................................................................8
4.2 Purchase Entirely for Own Account...................................................................8
4.3 Disclosure of Information...........................................................................9
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
4.4 Investment Experience...............................................................................9
4.5 Accredited Investor.................................................................................9
4.6 Restricted Securities...............................................................................9
4.7 Further Limitations on Disposition..................................................................9
4.8 Legends.............................................................................................9
4.9 Tax Advisors.......................................................................................10
5. Conditions of Purchaser's Obligations at Closing............................................................10
5.1 Representations and Warranties.....................................................................10
5.2 Performance........................................................................................10
5.3 Qualifications.....................................................................................10
5.4 Proceedings and Documents..........................................................................10
5.5 Transaction Documents..............................................................................11
5.6 Certificate of Designation.........................................................................11
5.7 Legal Opinion......................................................................................11
5.8 No Legal Proceedings...............................................................................11
5.9 Compliance Certificate.............................................................................11
5.10 Due Diligence; Schedule of Exceptions..............................................................12
5.11 Board of Directors.................................................................................12
6. Conditions of the Company's Obligations at Closing..........................................................12
6.1 Representations and Warranties.....................................................................12
6.2 Qualifications.....................................................................................12
6.3 Transaction Documents..............................................................................12
6.4 Certificate of Designation.........................................................................12
7. Covenants of the Company....................................................................................12
7.1 Prompt Payment of Taxes............................................................................12
7.2 Maintenance of Insurance...........................................................................13
7.3 Compliance with Laws...............................................................................13
7.4 Keeping of Records and Books of Account............................................................13
7.5 Maintenance of Properties..........................................................................13
7.6 Obligations........................................................................................13
7.7 Public Disclosures.................................................................................13
7.8 Warrant Agreement..................................................................................13
8. Miscellaneous...............................................................................................14
8.1 Successors and Assigns.............................................................................14
8.2 Governing Law......................................................................................14
8.3 Counterparts.......................................................................................14
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
8.4 Titles and Subtitles...............................................................................14
8.5 Notices............................................................................................14
8.6 Finder's Fee.......................................................................................14
8.7 Expenses...........................................................................................14
8.8 Amendment and Waivers..............................................................................14
8.9 Severability.......................................................................................15
8.10 Aggregation of Stock...............................................................................15
8.11 GAAP...............................................................................................15
8.12 Entire Agreement...................................................................................15
</TABLE>
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<PAGE>
EXHIBITS
A. Certificate of Designation
B. Schedule of Exceptions
C. Investor Rights Agreement
D. Warrant Agreement
E. Option Agreement
F. Legal Opinion of Company Counsel
G. Legal Opinion of Parent Counsel
-iv-
<PAGE>
eResearchTechnology, Inc.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
entered into as of March 24, 2000, by and among eResearchTechnology, Inc., a
Delaware corporation (the "Company"), Premier Research Worldwide, Ltd., a
Delaware corporation ("Parent"), and Communicade Inc., a Delaware corporation
("Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Authorization of the Shares. The Company has, or before the
Closing (as hereinafter defined) will have, authorized the sale and issuance of
95,000 shares of its Series A Preferred Stock (the "Series A Preferred Stock"),
having the rights, restrictions, privileges and preferences as set forth in the
Company's Series A Preferred Stock in the form attached hereto as Exhibit A (the
"Certificate of Designation").
1.2 Sale and Issuance of Series A Preferred Stock. Subject to the
terms and conditions of this Agreement, Purchaser agrees to purchase at the
Closing, and the Company agrees to sell and issue to Purchaser at the Closing,
95,000 shares of the Company's Series A Preferred Stock (the "Shares"), at a
purchase price of $100 per share, or an aggregate purchase price of $9,500,000
(the "Purchase Price").
1.3 Filing of Certificate of Designation. The Company shall adopt
and file with the Secretary of State of Delaware on or before the Closing (as
defined below) the Certificate of Designation.
1.4 Closing Date. The closing of the purchase and sale of the Shares
hereunder shall be held at the offices of Jones, Day, Reavis & Pogue, 599
Lexington Avenue, New York, New York at 10:00 a.m., local time, on March 24,
2000 (the "Closing") or at such other time and place as shall be mutually agreed
upon by the Company and Purchaser. At the Closing, Purchaser shall tender to the
Company, by check or wire transfer, the Purchase Price for the Shares. At the
Closing, the Company shall issue to Purchaser a certificate or certificates
representing the Shares purchased by Purchaser.
2. Representations and Warranties of the Company. Except as set forth
on the Schedule of Exceptions attached as Exhibit B hereto (the "Schedule of
Exceptions"), the Company hereby represents and warrants to Purchaser as
follows, as of the date hereof and as of the Closing:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is qualified to do business in every jurisdiction
in which its ownership of property or conduct of business requires it to be so
qualified, except where the failure to obtain such qualification could not
reasonably be expected to have a material adverse effect on the business,
operating results, assets or financial condition of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect"). The Company
possesses all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to carry
on its business as now conducted and as proposed to be conducted and to carry
out the
<PAGE>
transactions contemplated by this Agreement. The copies of the Company's
charter documents and bylaws which have been furnished to Purchaser reflect all
amendments made thereto at any time prior to the date of this Agreement and are
complete and correct.
2.2 Capitalization and Voting Rights.
(a) The authorized capital of the Company consists, or will
consist of:
(i) Preferred Stock. 10,000,000 shares, without par value
(the "Preferred Stock"), of which 95,000 shares have been designated Series A
Preferred Stock, none of which are issued and outstanding prior to the Closing
and all of which will be sold pursuant to this Agreement at the Closing. The
rights, privileges and preferences of the Series A Preferred Stock are as set
forth in the Certificate of Designation.
(ii) Common Stock. 50,000,000 shares of Common Stock, par
value $.01 per share (the "Common Stock"), of which 1,000 shares are issued and
outstanding as of the date hereof.
(iii) Warrant. In accordance with Section 7.8, upon the
consummation of an Initial Public Offering (as defined in Section 7.8), the
Company will issue a warrant to Purchaser to purchase 2.5% of the then
outstanding shares of its Common Stock pursuant to the terms of the Warrant
Agreement (as defined in Section 2.4).
(b) Except for (i) the conversion privileges of the Series A
Preferred Stock to be issued under this Agreement and (ii) the warrant described
in Section 2.2(a) above, there are not outstanding any stock, options, warrants
or other securities convertible or exchangeable for any shares of the Company's
capital stock or containing any profits participation features, or any
outstanding rights or options to subscribe for or purchase the Company's capital
stock or any stock or securities convertible into or exchangeable for the
Company's capital stock or any stock appreciation rights or phantom stock plans,
or obligations for the purchase or acquisition from the Company of any shares of
its capital stock. The Company is not a party or subject to any agreement or
understanding and there is no agreement or understanding between any other
persons or entities which affects or relates to the voting or giving of written
consents with respect to any security or by a director of the Company.
(c) As of the Closing, the Company shall not be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any warrants, options or other rights
to acquire its capital stock.
2.3 Subsidiaries; Investments. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a participant in any
joint venture, partnership or similar arrangement. Each such subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, possesses all requisite corporate power and
authority and all material licenses, permits and authorizations necessary to own
its properties and to carry on its business as now being conducted and as
presently proposed to be conducted and is qualified to do business in every
jurisdiction in which its ownership of property or the conduct of business
requires to be so qualified, except where the failure to obtain such
qualification would not have a Material Adverse Effect. All of the outstanding
shares of capital stock of each such subsidiary are validly issued, fully paid
and nonassessable, and all such shares are owned by the Company, free and clear
of any lien, and are not subject to any option or right to purchase any such
shares. Neither the Company nor any
-2-
<PAGE>
such subsidiary owns or holds the right to acquire any shares of stock or any
other security or interest in any other person or entity.
2.4 Authorization. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Investor Rights Agreement among
the Company, Parent and Purchaser, substantially in the form attached hereto as
Exhibit C (the "Investor Rights Agreement"), the Warrant Agreement among the
Company and Purchaser, substantially in the form attached hereto as Exhibit D
(the "Warrant Agreement"), the Put Option Agreement among the Company, Parent
and Purchaser, substantially in the form attached hereto as Exhibit E (the
"Option Agreement", and together with this Agreement, the Investor Rights
Agreement and the Warrant Agreement, the "Transaction Documents"), the
performance of all obligations of the Company under the Transaction Documents,
and the authorization, issuance (or reservation for issuance), sale and delivery
of the Series A Preferred Stock being sold hereunder constitute valid and
legally binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investor Rights Agreement may be limited by applicable federal or state
securities laws. The Series A Preferred Stock being purchased by Purchaser
hereunder, when issued, sold and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable.
2.5 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for the filing of the Certificate of
Designation with the Delaware Secretary of State.
2.6 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of any of the Transaction Documents, or the right of the Company to
enter into any such agreement or to consummate the transactions contemplated
thereunder, or that might result, either individually or in the aggregate, in a
Material Adverse Effect, financially or otherwise, or any change in the current
equity ownership of the Company. The Company is not subject to any arbitration
proceedings under collective bargaining agreements or otherwise or, to the
Company's knowledge, any governmental investigation or inquiry and, to the
Company's knowledge, there is no reasonable basis for any of the foregoing. The
foregoing includes, without limitation, actions, suits, proceedings or
investigations pending or threatened involving (a) the prior employment of any
of the Company's employees, or their use in connection with the Company's
business of any information allegedly proprietary to any of their former
employers, or (b) negotiations by the Company with potential investors in the
Company. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
2.7 Proprietary Information and Inventions Agreements. Each
employee, officer and consultant of the Company has executed a Proprietary
Information and Inventions Assignment Agreement. The Company is not aware that
any of its employees, officers or
-3-
<PAGE>
consultants are in violation thereof, and the Company will use its best efforts
to prevent any such violation. The Company is not aware that any officer or key
employee intends to terminate employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles relating to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company.
2.8 Title to Property and Assets. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens that arise in the ordinary course of business and do
not materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in compliance
with such leases and holds a valid leasehold interest free of any liens, claims
or encumbrances.
2.9 Financial Statements; Liabilities. The Company commenced
operations on January 1, 2000. The Company's audited financial statements
(balance sheet, statement of operations, and statements of stockholders' equity
and cash flows) at and for the period ended December 31, 1999, (the "Financial
Statements") present the historical operating revenues, expenses, assets and
liabilities of Parent, are complete and correct in all material respects, are
consistent with the books and records of the Company, and have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis ("GAAP") throughout the periods indicated. The Financial
Statements fairly present the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein.
Except as set forth in the Financial Statements, the Company has no
material obligations or liabilities, other than (i) liabilities incurred in the
ordinary course of business subsequent to the December 31, 1999 balance sheet
(the "December Balance Sheet"), none of which is a liability resulting from a
breach of contract or breach of warranty or claim of infringement of an
Intellectual Property Right (as defined below) of a third party, and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business, and not required under GAAP to be reflected in the Financial
Statements, which, individually or in the aggregate, are not material to the
financial condition of the Company, exclusive of obligations for salaries
accrued since December 31, 1999 but not yet due, and recurring trade payables
not greater than $100,000 in the aggregate incurred in the ordinary course of
business.
2.10 Material Contracts and Other Commitments. Except for the
Transaction Documents there are no agreements, instruments or contracts to which
the Company is a party or by which it is bound, other than the following
(collectively, the "Contracts"): (i) contracts for the purchase of supplies and
services that were entered into in the ordinary course of business, do not
involve the payment of more than $50,000 in cash, goods, or services, and do not
extend for more than one date hereof, (ii) contracts entered into in the
ordinary course of business that do not involve amounts in excess of 5% of the
Company's 1999 revenues, and (iii) contracts terminable at will by the Company
on no more than 30 days notice without cost or liability to the Company and are
not material to the conduct of the Company's business. All of the Contracts are
valid, binding and in full force and effect in all material respects and
enforceable by the Company in accordance with their respective terms in all
material respects, subject to the effect of applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium, usury or other laws of
general application relating to or affecting enforcement of creditors' rights
and rules or laws concerning equitable remedies. The Company is not in material
default under any of such Contracts. To the knowledge of the Company, no other
party to any of the Contracts is in material default thereunder.
2.11 Proprietary Rights.
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(a) At the time of the Closing the Company owns, or has valid
license rights with respect to, all patents, patent applications, if any,
trademarks, service marks, trade names, inventions, processes, formulae, trade
secrets, franchises, copyrights and other proprietary rights (collectively,
"Intellectual Property Rights") employed in or necessary for the operation of
its business as now conducted with no known infringement of or conflict with the
rights of others. Such ownership and title are exclusive and not subject to
termination without the Company's consent. To the Company's knowledge, the
conduct of its business does not infringe or conflict with any intellectual
property rights of any third party. There are no outstanding options, licenses,
or agreements of any kind relating to the foregoing Intellectual Property
Rights, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the Intellectual Property Rights of any
other person or entity. The Company is not aware of any third party that has
misappropriated or is infringing or violating any of its Intellectual Property
Rights. The Company has not received any communications alleging that the
Company has violated or, by conducting its business as proposed, would violate
any of the Intellectual Property Rights of any other person or entity, and there
have been no claims made against the Company asserting the invalidity or
unenforceability or any of the Company's Intellectual Property Rights. The
Company does not believe it is or will be necessary to use any inventions of any
of its employees (or persons it currently intends to hire) made prior to their
employment by the Company.
(b) The transactions contemplated by this Agreement shall have
no Material Adverse Effect on the Company's right, title and interest in and to
the Company's Intellectual Property Rights.
2.12 Compliance with Other Instruments. The Company is not in
violation of, or default on (i) any term of its Restated Certificate or Bylaws,
or (ii) any statute, rule or regulation applicable to the Company, or any term
of any material contract, mortgage, indenture, judgment, writ, decree, order or
instrument to which the Company is subject and a violation of which would have a
Material Adverse Effect. The execution, delivery and performance of this
Agreement and the Investors Rights Agreement, and the consummation of the
transactions contemplated hereby and thereby will not result in any such
violation or be in conflict with or constitute either a default under any such
instrument, judgment, order, writ, decree or contract or an event that gives any
third party the right to modify, terminate or accelerate any obligation under
any such instrument, judgment, order, writ, decree or contract or that results
in the creation of any lien, charge or encumbrance upon any assets of the
Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of
any material permit, license, authorization, or approval applicable to the
Company, the effect which would in any such case constitute a Material Adverse
Effect.
2.13 Related Party Transactions. No employee, officer, stockholder
or director of the Company or member of his or her immediate family is indebted
to the Company, nor is the Company indebted (or committed to make loans or
extend or guarantee credit) to any of them, other than (i) for payment of salary
for services rendered, (ii) reimbursement for reasonable expenses incurred on
behalf of the Company, and (iii) for other standard employee benefits made
generally available to all employees including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company, nor does any such person have any interest in any material asset or
right of the Company. To the Company's knowledge, no officer, director, or
stockholder or any member of their immediate families is, directly or
indirectly, interested in any contract with the Company (other than such
contracts as relate to any such person's ownership of capital stock or other
securities of the Company).
2.14 Licenses; Permits. The Company has all franchises, permits,
licenses, and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which
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could have a Material Adverse Effect, and believes it can obtain, without undue
burden or expense, any similar authority for the conduct of its business as
presently planned to be conducted. The Company is not in default in any material
respect under any of such franchises, permits, licenses or other similar
authority.
2.15 Registration Rights. Except as provided in the Investor Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.16 Corporate Documents. Except for amendments necessary to satisfy
representations and warranties or conditions contained herein (the form of which
amendments has been approved by Purchaser), the Certificate of Designation and
bylaws of the Company are in the form provided to Purchaser.
2.17 Changes. Since December 31, 1999, there has not been:
(i) any material adverse change in the assets, liabilities,
financial condition, operations, business prospects, employee relations,
customer or supplier relations or operating results of the Company from that
reflected in the Financial Statements;
(ii) any action by the Company that would have required the
consent of the holders of a majority of the Series A Preferred Stock pursuant to
the Certificate of Designation or the Investor Rights Agreement;
(iii) any investment in or steps taken by the Company to
incorporate any subsidiary;
(iv) any damage, destruction or loss, whether or not covered
by insurance, that would constitute a Material Adverse Effect;
(v) any waiver by the Company of a valuable right or of a
material debt owed to it;
(vi) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(vii) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
(viii) any loans or guarantees made by the Company to or for
the benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(ix) any change in any compensation arrangement or agreement
with any key employee;
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(x) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets, other intangible assets or other
Intellectual Property Rights; or
(xi) any resignation or termination of employment of any key
officer of the Company.
(b) The Company has not at any time made payments for political
contributions or made any bribes, kickback payments or other illegal payments.
2.18 Tax Returns, Payments and Elections. The Company has filed all
tax returns and reports (including information returns and reports) as required
by law. The Company has paid all taxes and other assessments due, except those
contested by it in good faith that are listed on Exhibit B. The provision for
taxes of the Company as shown in the Financial Statements is adequate for taxes
due or accrued as of the date thereof. The Company has not elected pursuant to
the Internal Revenue Code of 1986, as amended (the "Code"), to be treated as a
Subchapter S corporation or a collapsible corporation pursuant to Section
1362(a) or Section 341(f) of the Code, nor has it made any other elections
pursuant to the Code (other than elections that relate solely to methods of
accounting, depreciation or amortization) that would have a Material Adverse
Effect.
2.19 Insurance. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, in customary amounts
(subject to reasonable deductibles) and that the Company believes is sufficient
for its business as conducted and as proposed to be conducted.
2.20 Minute Books. The minute books of the Company made available to
Purchaser contain minutes of all meetings of directors and stockholders since
the time of incorporation and reflect all transactions referred to in such
minutes accurately in all material respects.
2.21 Employee Matters. The Company is not aware that any officer or
key employee, or that any group of key employees, currently intends to terminate
their employment with the Company. The employment of each officer and employee
of the Company is terminable at the will of the Company.
2.22 Millennium Compliance. The failure by the Company's computer
systems to be capable of the following during and/or after January 1, 2000, will
not have a Material Adverse Effect on the Company: (a) handling date information
involving all and any dates, including accepting input, providing output and
performing date calculations in whole or in part; (b) operating accurately
without interruption on and in respect of any and all dates and without change
in performance; (c) responding to and processing two digit year input without
creating any ambiguity as to the century; and (d) storing and providing date
input information without creating any ambiguity as to the century.
2.23 Disclosure. Neither this Agreement nor any of the Exhibits,
Schedules, or closing certificates hereto contain any untrue statement of a
material fact or omit a material fact necessary to make each statement contained
herein or therein, in light of the circumstances under which it is made, not
misleading.
3. Representations and Warranties of Parent. Parent hereby represents
and warrants to Purchaser as follows, as of the date hereof and as of the
Closing:
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3.1 Organization, Good Standing and Qualification. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is qualified to do business in every jurisdiction
in which its ownership of property or conduct of business requires it to be so
qualified, except where the failure to obtain such qualification could not
reasonably be expected to have a material adverse effect on the business,
operating results, assets or financial condition of Parent and its subsidiaries
taken as a whole. Parent possesses all requisite corporate power and authority
and all material licenses, permits and authorizations necessary to own and
operate its properties, to carry on its business as now conducted and as
proposed to be conducted and to carry out the transactions contemplated by this
Agreement. The copies of Parent's charter documents and bylaws which have been
furnished to Purchaser reflect all amendments made thereto at any time prior to
the date of this Agreement and are complete and correct.
3.2 Authorization. All corporate action on the part of Parent, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement and the Option Agreement, the performance of all
obligations of Parent under this Agreement and the Option Agreement, and the
authorization, issuance (or reservation for issuance), sale and delivery of the
shares of common stock of Parent issuable pursuant to the Option Agreement (the
"Parent Common Stock") constitute valid and legally binding obligations of
Parent, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies. The Parent Common
Stock, when issued, sold and delivered in accordance with the terms of the
Option Agreement, will be duly and validly issued, fully paid and nonassessable.
3.3 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for the filing of the Certificate of
Designation with the Delaware Secretary of State.
4. Investment Representations, Warranties and Covenants of Purchaser.
Purchaser hereby represents and warrants that:
4.1 Authorization. Purchaser has full power and authority to enter
into this Agreement and the other Transaction Documents, and each such
agreement, when executed and delivered, will constitute a valid and legally
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent that the indemnification provisions contained
in the Investor Rights Agreement may be limited by applicable laws.
4.2 Purchase Entirely for Own Account. This Agreement is made with
Purchaser in reliance upon Purchaser's representation to the Company, which by
Purchaser's execution of this Agreement Purchaser hereby confirms, that the
Series A Preferred Stock to be received by Purchaser and the Common Stock
issuable upon conversion thereof (collectively, the "Securities") will be
acquired for investment for Purchaser's own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, Purchaser further
represents that Purchaser does not
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have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to such person or to any third person,
with respect to any of the Securities.
4.3 Disclosure of Information. Purchaser believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Series A Preferred Stock. Purchaser further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series A Preferred
Stock and the business, properties, prospects and financial condition of the
Company. The foregoing, however, does not limit or modify the representations
and warranties of the Company in Section 2 of this Agreement or the right of
Purchaser to rely thereon.
4.4 Investment Experience. Purchaser is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Series A Preferred Stock. Purchaser
also represents it has not been organized solely for the purpose of acquiring
the Series A Preferred Stock.
4.5 Accredited Investor. Purchaser is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
4.6 Restricted Securities. Purchaser understands that the Securities
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In addition, Purchaser represents that it is familiar with SEC
Rule 144, as presently in effect, and understands the resale limitations imposed
thereby and by the Act. Purchaser understands that no public market presently
exists for the Series A Preferred Stock or Common Stock of the Company, and that
there are no assurances that any such market will be created.
4.7 Further Limitations on Disposition. Without in any way limiting
the above, Purchaser further agrees not to make any disposition of all or any
portion of the Securities unless and until the transferee has agreed in writing
for the benefit of the Company to be bound by this Section 4 and Section 8 of
this Agreement and Sections 1.9, 1.12 and 2 of the Investor Rights Agreement,
and:
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, Purchaser shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Act.
4.8 Legends. It is understood that the certificate(s) evidencing the
Shares shall bear the following legends:
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE AGREEMENTS COVERING
THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD
OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RIGHTS OF FIRST REFUSAL AND MARKET STAND-OFF PROVISIONS
CONTAINED IN THE COMPANY'S INVESTOR RIGHTS AGREEMENT DATED MARCH 24,
2000. A COPY OF SUCH AGREEMENT MAY BE OBTAINED WITHOUT CHARGE UPON
WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.
4.9 Tax Advisors. Purchaser has reviewed with its own tax advisors
the federal, state and local tax consequences of its purchase of Shares, where
applicable, and the transactions contemplated by this Agreement. Purchaser is
relying solely on its own tax advisors and understands that Purchaser (and not
the Company) shall be responsible for Purchaser's own tax liability that may
arise as a result of its purchase of Shares or the transactions contemplated by
this Agreement.
5. Conditions of Purchaser's Obligations at Closing. The obligations of
Purchaser to purchase Shares at the Closing are subject to the fulfillment of
each of the following conditions:
5.1 Representations and Warranties. The representations and
warranties of each of the Company and Parent contained in Section 2 and Section
3, respectively, shall be true in all respects (or, if any such representation
is not expressly qualified by "materiality," "Material Adverse Effect" or words
of similar import, then in all material respects) on and as of the date hereof
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
5.2 Performance. Each of the Company and Parent shall have performed
and complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
5.3 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Shares will have been obtained by each of the Company and Parent as of the
Closing.
5.4 Proceedings and Documents.
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(a) All corporate and other proceedings in connection with the
transactions contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to Purchaser, and
Purchaser shall have received all such counterparts and certified or other
copies of such documents as Purchaser may reasonably request.
(b) The Company shall have delivered to Purchaser certified
copies of the resolutions duly adopted by the Company's Board of Directors
authorizing the execution, delivery and performance of this Agreement, the other
Transaction Documents, the filing of the Certificate of Designation, the
issuance and sale of the Series A Preferred Stock, the reservation for issuance
of Common Stock upon conversion of the Series A Preferred Stock, and the
consummation of all other transactions contemplated by this Agreement.
(c) Parent shall have delivered to Purchaser certified copies of
the resolutions duly adopted by Parent's Board of Directors authorizing the
execution, delivery and performance of this Agreement and the Option Agreement
and the reservation of Parent Common Stock for issuance upon exercise of
Purchaser's rights under the Option Agreement.
(d) The Company shall have delivered to Purchaser certified
copies of the Certificate of Designation and the Company's bylaws, each as in
effect at the Closing. (e) As of the Closing, the Company shall have delivered
to Purchaser a good standing certificate for the Company from the Secretary of
State of Delaware, dated as of a date within 30 days prior to the Closing.
5.5 Transaction Documents. The Company, Parent, Purchaser and all
other parties thereto shall have entered into the Transaction Documents (other
than the Warrant Agreement).
5.6 Certificate of Designation. The Certificate of Designation shall
have been filed with the Delaware Secretary of State.
5.7 Legal Opinion. Duane, Morris & Heckscher LLP, counsel to the
Company, shall have rendered to Purchaser a legal opinion in substantially the
form attached hereto as Exhibit F, and Archer & Greiner, counsel to Parent,
shall have rendered to Purchaser a legal opinion in substantially the form
attached hereto as Exhibit G.
5.8 No Legal Proceedings. No proceeding challenging this Agreement
or the transactions contemplated hereby or seeking to prohibit, alter, prevent
or materially delay the Closing or seeking damages in connection therewith shall
have been instituted or threatened by any person or entity.
5.9 Compliance Certificate. (a) The Chairman of the Company shall
deliver to Purchaser at the Closing a certificate stating that the conditions
specified in Sections 5.1 through 5.8 with respect to the Company have been
fulfilled.
(b) The President of Parent shall deliver to Purchaser at
the Closing a certificate stating that the conditions specified in Sections 5.1
through 5.8 with respect to Parent have been fulfilled.
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5.10 Due Diligence; Schedule of Exceptions. Purchaser shall have
completed its financial and legal due diligence review of the Company with the
results thereof satisfactory to Purchaser in its sole discretion, and the
Schedule of Exceptions shall be satisfactory in form and substance to Purchaser
in its sole discretion.
5.11 Board of Directors. The Company shall have a board of directors
consisting of six directors. As of the Closing, the Board of Directors shall
consist of Sheldon M. Bonovitz, Joseph A. Esposito, Joel Morganroth, Howard D.
Ross, John M. Ryan and one person designated by Purchaser who shall initially be
Thomas L. Harrison.
6. Conditions of the Company's Obligations at Closing. The obligations
of the Company to sell and issue the Shares at the Closing are subject to the
fulfillment of each of the following conditions:
6.1 Representations and Warranties. The representations and
warranties of Purchaser contained in Section 4 shall be true in all respects
(or, if any such representation is not expressly qualified by "materiality,"
"Material Adverse Effect" or words similar import, then in all material
respects) on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
6.2 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
6.3 Transaction Documents. The Company, Purchaser and all other
parties thereto shall have entered into the Transaction Documents (other than
the Warrant Agreement).
6.4 Certificate of Designation. The Certificate of Designation shall
have been filed with the Delaware Secretary of State.
7. Covenants of the Company. Without limiting any other covenants and
provisions hereof, each of the Company and Parent (where applicable) covenants
and agrees that until the consummation of an underwritten public offering
pursuant to an effective registration under the Act covering the offer and sale
by the Company of its Common Stock in which the aggregate net proceeds to the
Company equal or exceed $25,000,000 (a "Qualified Public Offering"), it will
perform and observe the following covenants and provisions, and will cause each
subsidiary and any other corporation of which it directly or indirectly owns at
least fifty percent (50%) of such corporation's outstanding shares (a
"Subsidiary"), if and when such Subsidiary exists, to perform and observe such
of the following covenants and provisions as are applicable to such Subsidiary.
7.1 Prompt Payment of Taxes. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any Subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books
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<PAGE>
adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefor.
7.2 Maintenance of Insurance. The Company will maintain insurance
with responsible and reputable insurance companies or associations in such
amounts and covering such risks as is customarily carried by companies engaged
in similar businesses and owning similar properties as the Company.
7.3 Compliance with Laws. The Company will comply, and cause each
Subsidiary to comply, with the requirements of all applicable foreign and
domestic laws, rules, regulations and orders of any governmental authority,
where noncompliance would have a Material Adverse Effect upon the business or
operations of the Company.
7.4 Keeping of Records and Books of Account. The Company will keep
adequate records and books of account in which complete entries will be made in
accordance with GAAP, reflecting all financial transactions of the Company.
7.5 Maintenance of Properties. The Company will maintain and
preserve all of its properties and assets, necessary for the proper conduct of
its business, in good repair, working order and condition, ordinary wear and
tear excepted.
7.6 Obligations. The Company will comply with all other material
obligations which it incurs pursuant to any contract or agreement, as such
obligations become due, unless and to the extent that (i) the same are being
contested in good faith and by appropriate proceedings and, if necessary,
adequate reserves (as determined in accordance with GAAP) have been established
on its books with respect thereto or (ii) the breach thereof would not have a
Material Adverse Effect.
7.7 Public Disclosures. The Company shall not disclose Purchaser's
name or identity as an investor in the Company in any press release or other
public announcement or in any document or material filed with any governmental
entity, without the prior written consent of Purchaser (which consent shall not
be unreasonably withheld), unless such disclosure is required by applicable law
or governmental regulations or by order of a court of competent jurisdiction, in
which case prior to making such disclosure, the Company shall give written
notice to Purchaser describing in reasonable detail the proposed content of such
disclosure and shall permit Purchaser to review and comment upon the form and
substance of such disclosure.
7.8 Warrant Agreement. If the Company consummates an underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of securities to
the general public for the account of the Company (an "Initial Public
Offering"), then simultaneously therewith the Company shall execute and deliver
to Purchaser the Warrant Agreement, and the Warrant Agreement will specify that
Purchaser is entitled to purchase a number of shares of the Company's Common
Stock equal to 2.5% of the then-outstanding common stock of Company (after
giving effect to the issuance of the shares of Common Stock sold by the Company
in the Initial Public Offering and the conversion of the Series A Preferred
Stock, if applicable) at an exercise price per share equal to 200% of the per
share offering price in the Initial Public Offering less the underwriters'
commission per share.
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8. Miscellaneous.
8.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any securities of the Company). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
8.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware, without reference to conflicts of law
rules.
8.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.5 Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and shall
be addressed (i) if to Purchaser, at its address set forth on the signature page
to this Agreement, and (ii) if to the Company, at the address of its principal
corporate offices (attention: Chairman), or at such other address as a party may
designate by 10 days' advance written notice to the other party pursuant to the
provisions above.
8.6 Finder's Fee. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Purchaser agrees to indemnify and hold harmless the Company from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which Purchaser or any of its officers, partners, employees, or
representative is responsible. The Company agrees to indemnify and hold harmless
Purchaser from any liability for any commission or compensation in the nature of
a finders' fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Company or any of its officers, employees
or representatives is responsible.
8.7 Expenses. Purchaser shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement, provided, however, that the Company will reimburse Purchaser for
the reasonable fees and expenses of its counsel in connection with the
transactions contemplated by this Agreement up to a maximum amount of $15,000.
8.8 Amendment and Waivers. Any term of this Agreement may be amended
and the performance of any term of this Agreement may be waived (either
generally or in a particular instance and
-14-
<PAGE>
either retroactively or prospectively) only with the written consent of the
Company and Purchaser. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities and the
Company.
8.9 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.10 Aggregation of Stock. All shares of the Series A Preferred
Stock held or acquired (or Common Stock issued upon conversion thereof) by
affiliated entities or persons (including partners or constituent members and
former partners and former constituent members) shall be aggregated for the
purpose of determining the availability of or discharge of any rights under this
Agreement. For purposes of this Section 8.10, the Company may rely on such
person whom a group of related persons shall designate from time to time for
information relating to the affiliations of entities or persons.
8.11 GAAP. Where any accounting determination or calculation is
required to be made under this Agreement or the exhibits hereto, such
determination or calculation (unless otherwise provided) shall be made in
accordance with GAAP.
8.12 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and thereof, and no party shall be liable
or bound to any other party in any manner by any warranties, representations, or
covenants except as specifically set forth herein or therein.
[Remainder of page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Series B Preferred
Stock Purchase Agreement as of the date first above written.
eResearchTechnology, Inc.
By: /s/ Joel Morganroth
----------------------------------------
Joel Morganroth, M.D.
Chairman
Address: 30 South 17th Street
Philadelphia, PA 19103
PURCHASER:
Communicade Inc.
By: /s/ Gerard A. Neumann
----------------------------------------
Name: Gerard A. Neumann
Title:
Address: 437 Madison Avenue
New York, NY 10022
PARENT:
Premier Research Worldwide, Ltd.
By: /s/ Joel Morganroth
----------------------------------------
Joel Morganroth, M.D.
Chairman and Chief Executive Officer
Address: 30 South 17th Street
Philadelphia, PA 19103
[Signature Page to Series A Preferred Stock Purchase Agreement]
<PAGE>
Exhibit A
CERTIFICATE OF DESIGNATION
<PAGE>
Exhibit B
eResearchTechnology, Inc.
SCHEDULE OF EXCEPTIONS
<PAGE>
Exhibit C
INVESTOR RIGHTS AGREEMENT
<PAGE>
EXHIBIT D
WARRANT AGREEMENT
<PAGE>
EXHIBIT E
OPTION AGREEMENT
<PAGE>
EXHIBIT F
OPINION OF DUANE, MORRIS & HECKSCHER LLP
<PAGE>
eReserachTechnology, Inc.
INVESTOR RIGHTS AGREEMENT
March 24, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
1. Registration Rights......................................................1
1.1 Definitions.....................................................1
1.2 Piggyback Registration Rights...................................2
1.3 Required Registration...........................................3
1.4 Registration on Form S-3........................................4
1.5 Registration Procedures.........................................5
1.6 Furnish Information.............................................6
1.7 Expenses of Registration........................................6
1.8 No Delay of Registration........................................6
1.9 Indemnification.................................................6
1.10 Reports under Securities Exchange Act of 1934...................8
1.11 Assignment of Registration Rights...............................8
1.12 "Market Stand-Off" Agreement....................................9
1.13 Termination of Registration Rights..............................9
2. Company Right of First Refusal on Sales of Shares........................9
2.1 General.........................................................9
2.2 Exceptions.....................................................10
2.3 No Assignment of Rights of First Refusal.......................10
2.4 Termination....................................................10
2.5 Other Restrictions on Transfer.................................10
3. Right of First Refusal on Company Issuance..............................10
3.1 Right of First Refusal.........................................10
3.2 Pro Rata Share.................................................10
3.3 New Securities.................................................11
3.4 Procedure......................................................11
3.5 Termination and Assignment.....................................12
3.6 Company Right to Terminate Issuance of New Securities..........12
4. Covenants of the Company................................................12
4.1 Delivery of Financial Statements...............................12
4.2 Inspection.....................................................13
4.3 Board of Directors.............................................13
4.4 Termination of Covenants.......................................13
5. Miscellaneous...........................................................13
5.1 Successors and Assigns.........................................13
5.2 Governing Law..................................................14
5.3 Counterparts...................................................14
5.4 Titles and Subtitles...........................................14
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
5.5 Notices........................................................14
5.6 Expenses.......................................................14
5.7 Amendments and Waivers.........................................14
5.8 Aggregation of Stock...........................................14
5.9 Severability...................................................14
5.10 Entire Agreement; Amendment; Waiver............................14
5.11 Dispute Resolution.............................................15
5.12 Remedies.......................................................15
5.13 No Inconsistent Agreements.....................................15
-ii-
<PAGE>
eResearchTechnology, Inc.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (this "Agreement") is made as of March
24, 2000, by and among eResearchTechnology, Inc., a Delaware corporation (the
"Company"), Premier Research Worldwide, Ltd., a Delaware corporation (the "Prior
Holder"), and Communicade Inc., a Delaware corporation ("Investor").
RECITALS
A. The Company and Investor are entering into a Series A Preferred
Stock Purchase Agreement (the "Purchase Agreement") of even date herewith;
B. In order to induce Investor to purchase shares of Series A Preferred
Stock pursuant to the Purchase Agreement, the Company and the Prior Holder
desire that the Company grant to Investor the registration and other rights set
forth herein; and
C. Investor desires that this Agreement shall govern the registration
and other rights of Investor.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "1934 Act" shall mean the Securities Exchange Act
of 1934, as amended.
(b) The term "Act" means the Securities Act of 1933, as amended.
(c) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any permitted assignee thereof
pursuant to the terms of Section 1.11.
(d) The term "Ownership Percentage" means and includes, with
respect to each Holder of Registrable Securities requesting inclusion of
Registrable Securities in an offering pursuant to this Agreement, the number of
Registrable Securities held by such Holder divided by the aggregate of all
Registrable Securities held by all Holders requesting registration in such
offering.
(e) The term "Public Offering" means and includes the closing of
a firm commitment underwritten public offering pursuant to an effective
registration statement under the Act, covering the offer and sale of securities
to the general public for the account of the Company.
(f) The terms "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
<PAGE>
(g) The term "Registrable Securities" means (i) Common Stock
issuable or issued upon conversion of the Company's Series A Preferred Stock
acquired by Investor pursuant to the Purchase Agreement; and (iii) any Common
Stock of the Company 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, the
foregoing, excluding in all cases, however, any shares sold or transferred by a
person in a transaction in which the rights under this Section 1 are not
assigned.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 Piggyback Registration Rights.
(a) Registration Rights. If at any time the Company shall
determine to register under the Act (including pursuant to a demand of any
stockholder of the Company exercising registration rights other than pursuant to
Section 1.3 hereof) any of its common stock (other than a registration relating
solely to the sale of securities to participants in a Company employee benefits
plan, a registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities or a registration in which the only
common stock being registered is common stock issuable upon conversion of debt
securities which are also being registered), it shall send to each Holder
written notice of such determination and, if within 15 days after receipt of
such notice, such Holder shall so request in writing, the Company shall use its
commercially reasonable efforts to include in such registration statement all or
any part of the Registrable Securities that such Holder requests to be
registered.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the written notice given pursuant
to Section 1.2(a). In such event, the right of any Holder to registration
pursuant to this Section 1.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 1.2, if the managing
underwriter determines in its sole discretion that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
may limit the Registrable Securities to be included in such registration. The
Company shall so advise all Holders distributing their securities through such
underwriting, and the number of shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated in the following order of priority (A) first, to the holders of the
Company's equity securities who initiated such registration pursuant to such
holders' registration rights or to the Company if the Company initiated such
registration, (B) second, to the Holders requesting to sell common stock
according to each Holder's Ownership Percentage, (C) third, to the Company, and
(D) fourth, to the extent additional securities may be included therein, pro
rata among the other selling stockholders according to the total amount of
securities owned by each such stockholder.
If any of the Holders disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter.
2
<PAGE>
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
1.3 Required Registration.
(a) On as many as, but not more than, two occasions, not earlier
than the earlier of either (i) six months after the completion by the Company of
its initial Public Offering or (ii) the third anniversary of the date hereof,
one or more Holders of Registrable Securities then outstanding may require the
Company, at the Company's expense, to register some or all of such Holders'
Registrable Securities, provided that each such registration covers an offering
with an aggregate offering price that is not less than $10,000,000; and
provided, further, that such Holder(s) may not require such registration more
than once in any 12-month period. Such Holder(s) shall notify the Company in
writing that it or they intend to offer or cause to be offered for public sale
of all or any portion of the Registrable Securities, and within 10 days after
the receipt of such notice, the Company will so notify all holders of
Registrable Securities.
(b) Upon written request of any Holder given within 30 days
after the receipt by such Holder from the Company of such notification, the
Company will use its commercially reasonable efforts to cause all or any part of
the Registrable Securities that may be requested by any Holder thereof
(including the Holder or Holders giving the initial notice of intent to offer
(each an "Initiating Holder" and collectively the "Initiating Holders")) to be
registered under the Securities Act as expeditiously as possible. The Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practical, but in any event within 90 days
after receipt by the Company of the request of the Initiating Holder.
(c) Notwithstanding anything contained in this Section 1.3 or
Section 1.4 to the contrary, if the Company furnishes to the Holders requesting
any registration pursuant to such sections a certificate signed by the President
of the Company stating that, in the good faith judgment of the Board of
Directors of the Company, such registration would be seriously detrimental to
the Company and that it is in the best interests of the Company to defer the
filing of a registration statement, then the Company shall have the right to
defer the filing of a registration statement with respect to such offering for a
period of not more than 90 days; provided, however, that the Company may not
exercise such right more than once in any 12-month period.
(d) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as part of their request and the Company shall
include such information in the written notice referred to above.
(e) If the registration to be effected pursuant to this Section
1.3 is a registration in connection with the Company's initial Public Offering,
the underwriter shall be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Holders of Registrable Securities
included in such registration. In all subsequent registrations effected pursuant
to this Section 1.3, the underwriter, if any, shall be selected by a majority in
interest of the Holders of Registrable Securities included in such registration
and shall be reasonably acceptable to the Company. In any event, the right of
any Holder to include his, her or its Registrable Securities in such
registration shall be conditioned 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 enter into an underwriting
agreement in customary form with the underwriters selected for such
underwriting.
3
<PAGE>
(f) Notwithstanding the foregoing, if the managing underwriter
advises the Holders of Registrable Securities included in such registration in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among the Holders according to each such
Holder's Ownership Percentage.
(g) Notwithstanding the foregoing, the Company shall not be
obligated to effect, or to take any action to effect, any registration pursuant
to this Section 1.3: (i) after the Company has effected two registrations
pursuant to this Section 1.3 and such registrations have been declared or
ordered effective and kept effective for the period set forth in Section 1.5(a)
and the Company has registered at least 80% of the total number of Registrable
Securities requested to be included therein, (ii) during the period starting
with the date 60 days prior to the Company's good faith estimate of filing of,
and ending on a date 120 days after the effective date of, a registration
statement filed under the Act (other than a registration of securities in a Rule
145 transaction or relating solely to the sale of securities to participants in
a Company stock plan), provided that the Company is actively employing in good
faith its commercially reasonable efforts to cause such registration statement
to become effective, and provided further that the Holders were given the
opportunity to fully participate in such registration pursuant to, and the
Company otherwise complied with its obligations under Section 1.2 above, (iii)
if the Initiating Holders propose to dispose of shares of Registrable Securities
that may be immediately registered on Form S-3 pursuant to a request made
pursuant to Section 1.4 below or (iv) if the Registrable Securities requested to
be registered by the Initiating Holders may be sold by such Initiating Holders
in a 90-day period pursuant to Rule 144 of the Act.
1.4 Registration on Form S-3. In case the Company shall receive from
a Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 (or any similar form promulgated by the SEC) and any
related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company will, not
more than twice in any year:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, use its commercially reasonable
efforts to effect such registration and all such qualifications and compliances
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holder's or Holders' Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within 20 days after receipt
of such written notice from the Company; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 1.4: (1) if Form S-3 is not available for
such offering by the Holders; (2) if the Company shall furnish to the Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not more
than 180 days after receipt of the request of the Holder or Holders under this
Section 1.4; provided, however, that the Company shall not utilize this right
more than once in any 12-month period; or (3) with respect to any Holder, if the
number of Registrable Securities requested to be registered on Form S-3 by such
Holder may be sold by such Holder in a 90-day period pursuant to Rule 144 of the
Act.
4
<PAGE>
(c) Subject to the foregoing, the Company shall use its
commercially reasonable efforts to file a registration statement covering the
Registrable Securities and other securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Holders.
Registrations effected pursuant to this Section 1.4 shall not be counted as
demands for registration effected pursuant to Section 1.3. If the Holders giving
the initial notice propose to offer the Registrable Securities by means of an
underwriting, the terms of Sections 1.3(d) and (e) shall apply.
1.5 Registration Procedures. Whenever required under this Section 1
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use commercially reasonable efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for a period of up to 120
days or, if earlier, until the distribution contemplated in the Registration
Statement has been completed;
(b) 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 Act;
(c) Furnish to the Holders participating in such registration
such numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as they
may reasonably request in order to facilitate the public offering of Registrable
Securities owned by them;
(d) Use commercially reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such state or jurisdictions;
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering (and each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement);
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed; and
5
<PAGE>
(h) Provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration.
1.6 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
1.7 Expenses of Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Sections
1.2, 1.3 and 1.4 for each Holder (which right may be assigned as provided in
Section 1.11), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of counsel for the Company and no more
than one counsel for all the selling Holders, but excluding underwriting
discounts and commissions relating to Registrable Securities.
1.8 No Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action, as such expenses are incurred; provided, however, that the
indemnity agreement contained in this subsection 1.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld or delayed), nor shall the Company be liable
in any case for any such loss, claim, damage, liability, or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished by any such Holder,
underwriter or controlling person for use in such registration.
6
<PAGE>
(b) To the extent permitted by law, each Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, severally but not jointly, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder; and
each such Holder will pay any legal or other expenses reasonably incurred by any
person intended for use in such registration to be indemnified pursuant to this
subsection 1.9(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity by
any Holder under this subsection 1.9(b) exceed the net proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with one counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
indemnified party under this Section 1.9 unless and to the extent that the
failure to deliver notice is materially prejudicial to its ability to defend
such action. Any omission to so deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section 1.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
7
<PAGE>
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.10 Reports under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after 90 days after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after 90 days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.11 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds with a
value of at least $2,000,000 in the aggregate, provided: (a) the Company is,
within a reasonable time before such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; (b) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement, including without limitation the provisions of
Section 1.12 below; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act. For the purposes of
determining the number of shares of Registrable Securities held by a transferee
or assignee of a holder of Registrable Securities, (i) the holdings of
affiliated partnerships, limited liability companies and other entities and
their constituent or retired partners or members or limited partners
(collectively, "Affiliated Persons"), and (ii) the holdings of spouses,
ancestors, lineal descendants and siblings who acquire Registrable Securities by
gift, will or intestate succession (collectively, "Family Members"), shall in
each case be aggregated together, provided that all assignees and transferees
who would not qualify individually for assignment of registration rights shall
designate in writing to the Company from time to time a single attorney-in-fact
on behalf of the entire group of Affiliated Persons or Family Members,
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<PAGE>
as the case may be, for the purpose of exercising any rights, receiving notices
or taking any action under this Section 1.
1.12 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees or affiliated entities who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
common stock included in such registration; provided, however, that:
(a) all officers and directors of the Company enter into similar
agreements; and
(b) such market stand-off time period shall not exceed 180 days
except as may be agreed by holders of a majority of the then outstanding
Registrable Securities.
Each Holder agrees to provide to the other underwriters of any
public offering such further agreement as such underwriter may require in
connection with this market stand-off agreement. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to the Registrable Securities of each Holder (and the shares or
securities of every other person subject to the foregoing restriction) until the
end of such period.
1.13 Termination of Registration Rights. The right of any Holder to
inclusion in any registration pursuant to Section 1.2 or to request registration
pursuant to Section 1.3 shall terminate upon the earlier of (i) five years after
the date of the Company's initial Public Offering, or (ii) such date as a public
trading market shall exist for the Company's Common Stock and all shares of
Registrable Securities beneficially owned or subject to Rule 144 aggregation by
such Holder may immediately be sold under Rule 144 (without regard to Rule
144(k)) during any 90-day period.
2. Company Right of First Refusal on Sales of Shares.
2.1 General. In the event that, at any time prior to the effective
date of the Company's initial Public Offering, a Holder proposes to make any
sale or transfer of Series A Preferred Stock, or Common Stock issued upon
conversion of Series A Preferred Stock, otherwise permitted pursuant to this
Agreement, then prior to effecting such sale or transfer the Holder shall give
the Company the opportunity to purchase such shares in the following manner:
(a) Such Holder shall give notice (the "Transfer Notice") to the
Company in writing of such intention, specifying the securities proposed to be
sold or transferred, the proposed price per share therefor (the "Transfer
Price"), the name of the proposed transferee or transferees and the other
material terms upon which such disposition is proposed to be made, including
such other terms and information as the Company may reasonably request in order
to confirm the bona fide nature of the proposed transaction.
(b) The Company shall have the right, exercisable by written
notice given by the Company to such Holder within 20 days after receipt of such
Transfer Notice to purchase all (but not less than all) of the securities
specified in such Transfer Notice.
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<PAGE>
(c) If the Company exercises its right of first refusal
hereunder, the closing of the purchase of the securities with respect to which
such right has been exercised shall take place within 30 days after the Company
gives notice of such exercise, which period of time shall be extended if
necessary to comply with applicable securities laws and regulations. Upon
exercise of its right of first refusal, the Company and such Holder shall be
legally obligated to consummate the purchase contemplated thereby and shall use
their best efforts to secure any approvals required in connection therewith.
(d) If the Company does not exercise its right of first refusal
hereunder within the 20 day period specified for such exercise, such Holder
shall be free, during the period of 60 days following the expiration of such
time for exercise to enter into an agreement to sell the securities specified in
such Transfer Notice, to the specified proposed transferee or another investor
which is solely a financial investor acquiring for investment purposes, on terms
no less favorable to such Holder than the terms specified in such Transfer
Notice, provided that the closing of the purchase and sale of such securities
shall take place within 30 days after such Holder enters into such agreement.
2.2 Exceptions. The right of first refusal herein shall not apply to
any transfer of securities by a Holder without receipt of consideration by the
Holder (a) to any Family Member (as defined in Section 1.10) of any Holder who
is an individual, or to a trust for the benefit of the Holder or the Holder's
Family Members or (ii) to any Affiliated Person (as defined in Section 1.11) of
a Holder that is an entity, provided in any such case that the transferee agrees
to be bound by the provisions of this right of first refusal with respect to any
further transfers.
2.3 No Assignment of Rights of First Refusal. The Company may not
assign its rights of first refusal under this Section 2.
2.4 Termination. The Company's right of first refusal set forth
herein shall terminate upon the first to occur of (i) the closing of an initial
Public Offering of the Common Stock of the Company to the general public which
is effected pursuant to a registration statement filed with, and declared
effective by, the SEC under the Act, and (ii) such date as the Company shall be
subject to the reporting requirements of Section 13(a) or 15(d) of the 1934 Act.
2.5 Other Restrictions on Transfer. Notwithstanding anything to the
contrary contained herein, (a) until the six-month anniversary of the date
hereof, no Holder shall transfer any shares of Series A Preferred Stock without
the prior written consent of the Company; and (b) until the effective date of
the Company's initial Public Offering, no Holder shall transfer any shares of
Series A Preferred Stock to any person or entity engaged in conducting or
providing products or services for use in conducting clinical research trials.
3. Right of First Refusal on Company Issuance.
3.1 Right of First Refusal. The Company hereby grants to Investor a
right of first refusal ("Right of First Refusal") to purchase Investor's Pro
Rata Share (as defined in Section 3.2 below) of any New Securities (as defined
in Section 3.3 below) which the Company may, from time to time, propose to issue
and sell.
3.2 Pro Rata Share. Investor's "Pro Rata Share," for purposes of
this Section 3, is equal to the product obtained by dividing (a) the aggregate
Stated Value (as defined in the Company's Certificate of Designation of Series A
Convertible Preferred Stock) of the Series A Preferred Stock then held by the
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Investor by (b) the difference between the valuation of the Company upon
consummation of the sale of such New Securities, as determined in good faith by
the Board of Directors (including the Investor Nominee (as defined in Section
4.4) then serving as a director) and the proposed purchaser of such New
Securities, and the aggregate consideration to be paid by such proposed
purchaser for such New Securities.
3.3 New Securities. Except as set forth below, "New Securities"
shall mean any shares of capital stock of the Company, including Common Stock
and Preferred Stock, whether or not now authorized, and rights, options,
warrants or any similar instrument to purchase such shares of Common Stock or
Preferred Stock and securities of any type whatsoever that are, or may by their
terms become, convertible into such shares of Common Stock or Preferred Stock.
Notwithstanding the foregoing, "New Securities" do not include the following:
(i) shares of Common Stock issued upon the conversion of the Series A Preferred
Stock; (ii) shares of Common Stock, or options or other rights to purchase
Common Stock, issued or granted to employees, officers, directors and
consultants of the Company pursuant to any one or more employee stock incentive
plans or agreements either approved, or within an aggregate amount approved, by
the Company's Board of Directors; (iii) securities issued or issuable pursuant
to financing transactions approved by the Company's Board of Directors
including, but not limited to, equipment leases or bank lines of credit,
provided that the specific issuance is approved by the Board; (iv) shares of
Common Stock or other securities issued as a dividend or distribution on, or in
connection with a split of or recapitalization of, any of the capital stock of
the Company; (v) shares of capital stock of the Company issued pursuant to
warrants outstanding as of the date hereof; (vi) securities issued by the
Company pursuant to the acquisition of another corporation or other entity by
the Company by merger, purchase of all or substantially all of the capital stock
or assets, or other reorganization as a result of which the stockholders of the
Company will continue to hold more than fifty percent (50%) of the voting
securities of the Company; or (vii) securities issued in a firm commitment
underwritten Public Offering covering the offer and sale of securities of the
Company.
3.4 Procedure.
(a) In the event the Company proposes to undertake an issuance
of New Securities with respect to which the Investor has a right of first
refusal hereunder, it shall give Investor written notice (the "Company Notice")
of its intention, describing the amount and type of New Securities to be issued,
and the price and terms upon which the Company proposes to issue the same.
Investor shall have 20 days from the date of receipt of the Company Notice to
exercise its Right of First Refusal to purchase up to its Pro Rata Share of such
New Securities for the price and upon the terms specified in the Company Notice
by delivering written notice (the "Right of First Refusal Election Notice") to
the Company and stating therein the quantity of New Securities to be purchased.
(b) Settlement for the New Securities to be purchased by
Investor pursuant to this Section 3.4 shall be made in cash within 20 days from
Investor's date of receipt of the Company Notice; provided, however, that if the
terms of payment for the New Securities specified in the Company Notice were for
other than cash against delivery, Investor shall pay in cash to the Company the
fair market value of such consideration as mutually agreed upon by the Company
and Investor or, if no such agreement is reached, as determined by an investment
banking firm mutually acceptable to the Company and Investor, which appraisal
shall be final, within five days of such determination if such determination is
made after 15 days following receipt of the Company Notice.
(c) In the event that Investor has not elected or does not have
the right to purchase all of the New Securities within 20 days of the receipt of
Company Notice pursuant to clause (a) above, the Company shall have 90 days
thereafter to sell the New Securities not elected or entitled to be
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<PAGE>
purchased by Investor at a price and upon terms no more favorable to the
proposed purchasers of such New Securities than specified in the Company Notice.
In the event the Company has not sold some or all of the New Securities within
such 90 day period, the Company shall not thereafter issue or sell any unsold
New Securities without first offering such securities to Investor in the manner
provided above.
(d) If Investor shall have failed to deliver to the Company its
Right of First Refusal Election Notice within the time periods described in this
Section 3.4, Investor shall be deemed to have waived its Right of First Refusal
as to such financing to which such notice pertains.
3.5 Termination and Assignment. The Right of First Refusal granted
in this Section 3 shall expire upon the effective date of the Company's first
Public Offering of securities registered under the Securities Act at an
aggregate offering price of at least $25,000,000. The Right of First Refusal is
non-assignable except to any transferee to whom registration rights may be
transferred pursuant to Section 6 of this Agreement.
3.6 Company Right to Terminate Issuance of New Securities.
Notwithstanding the foregoing, the Company may in its sole discretion terminate
any proposed issuance of New Securities in respect of which the Company has
given Company Notice, at any time prior to the consummation thereof. The
foregoing provision shall apply even in the event Investor shall have exercised
its Right of First Refusal hereunder; provided, however, that no New Securities
shall then have been issued.
4. Covenants of the Company.
4.1 Delivery of Financial Statements. The Company shall deliver to
Investor, so long as Investor shall be a Holder of at least ten percent (20%) of
the Series A Preferred Stock issued pursuant to the Purchase Agreement (subject
to appropriate adjustment for stock splits, dividends, combinations and other
recapitalizations):
(a) as soon as practicable, but in any event within 120 days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company and statement of stockholders'
equity as of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with U.S. generally accepted accounting principles, consistently
applied ("GAAP"), and, to the extent available, audited and certified by
independent public accountants of nationally recognized standing selected by the
Company;
(b) as soon as practicable, but in any event within 60 days
after the end of each of the first three quarters of each fiscal year of the
Company, an unaudited profit or loss statement, a statement of cash flows for
such fiscal quarter and an unaudited balance sheet as of the end of such fiscal
quarter in reasonable detail;
(c) as soon as practicable, but in any event prior to the end of
each fiscal year, a budget and business plan for the next fiscal year, including
balance sheets, income statements and statements of cash flows, and, as soon as
prepared, any other budgets or revised budgets prepared by the Company; and
(d) a statement of the authorized, issued and then outstanding
capital stock of the Company and all outstanding options, warrants and other
rights to acquire capital stock of the Company, including the following
information with respect to such outstanding stock, options, warrants and
rights: the
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holder; the number of shares covered; and the exercise price and expiration
date, if applicable; in each case as Investor may from time to time request.
4.2 Inspection. So long as Investor holds at least 20% of the Series
A Preferred Stock issued pursuant to the Purchase Agreement (as adjusted for
subsequent stock splits, combinations or reclassifications), the Company shall
permit Investor, at its own expense, to visit and inspect the Company's
properties, and to discuss the Company's affairs, finances and accounts with the
Company's officers, employees and outside accountants, all at such reasonable
times as may be requested by Investor.
4.3 Board of Directors. Investor shall be entitled to nominate one
member (the "Investor Nominee") to the Company's Board of Directors at each
meeting or pursuant to each written consent of the Company's stockholders for
the election of directors, and to remove from office the Investor Nominee and to
fill any vacancy caused by the resignation, death or removal of the Investor
Nominee. Each of Investor and the Prior Holder hereby agrees to vote all of its
respective shares of Common Stock and Series A Preferred Stock and any other
voting securities of the Company now owned or hereafter acquired in favor of the
election of the Investor Nominee to the Board.
(a) The Company shall call, promptly following receipt of a
request by Investor, a special meeting of the stockholders of the Company to
elect an Investor Nominee to the Board and to cause the removal of the Investor
Nominee if Investor shall request the removal of the Investor Nominee in writing
for any reason. Investor shall have the right to designate a new nominee in the
event the existing Investor Nominee shall be removed pursuant to this Section
4.3(a) or shall vacate his directorship for any reason.
(b) The Company shall use reasonable efforts to prevent any
action from being taken by the Board during the pendency of any vacancy due to
death, resignation or removal of an Investor Nominee, unless Investor shall have
failed to act to nominate and elect a replacement in a timely manner.
(c) The Company shall enter into indemnity agreements with the
Investor Nominee on the same terms as the Company may have with any other
director of the Company, and cause the Investor Nominee (and any former Investor
Nominee) to be covered on any insurance policy maintained from time to time by
the Company or any other person covering acts and omissions of the directors and
officers of the Company in their capacity as such.
4.4 Termination of Covenants. The covenants set forth in this
Section 4 shall terminate and be of no further force or effect (i) upon the
consummation of a Public Offering or when the Company first becomes subject to
the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act,
whichever event shall first occur or (ii) with respect to the covenants set
forth in Section 4.2, as to any Holder, or transferee or assignee of such
Holder, who is deemed by the Board of Directors of the Company acting in good
faith to be a competitor or potential competitor of the Company.
5. Miscellaneous.
5.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
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5.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware without reference to conflicts of law
rules.
5.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
5.5 Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and shall
be addressed (i) if to Investor or to the Prior Holder, at its respective
address set forth on the signature page hereto and (ii) if to the Company, at
the address of its principal corporate offices (attention: Chairman), or in any
such case at such other address as a party may designate by 10 days' advance
written notice to the other party pursuant to the provisions above.
5.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
5.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding; provided, however,
that in the event that such amendment or waiver adversely affects the
obligations and/or rights of any Holder in a different manner than the other
Holders, such amendment or waiver shall also require the written consent of such
Holder. Any amendment or waiver effected in accordance with this paragraph shall
be binding upon each holder of any Registrable Securities then outstanding, each
future holder of all such Registrable Securities, and the Company.
5.8 Aggregation of Stock. All shares of the Series A Preferred Stock
of the Company held or acquired (or Common Stock issuable upon conversion
thereof) by affiliated entities or persons (including partners or constituent
members and former partners and former constituent members) shall be aggregated
together for the purpose of determining the availability or discharge of any
rights under this Agreement. For purposes of this Section 5.8, the Company may
rely on such person whom a group of related persons shall designate from time to
time for information relating to the affiliations of entities or persons.
5.9 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
5.10 Entire Agreement; Amendment; Waiver. This Agreement (including
the Exhibits hereto, if any) constitutes the full and entire understanding and
agreement between the parties with regard to
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the subjects hereof and thereof, and supersedes all prior agreements and
understandings, whether written or oral, with respect to the subject matter
hereof.
5.11 Dispute Resolution. If there arises a dispute between any party
to this Agreement, and any other party to this Agreement regarding this
Agreement, those parties agree to negotiate in good faith to resolve the dispute
between them regarding this Agreement. If the negotiations do not resolve the
dispute to the reasonable satisfaction of both parties, then each party shall
nominate one partner, member or senior officer of the rank of Vice President or
higher as its representative. These representatives shall, within 30 days of a
written request by either party to call such a meeting, meet in person and alone
(except for one assistant for each party) and shall attempt in good faith to
resolve the dispute. If the dispute cannot be resolved by such senior managers
in such meeting, the parties agree that they shall, if requested in writing by
either party, meet within 30 days after such written notification for one day
with an impartial mediator mutually agreed upon by the parties and consider
dispute resolution alternatives other than litigation. If any alternative method
of dispute resolution is not agreed upon within 30 days after the one day
mediation, either party may begin litigation proceedings. This procedure shall
be a prerequisite before taking any additional action hereunder.
5.12 Remedies. Subject to Section 5.11, in the event of a breach by
the Company of its obligations under this Agreement, each Holder, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it will waive the
defense that a remedy at law would be adequate.
5.13 No Inconsistent Agreements. The Company has not, as of the date
hereof, and will not, on or after the date hereof, enter into any agreement with
respect to its securities which is inconsistent with or more favorable to any
stockholder on the date hereof than the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The Company shall
not, directly or indirectly, enter into any merger, consolidation or
reorganization in which the Company is not the surviving corporation unless the
proposed surviving corporation, prior to the merger, consolidation or
reorganization, agrees in writing to assume the obligations of the Company under
this Agreement, and for that purpose references herein to "Registrable
Securities" shall be deemed to be references to the securities to which holders
of Registrable Securities would be entitled to receive in exchange for
Registrable Securities in any such merger, consolidation or reorganization
unless such securities were registered under the Act in connection with the
merger, consolidation or reorganization.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this Investor Rights
Agreement as of the date first above written.
eResearchTechnology, Inc.
By: /s/ Joel Morganroth
-------------------------------------
Joel Morganroth, M.D.
Title: Chairman
Address: 30 South 17th Street
Philadelphia, PA 19103
INVESTOR:
Communicade Inc.
By: /s/ Gerard A. Neumann
-------------------------------------
Name: Gerard A. Neumann
Title: Chief Financial Officer
Address: 437 Madison Avenue
New York, NY 10022
PRIOR HOLDER:
Premier Research Worldwide, Ltd.
By: /s/ Joel Morganroth
-------------------------------------
Joel Morganroth, M.D.
Chairman and Chief Executive Officer
Address: 30 South 17th Street
Philadelphia, PA 19103
[Signature Page to Investor Rights Agreement]
<PAGE>
EXHIBIT D
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT
WITH A VIEW TO THE DISTRIBUTION THEREOF AND, EXCEPT AS STATED IN AN AGREEMENT
BETWEEN THE HOLDER OF THIS CERTIFICATE AND THE ISSUER CORPORATION, SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR THE ISSUER
CORPORATION RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE ISSUER
CORPORATION) STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
VOID AFTER 5:00 P.M., PHILADELPHIA TIME, ON _________________, 2002 OR IF NOT A
BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., PHILADELPHIA TIME, ON THE NEXT
FOLLOWING BUSINESS DAY.
NO. 1
WARRANT TO PURCHASE
_______ SHARES OF
COMMON STOCK
OF
ERESEARCHTECHNOLOGY, INC.
TRANSFER RESTRICTED -- SEE SECTION 5.01
This certifies that, for good and valuable consideration, Communicade,
Inc. or its permitted successors and assignees (the "Warrantholder"), is
entitled to purchase from eResearchTechnology, Inc., a Delaware corporation (the
"Company"), subject to the terms and conditions hereof, at any time on or after
the date hereof, and before 5:00 p.m., Philadelphia time, on __________, 2002
(or, if such day is not a Business Day, at or before 5:00 p.m., Philadelphia
time, on the next following Business Day), the number of fully paid and non-
assessable shares of Common Stock stated above at the Exercise Price. The
Exercise Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Article III hereof.
ARTICLE I
<PAGE>
Section 1.01 Definition of Terms. As used in this Warrant, the
following capitalized terms shall have the following respective meanings:
(a) Business Day: A day other than a Saturday, Sunday or other
day on which banks in the Commonwealth of Pennsylvania are authorized by law to
remain closed.
(b) Common Stock: Common Stock, $.01 par value per share, of
the Company.
(c) Exercise Price: $ per Warrant Share, as such price may
be adjusted from time to time pursuant to Article III hereof.
(d) Expiration Date: 5:00 p.m., Philadelphia time, on ,
2002 or if such day is not a Business Day, the next succeeding day which is a
Business Day.
(e) Holder: A holder of outstanding Warrants.
(f) Person: An individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or any department
or agency thereof.
(g) Public Offering: A public offering of any of the Company's
equity or debt securities pursuant to a registration statement under the
Securities Act.
(h) Securities Act: The Securities Act of 1933, as amended.
(i) Transfer: See Section 5.01.
(j) Warrant: This Warrant and all other warrants that may be
issued in its place.
(k) Warrantholder: The person or entity to whom this Warrant
is originally issued, or any successor in interest thereto, or any assignee or
transferee thereof, in whose name this Warrant is registered upon the books to
be maintained by the Company for that purpose.
(l) Warrant Shares: The shares of Common Stock purchasable
upon exercise of the Warrants.
ARTICLE II
DURATION AND EXERCISE OF WARRANT
Section 2.01 Duration of Warrant. The Warrantholder may exercise this
Warrant at any time and from time to time after the date hereof and before 5:00
p.m., Philadelphia time, on
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<PAGE>
the Expiration Date. If this Warrant is not exercised on or before the
Expiration Date, it shall become void, and all rights hereunder shall thereupon
cease.
(a) Exercise of Warrant.
(i) The Warrantholder may exercise this Warrant, in whole
or in part, by presentation and surrender of this Warrant to the Company at its
corporate office at 30 South 17th Street, Philadelphia, PA 19103, or at the
office of its stock transfer agent, if any, with the Subscription Form annexed
hereto duly executed and accompanied by payment of the full Exercise Price for
each Warrant Share to be purchased.
(ii) Upon receipt of this Warrant with the Subscription
Form duly executed and accompanied by payment of the aggregate Exercise Price
for the Warrant Shares for which this Warrant is then being exercised, the
Company shall cause to be issued certificates for the total number of whole
shares of Common Stock for which this Warrant is being exercised (adjusted to
reflect the effect of the provisions contained in Article III hereof, if any) in
such denominations as are requested for delivery to the Warrantholder, and the
Company shall thereupon deliver such certificates to the Warrantholder. The
Warrantholder shall be deemed to be the holder of record of the Shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of the Company shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the
Warrantholder. If at the time this Warrant is exercised, a registration
statement is not in effect to register under the Securities Act the Warrant
Shares issuable upon exercise of this Warrant, the Company may require the
Warrantholder to make such investment intent representations, and to provide the
Company with an opinion of counsel (which may be counsel for the Company) and
may place such legends on certificates representing the Warrant Shares, as may
be reasonably required in the opinion of counsel to the Company to permit the
Warrant Shares to be issued without such registration.
(iii) Notwithstanding anything to the contrary set forth
herein, upon exercise of this Warrant, the Warrantholder may, at its election,
either (i) exercise this Warrant by paying to the Company an amount equal to the
aggregate Exercise Price of the shares being purchased or (ii) receive shares of
Common Stock equal to the value (as determined below) of this Warrant, in which
event the Company shall issue to the Warrantholder a number of shares of Common
Stock computed using the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares to be issued to the Warrantholder.
Y = the number of shares purchasable under this Warrant with
respect to which the Exercise Price is to be paid.
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<PAGE>
A = the current fair market value of one share of the
Company's Common Stock.
B = the Exercise Price then in effect.
As used herein, current fair market value of the Company's Common Stock shall
mean with respect to each share of Common Stock the average of the closing
prices of the Company's Common Stock sold on all securities exchanges on which
the Common Stock may at the time be listed, or, if there have been no sales on
any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day the
Common Stock is not so listed, the average of the representative bid and asked
prices quoted in the Nasdaq Stock Market as of 4:00 p.m., New York City time,
or, if on any day the Common Stock is not quoted in the Nasdaq Stock Market, the
average of the highest bid and lowest asked price on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over the 20 consecutive business days prior to the day as of which the current
fair market value of Common Stock is being determined. If at any time the Common
Stock is not listed on any securities exchange or quoted in the Nasdaq Stock
Market or the over-the-counter market, the current fair market value shall be
the highest price per share that the Company could obtain from a willing buyer
(not a current employee or director) for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good faith by the
Board of Directors of the Company, unless the Warrantholder shall purchase such
shares in conjunction with an underwritten public offering of the Company's
Common Stock pursuant to a registration statement filed under the Securities Act
of 1933, in which case the fair market value shall be the price per share at
which the Common Stock is sold to the public in such offering.
(iv) In case the Warrantholder shall exercise this Warrant
with respect to less than all of the Warrant Shares that may be purchased under
this Warrant, the Company shall execute a new warrant in the form of this
Warrant for the balance of such Warrant Shares and deliver such new warrant to
the Warrantholder.
Section 2.02 Reservation of Shares. The Company hereby agrees that at
all times there shall be reserved for issuance and delivery upon exercise of
this Warrant such number of shares of Common Stock or other shares of capital
stock of the Company from time to time issuable upon exercise of this Warrant.
All such shares shall be duly authorized, and when issued upon such exercise,
shall be validly issued, fully paid and nonassessable, free and clear of all
liens, security interests, charges and other encumbrances or restrictions on
sale and free and clear of all preemptive rights.
Section 2.03 Fractional Shares. The Company shall not be required to
issue any fraction of a share of its capital stock in connection with the
exercise of this Warrant, and in any case where the Warrantholder would, except
for the provisions of this Section 2.04, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall, upon the exercise of this Warrant and receipt of the Exercise
Price, issue only
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<PAGE>
the largest number of whole shares purchasable upon exercise of this Warrant.
The Company shall not be required to make any cash or other adjustment in
respect of such fraction of a share to which the Warrantholder would otherwise
be entitled, but shall return to the Warrantholder that portion of the Exercise
Price that represents such fraction of a share.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK PURCHASABLE
AND OF EXERCISE PRICE
The Exercise Price and the number and kind of Warrant Shares shall be
subject to adjustment from time to time upon the happening of certain events as
provided in this Article III.
Section 3.01 Mechanical Adjustment.
(a) If at any time prior to the exercise of this Warrant in
full, the Company shall (i) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (ii) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (iii)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares; or (iv) issue any shares of its capital stock by
reclassification of its Common Stock (including any such reclassification in
connection with a consolidation or a merger in which the Company is the
continuing corporation), the Exercise Price in effect at the time of the record
date of such dividend, distribution, subdivision, combination, reclassification
or recapitalization shall be adjusted so that the Warrantholder shall be
entitled to receive the aggregate number and kind of shares which, if this
Warrant had been exercised in full immediately prior to such event, it would
have owned by virtue of such exercise and been entitled to receive by virtue of
such dividend, distribution, subdivision, combination, reclassification or
recapitalization. Any adjustment required by this paragraph 3.01(a) shall be
made successively immediately after the record date, in the case of a dividend
or distribution, or the effective date, in the case of a subdivision,
combination, recapitalization or reclassification, to allow the purchase of such
aggregate number and kind of shares.
(b) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to paragraph (a) of this Section 3.01, the Warrant
Shares shall simultaneously be adjusted by multiplying the number of Warrant
Shares initially issuable upon exercise of each Warrant by the Exercise Price in
effect on the date thereof and dividing the product so obtained by the Exercise
Price, as adjusted.
(c) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent in such price; provided, however, that any adjustments which by reason of
this paragraph (c) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 3.01 shall be made to the nearest cent or to the nearest one-hundredth
of a
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<PAGE>
share, as the case may be. Notwithstanding anything in this Section 3.01 to
the contrary, the Exercise Price shall not be reduced to less than the then
existing par value of the Common Stock as a result of any adjustment made
hereunder.
Section 3.02 Notice of Adjustment. Whenever the number of Warrant
Shares or the Exercise Price is adjusted as herein provided, the Company shall
prepare and deliver to the Warrantholder a certificate signed by its President,
setting forth the adjusted number of shares purchasable upon the exercise of
this Warrant and the Exercise Price of such shares after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which adjustment was made.
Section 3.03 No Adjustment for Cash Dividends. No adjustment in respect
of any cash dividends shall be made during the term of this Warrant.
Section 3.04 Preservation of Purchase Rights in Certain Transactions.
In case of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock (other than subdivision or combination of the
outstanding Common Stock and other than a change in the par value of the Common
Stock) or in case of any consolidation or merger of the Company with or into
another corporation (other than a merger with a subsidiary in which the Company
is the continuing corporation and that does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the class issuable upon exercise of this Warrant) or in the case of any sale,
lease, transfer or conveyance to another corporation of the property and assets
of the Company as an entirety or substantially as an entirety, the Company
shall, as a condition precedent to such transaction, cause such successor or
purchasing corporation, as the case may be, to execute with the Warrantholder an
agreement granting the Warrantholder the right thereafter, upon payment of the
Exercise Price in effect immediately prior to such action, to receive upon
exercise of this Warrant the kind and amount of shares and other securities and
property that it would have owned or have been entitled to receive after the
happening of such reclassification, change, consolidation, merger, sale or
conveyance had this Warrant been exercised immediately prior to such action.
Such agreement shall provide for adjustments in respect of such shares of stock
and other securities and property, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article III. In the event
that in connection with any such reclassification, capital reorganization,
change, consolidation, merger, sale or conveyance, additional shares of Common
Stock shall be issued in exchange, conversion, substitution or payment, in whole
or in part, for, or of, a security of the Company other than Common Stock, any
such issue shall be treated as an issue of Common Stock covered by the
provisions of this Article III. The provisions of this Section 3.04 shall
similarly apply to successive reclassifications, capital reorganizations,
consolidations, mergers, sales or conveyances.
Section 3.05 Dissolution or Liquidation. In the event of any proposed
distribution of the assets of the Company in dissolution or liquidation (except
under circumstances when Section 3.04 shall be applicable), the Company shall
mail notice thereof to the Warrantholder and shall make no distribution to
stockholders until the expiration of 30 days from the date of mailing
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<PAGE>
of the aforesaid notice and, in any such case, the Warrantholder may exercise
the purchase rights with respect to this Warrant within 30 days from the date of
mailing such notice and all rights herein granted not so exercised within such
30-day period shall thereafter become null and void.
Section 3.06 Form of Warrant After Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Exercise Price or
the number or kind of the Warrant Shares, and Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in this Warrant, as initially issued.
Section 3.07 Treatment of Warrantholder. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrantholder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for all purposes and shall not be
affected by any notice to the contrary.
ARTICLE IV
OTHER PROVISIONS RELATING TO
RIGHTS OF WARRANTHOLDER
Section 4.01 No Rights as Stockholders; Notice to Warrantholders.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or its transferees the right to vote or to receive dividends or to
consent or to receive notice as a stockholder in respect of any meeting of
stockholders for the election of directors of the Company or of any other
matter, or any rights whatsoever as stockholders of the Company. The Company
shall give notice to the Warrantholder by certified mail if at any time prior to
the expiration or exercise in full of the Warrants, any of the following events
shall occur:
(a) the Company shall authorize the payment of any dividend
payable in any securities upon shares of Common Stock or authorize the making of
any non-cash distribution to the holders of shares of Common Stock;
(b) the Company shall authorize the issuance to all holders of
Common Stock of any additional shares of Common Stock or of rights, options or
warrants to subscribe for or purchase Common Stock or of any other subscription
rights, options or warrants;
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale or conveyance of
the property of the Company as an entirety or substantially as an entirety); or
(d) a capital reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock
and other than a change in the par value of the Common Stock) or any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or change of Common
Stock
- 7 -
<PAGE>
outstanding) or in the case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially an entirety. Such
giving of notice shall be initiated (i) at least ten Business Days prior to the
date fixed as a record date or effective date or the date of closing of the
Company's stock transfer books for the determination of the stockholders
entitled to such dividend, distribution, or subscription rights, or for the
determination of the stockholders entitled to vote on such proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of the closing of the stock
transfer books, as the case may be. Failure to provide such notice shall not
affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or proposed merger, consolidation, sale,
conveyance, dissolution, liquidation or winding up.
Section 4.02 Lost, Stolen, Mutilated or Destroyed Warrants. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may in its discretion impose (which shall, in
the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as, and in substitution for, this
Warrant.
Section 4.03 Payment of Taxes. The Company shall pay all stamp taxes
attributable to the initial issuance of Warrant Shares issuable upon any
exercise of the Warrant or issuable pursuant to Section 3, excluding any tax or
taxes which may be payable because of the transfer involved in the issuance or
delivery of any certificates for Warrant Shares in a name other than that of the
exercising Warrantholder in respect of which such Warrant Shares are issued.
ARTICLE V
RESTRICTIONS ON TRANSFER OF WARRANTS
Section 5.01 Restrictions on Transfer.
(a) The Warrantholder understands and agrees that neither this
Warrant nor the Warrant Shares have been registered under the Securities Act,
and that accordingly they will not be transferable except as permitted under
various exemptions contained in the Securities Act, or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act.
(b) Neither this Warrant nor the Warrant Shares may be
disposed of or encumbered (any such action, a "Transfer"), except (i) to any
underwriter in connection with a Public Offering of the Common Stock, provided
that this Warrant is exercised immediately upon such Transfer and the shares of
Common Stock issued upon such exercise are sold by such underwriter as part of
such Public Offering and only in accordance with and subject to the provisions
of the Securities Act and the rules and regulations promulgated thereunder, or
(ii) to the extent that, in connection with any such transfer, the Warrantholder
first provides the Company with an opinion of counsel (which may be counsel for
the Company) to the effect that
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<PAGE>
such Transfer will be exempt from the registration and the prospectus delivery
requirements of the Securities Act and the registration or qualification
requirements of any applicable state securities laws, except that no such
opinion will be required with respect to a sale effected in accordance with Rule
144(k) or Rule 144A under the Securities Act or pursuant to an effective
registration statement under the Act.
(c) The Warrantholder understands that the Company shall not
be required to register any transfer of this Warrant or the Warrant Shares not
made in accordance with the restrictions contained herein and that the Company
may make a notation on its records or give instructions to any transfer agent of
this Warrant or the Warrant Shares in order to implement the restrictions on
transfer of this Warrant and the Warrant Shares as provided in paragraph
5.01(b).
ARTICLE VI
OTHER MATTERS
Section 6.01 Amendments and Waivers. The provisions of this Warrant,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waiver or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Holders of at least a majority-in-interest of the outstanding Warrants (based
upon the respective number of shares purchasable upon the exercise of the
Warrants). Whenever such consent is required hereunder, such consent may be
effected by any available legal means, including without limitation at a special
or regular meeting, by written consent or otherwise. Holders shall be bound by
any consent agreed to by a majority-in-interest of the Holders, whether or not
certificates representing such Warrants have been marked to indicate such
consent.
Section 6.02 Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware, notwithstanding
principles of conflicts of laws.
Section 6.03 Notice. Any notices or certificates by the Company to the
Holder and by the Holder to the Company shall be deemed delivered if in writing
and delivered in person or by certified mail (return receipt requested) to the
Holder addressed to it at the address which Holder has designated in writing to
the Company, and if to the Company, addressed to it at:
eResearchTechnology, Inc.
30 South 17th Street
Philadelphia, PA 19103
Attention: President and Chief Executive Officer
The Company may change its address by written notice to the Holder, and
the Holder may change its address by written notice to the Company.
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<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, _____________________________________________
hereby sells, assigns and transfers unto __________________________ the within
Warrant, together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint ________________________________ attorney, to
transfer said Warrant on the books of the within-named Company with respect to
the number of Warrant Shares set forth below, with full power of substitution in
the premises:
Name(s) of Number of
Assignee(s) Address Warrant Shares
----------- ------- --------------
And if said number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, a new Warrant is to be issued in the
name of said undersigned for the balance remaining of the Warrant Shares
represented by said Warrant.
Date:__________________
___________________________________
The above signature should
correspond exactly with the name on
the first page of this Warrant or
with the name of the assignee
appearing in the assignment form.
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
eResearch Technology, Inc.:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
_________________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $____________________.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay cash for any fractional share to:
(Please print Name, Address and Taxpayer I.D. No.)
Name____________________________________
Address_________________________________
________________________________________
Taxpayer I.D. No._______________________
And if said number of shares shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.
Signature_____________________________________
The above signature should
correspond exactly with the name on
the first page of this Warrant or
with the name of the assignee
appearing in the assignment form.
<PAGE>
EXHIBIT 10.44
PUT OPTION AGREEMENT
AGREEMENT, dated March 24, 2000, between Premier Research Worldwide,
Ltd, a Delaware corporation ("Company"), and Communicade Inc., a Delaware
corporation (the "Optionee").
WHEREAS, the Optionee on this date is acquiring 95,000 shares of the
Series A Preferred Stock (the "Preferred Shares") of eResearch Technology, Inc.,
a Delaware corporation which heretofore has been a wholly-owned subsidiary of
the Company ("eRT") pursuant to the terms of a Series A Preferred Stock Purchase
Agreement among the Company, Optionee and eRT (the "Purchase Agreement"); and
WHEREAS, it is a precondition of Optionee's purchase of the Preferred
Shares under the Purchase Agreement that the Company grant to the Optionee a
limited right to cause the Company to purchase the Preferred Shares, during the
period, at the price and on the terms hereinafter provided.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Grant of Put Option. (a) The Company hereby grants to the Optionee
an option (the "Option") to require the Company to purchase all or any portion
of the Preferred Shares at a purchase price of $100 per share (the "Option
Price"), which Option must be exercised, if at all, during the period commencing
on the first anniversary of the date of this Agreement and ending on the second
anniversary of the date of this Agreement (the "Option Period"). The Option
Price payable upon any exercise of the Option may be satisfied, at the election
of the Company, either in immediately available funds or by the issuance to
Optionee of the number of shares of the Company's Common Stock (the "Company
Common Stock") determined in accordance with subparagraph (b) below. The Option
shall terminate and be of no further force or effect in the event that prior to
the exercise of the Option the Preferred Shares are converted into the Common
Stock of eRT.
(b) In the event the Company chooses to satisfy the Option Price
payable with respect to an exercise of the Option by the issuance of Company
Common Stock, the number of shares so issuable to the Optionee shall equal the
result (rounded to the nearest whole number of shares) of (i) the aggregate
Option Price payable with respect to such exercise, divided by (ii) the average
closing price of the Company Common Stock on the NASDAQ National Market System
during the 20 consecutive business days on which such exchange is open for
trading, ending with the business day preceding the date of delivery of the
written notice of exercise pursuant to paragraph 2 below.
2. Exercise of Option. Optionee may exercise the Option, in whole or in
part, at any time or from time to time during the Option Period, by delivering
to the Company written notice of exercise, which notice shall specify the number
of Preferred Shares to be purchased by the Company. The closing of the sale and
purchase of the Preferred Shares pursuant to such an
<PAGE>
exercise of the Option (the "Closing") will occur within 15 days following the
delivery of such notice of exercise. At the Closing (i) the Optionee will
deliver to the Company the certificate or certificates representing the
Preferred Shares to be acquired by Company, accompanied by stock powers executed
in blank and otherwise will take such action as may be reasonably necessary in
order to transfer to the Company good and marketable title to such Preferred
Shares, free and clear of all claims, liens and encumbrances of any nature, and
(ii) the Company will at its election satisfy the Option Price either by (x)
wire transfer of the amount thereof in immediately available funds to Optionee's
designated bank account or (y) delivery to the Optionee of a certificate,
registered in the name of Optionee, representing the number of shares of Company
Common Stock determined pursuant to paragraph 1(b) above.
3. Representations of Optionee. Optionee represents and warrants to the
Company as follows:
(a) Optionee has full power, authority and capacity to execute and
deliver this Agreement, and this Agreement is the valid and binding obligation
of Optionee, enforceable according to its terms.
(b) Upon any exercise of the Option, Optionee will be the legal and
beneficial owner of, and shall at Closing convey to the Company hereunder good
and marketable title to, the Preferred Shares being sold pursuant to such
exercise, free and clear of any claim, lien, option, charge or encumbrance of
any nature whatsoever. Upon any exercise of the Option, Optionee will have full
power, authority and capacity to sell the Preferred Shares being sold pursuant
to such exercise to Company in accordance with the terms and provisions of this
Agreement.
(c) Upon any exercise of the Option, it will acquire the Company
Common Stock 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; it
understands that the Company Common Stock will not have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), by reason of its
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof, and accordingly the Company
Common Stock must be held indefinitely unless a subsequent disposition thereof
is (i) registered under the Securities Act or (ii) exempt from such
registration. The Company Common Stock will bear a legend indicating its
restricted status and the Company will make a notation on its transfer books to
such effect. Optionee further understands that the exemption from registration
afforded by Rule 144 under the Securities Act depends on the satisfaction of
various conditions and that, if applicable, Rule 144 affords the basis of sales
of the Company Common Stock in limited amounts under certain conditions.
4. Representations of Company. The Company represents and warrants to
Optionee as follows:
(a) The Company has full power, authority and capacity to issue the
shares of Company Common Stock upon exercise of the Option in accordance with
the terms and provisions of this Agreement and to execute and deliver this
Agreement, and this Agreement is the valid and binding obligation of Company,
enforceable according to its terms.
2
<PAGE>
(b) The Company Common Stock issuable upon exercise of the Option
has been duly and validly reserved for issuance, and upon issuance in accordance
with the terms of this Agreement, will be duly and validly issued, fully paid
and non-assessable. Upon such issuance, Optionee shall acquire good and
marketable title to such shares of Company Common Stock, free and clear of any
claim, lien, option, charge or encumbrance of any nature whatsoever other than
restrictions on transfer under applicable state and federal securities laws.
(c) The Company is, and for so long as the Option granted hereunder
remains outstanding will continue to be, in compliance with the reporting
requirements of Rule 144 of the Securities and Exchange Commission, the
Securities Act and the Securities Exchange Act of 1934, as amended.
5. Miscellaneous. All references to share prices and amounts herein
shall be equitably adjusted to reflect stock splits, stock dividends,
recapitalization and similar changes affecting the capital stock of the Company
or eRT, as the case may be. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their successors and assigns. This
Agreement shall be construed in accordance with the laws of the State of
Delaware. This Agreement may be executed in any number of counterparts each of
which shall constitute one and the same instrument.
IN WITNESS THEREOF, the parties have executed this Agreement as of the
date first above written.
PREMIER RESEARCH WORLDWIDE, LTD.
By:
---------------------------------------
Name:
Title:
COMMUNICADE INC.
By:
---------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.45
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT
WITH A VIEW TO THE DISTRIBUTION THEREOF AND, EXCEPT AS STATED IN AN AGREEMENT
BETWEEN THE HOLDER OF THIS CERTIFICATE AND THE ISSUER CORPORATION, SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR THE ISSUER
CORPORATION RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE ISSUER
CORPORATION) STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
VOID AFTER 5:00 P.M., PHILADELPHIA TIME, ON THE SECOND ANNIVERSARY OF THE DATE
ON WHICH ERESEARCHTECHNOLOGY, INC. CONSUMMATES ITS INITIAL PUBLIC OFFERING OR IF
NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., PHILADELPHIA TIME, ON THE
NEXT FOLLOWING BUSINESS DAY.
NO. 2
WARRANT TO PURCHASE
SHARES OF
COMMON STOCK
OF
ERESEARCHTECHNOLOGY, INC.
TRANSFER RESTRICTED -- SEE SECTION 5.01
This certifies that, for good and valuable consideration, Scirex
Corporation or its permitted successors and assignees (the "Warrantholder"), is
entitled to purchase from eResearchTechnology, Inc., a Delaware corporation (the
"Company"), subject to the terms and conditions hereof, at any time on or after
the date on which the Company consummates its initial Public Offering, and
before 5:00 p.m., Philadelphia time, on the second anniversary thereof (or, if
such day is not a Business Day, at or before 5:00 p.m., Philadelphia time, on
the next following Business Day), the Warrant Shares for an aggregate Exercise
Price of $1,000,000. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment as provided in Article III hereof.
<PAGE>
ARTICLE I
Section 1.01 Definition of Terms. As used in this Warrant, the
following capitalized terms shall have the following respective meanings:
(a) Business Day: A day other than a Saturday, Sunday or other
day on which banks in the Commonwealth of Pennsylvania are authorized by law to
remain closed.
(b) Common Stock: Common Stock, $.01 par value per share, of
the Company.
(c) Exercise Price: The price at which the Company's Common
Stock is sold to the public in the Company's initial Public Offering per Warrant
Share, as such price may be adjusted from time to time pursuant to Article III
hereof.
(d) Expiration Date: 5:00 p.m., Philadelphia time, on the
second anniversary of the date on which the Company consummates its initial
Public Offering or if such day is not a Business Day, the next succeeding day
which is a Business Day.
(e) Holder: A holder of outstanding Warrants.
(f) Person: An individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or any department
or agency thereof.
(g) Public Offering: A public offering of any of the Company's
Common Stock pursuant to a registration statement under the Securities Act.
(h) Securities Act: The Securities Act of 1933, as amended.
(i) Transfer: See Section 5.01.
(j) Warrant: This Warrant and all other warrants that may be
issued in its place.
(k) Warrantholder: The person or entity to whom this Warrant
is originally issued, or any successor in interest thereto, or any assignee or
transferee thereof, in whose name this Warrant is registered upon the books to
be maintained by the Company for that purpose.
(l) Warrant Shares: The shares of Common Stock purchasable
upon exercise of the Warrants, which shall initially equal $1,000,000 divided by
the Exercise Price, subject to adjustment as provided in Article III hereof.
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<PAGE>
ARTICLE II
DURATION AND EXERCISE OF WARRANT
Section 2.01 Duration of Warrant. The Warrantholder may exercise this
Warrant at any time and from time to time after the date on which the Company
consummates its initial Public Offering and before 5:00 p.m., Philadelphia time,
on the Expiration Date. If this Warrant is not exercised on or before the
Expiration Date, it shall become void, and all rights hereunder shall thereupon
cease.
(a) Exercise of Warrant.
(i) The Warrantholder may exercise this Warrant, in
whole or in part, by presentation and surrender of this Warrant to the Company
at its corporate office at 30 South 17th Street, Philadelphia, PA 19103, or at
the office of its stock transfer agent, if any, with the Subscription Form
annexed hereto duly executed and accompanied by payment of the full Exercise
Price for each Warrant Share to be purchased.
(ii) Upon receipt of this Warrant with the
Subscription Form duly executed and accompanied by payment of the aggregate
Exercise Price for the Warrant Shares for which this Warrant is then being
exercised, the Company shall cause to be issued certificates for the total
number of whole shares of Common Stock for which this Warrant is being exercised
(adjusted to reflect the effect of the provisions contained in Article III
hereof, if any) in such denominations as are requested for delivery to the
Warrantholder, and the Company shall thereupon deliver such certificates to the
Warrantholder. The Warrantholder shall be deemed to be the holder of record of
the Warrant Shares issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Warrantholder. If at the time this Warrant is exercised, a registration
statement is not in effect to register under the Securities Act the Warrant
Shares issuable upon exercise of this Warrant, the Company may require the
Warrantholder to make such investment intent representations, and to provide the
Company with an opinion of counsel (which may be counsel for the Company) and
may place such legends on certificates representing the Warrant Shares, as may
be reasonably required in the opinion of counsel to the Company to permit the
Warrant Shares to be issued without such registration.
(iii) Notwithstanding anything to the contrary set
forth herein, upon exercise of this Warrant, the Warrantholder may, at its
election, either (i) exercise this Warrant by paying to the Company an amount
equal to the aggregate Exercise Price of the shares being purchased or (ii)
receive shares of Common Stock equal to the value (as determined below) of this
Warrant, in which event the Company shall issue to the Warrantholder a number of
shares of Common Stock computed using the following formula:
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<PAGE>
X = Y(A-B)
------
A
Where: X = the number of shares to be issued to the Warrantholder.
Y = the number of shares purchasable under this Warrant
with respect to which the Exercise Price is to be
paid.
A = the current fair market value (as of the exercise
date) of one share of the Company's Common Stock.
B = the Exercise Price then in effect.
As used herein, current fair market value of the Company's Common Stock shall
mean with respect to each share of Common Stock the average of the closing
prices of the Company's Common Stock sold on all securities exchanges on which
the Common Stock may at the time be listed, or, if there have been no sales on
any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day the
Common Stock is not so listed, the average of the representative bid and asked
prices quoted in the Nasdaq Stock Market as of 4:00 p.m., New York City time,
or, if on any day the Common Stock is not quoted in the Nasdaq Stock Market, the
average of the highest bid and lowest asked price on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over the 20 consecutive business days prior to the day as of which the current
fair market value of Common Stock is being determined. If at any time the Common
Stock is not listed on any securities exchange or quoted in the Nasdaq Stock
Market or the over-the-counter market, the current fair market value shall be
the highest price per share that the Company could obtain from a willing buyer
(not a current employee or director) for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good faith by the
Board of Directors of the Company, unless the Warrantholder shall purchase such
shares in conjunction with an underwritten public offering of the Company's
Common Stock pursuant to a registration statement filed under the Securities Act
of 1933, in which case the fair market value shall be the price per share at
which the Common Stock is sold to the public in such offering.
(iv) In case the Warrantholder shall exercise this Warrant
with respect to less than all of the Warrant Shares that may be purchased under
this Warrant, the Company shall execute a new warrant in the form of this
Warrant for the balance of such Warrant Shares and deliver such new warrant to
the Warrantholder.
Section 2.02 Reservation of Shares. The Company hereby agrees that at
all times there shall be reserved for issuance and delivery upon exercise of
this Warrant such number of shares of Common Stock or other shares of capital
stock of the Company from time to time issuable upon exercise of this Warrant.
All such shares shall be duly authorized, and when issued upon such exercise,
shall be validly issued, fully paid and nonassessable, free and clear of all
liens, security
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<PAGE>
interests, charges and other encumbrances or restrictions on sale and free and
clear of all preemptive rights.
Section 2.03 Fractional Shares. The Company shall not be required to
issue any fraction of a share of its capital stock in connection with the
exercise of this Warrant, and in any case where the Warrantholder would, except
for the provisions of this Section 2.04, be entitled under the terms of this
Warrant to receive a fraction of a share upon the exercise of this Warrant, the
Company shall, upon the exercise of this Warrant and receipt of the Exercise
Price, issue only the largest number of whole shares purchasable upon exercise
of this Warrant. The Company shall not be required to make any cash or other
adjustment in respect of such fraction of a share to which the Warrantholder
would otherwise be entitled, but shall return to the Warrantholder that portion
of the Exercise Price that represents such fraction of a share.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK PURCHASABLE
AND OF EXERCISE PRICE
The Exercise Price and the number and kind of Warrant Shares shall be
subject to adjustment from time to time upon the happening of certain events as
provided in this Article III.
Section 3.01 Mechanical Adjustment.
(a) If at any time prior to the exercise of this Warrant in
full, the Company shall (i) declare a dividend or make a distribution on the
Common Stock payable in shares of its capital stock (whether shares of Common
Stock or of capital stock of any other class); (ii) subdivide, reclassify or
recapitalize its outstanding Common Stock into a greater number of shares; (iii)
combine, reclassify or recapitalize its outstanding Common Stock into a smaller
number of shares; or (iv) issue any shares of its capital stock by
reclassification of its Common Stock (including any such reclassification in
connection with a consolidation or a merger in which the Company is the
continuing corporation), the Exercise Price in effect at the time of the record
date of such dividend, distribution, subdivision, combination, reclassification
or recapitalization shall be adjusted so that the Warrantholder shall be
entitled to receive the aggregate number and kind of shares which, if this
Warrant had been exercised in full immediately prior to such event, it would
have owned by virtue of such exercise and been entitled to receive by virtue of
such dividend, distribution, subdivision, combination, reclassification or
recapitalization. Any adjustment required by this paragraph 3.01(a) shall be
made successively immediately after the record date, in the case of a dividend
or distribution, or the effective date, in the case of a subdivision,
combination, recapitalization or reclassification, to allow the purchase of such
aggregate number and kind of shares.
(b) Whenever the Exercise Price payable upon exercise of this
Warrant is adjusted pursuant to paragraph (a) of this Section 3.01, the Warrant
Shares shall simultaneously be adjusted by multiplying the number of Warrant
Shares initially issuable upon exercise of each
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<PAGE>
Warrant by the Exercise Price in effect on the date thereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(c) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent in such price; provided, however, that any adjustments which by reason of
this paragraph (c) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 3.01 shall be made to the nearest cent or to the nearest one-hundredth
of a share, as the case may be. Notwithstanding anything in this Section 3.01 to
the contrary, the Exercise Price shall not be reduced to less than the then
existing par value of the Common Stock as a result of any adjustment made
hereunder.
Section 3.02 Notice of Adjustment. Whenever the number of Warrant
Shares or the Exercise Price is adjusted as herein provided, the Company shall
prepare and deliver to the Warrantholder a certificate signed by its President,
setting forth the adjusted number of shares purchasable upon the exercise of
this Warrant and the Exercise Price of such shares after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which adjustment was made.
Section 3.03 No Adjustment for Cash Dividends. No adjustment in respect
of any cash dividends shall be made during the term of this Warrant.
Section 3.04 Preservation of Purchase Rights in Certain Transactions.
In case of any reclassification, capital reorganization or other change of
outstanding shares of Common Stock (other than subdivision or combination of the
outstanding Common Stock and other than a change in the par value of the Common
Stock) or in case of any consolidation or merger of the Company with or into
another corporation (other than a merger with a subsidiary in which the Company
is the continuing corporation and that does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the class issuable upon exercise of this Warrant) or in the case of any sale,
lease, transfer or conveyance to another corporation of the property and assets
of the Company as an entirety or substantially as an entirety, the Company
shall, as a condition precedent to such transaction, cause such successor or
purchasing corporation, as the case may be, to execute with the Warrantholder an
agreement granting the Warrantholder the right thereafter, upon payment of the
Exercise Price in effect immediately prior to such action, to receive upon
exercise of this Warrant the kind and amount of shares and other securities and
property that it would have owned or have been entitled to receive after the
happening of such reclassification, change, consolidation, merger, sale or
conveyance had this Warrant been exercised immediately prior to such action.
Such agreement shall provide for adjustments in respect of such shares of stock
and other securities and property, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article III. In the event
that in connection with any such reclassification, capital reorganization,
change, consolidation, merger, sale or conveyance, additional shares of Common
Stock shall be issued in exchange, conversion, substitution or payment, in whole
or in part, for, or of, a security of the Company other than Common Stock, any
such issue shall be treated as an issue of Common Stock covered by the
provisions of this Article III. The provisions
- 6 -
<PAGE>
of this Section 3.04 shall similarly apply to successive reclassifications,
capital reorganizations, consolidations, mergers, sales or conveyances.
Section 3.05 Dissolution or Liquidation. In the event of any proposed
distribution of the assets of the Company in dissolution or liquidation (except
under circumstances when Section 3.04 shall be applicable), the Company shall
mail notice thereof to the Warrantholder and shall make no distribution to
stockholders until the expiration of 30 days from the date of mailing of the
aforesaid notice and, in any such case, the Warrantholder may exercise the
purchase rights with respect to this Warrant within 30 days from the date of
mailing such notice and all rights herein granted not so exercised within such
30-day period shall thereafter become null and void.
Section 3.06 Form of Warrant After Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Exercise Price or
the number or kind of the Warrant Shares, and Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in this Warrant, as initially issued.
Section 3.07 Treatment of Warrantholder. Prior to due presentment for
registration of transfer of this Warrant, the Company may deem and treat the
Warrantholder as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing hereon) for all purposes and shall not be
affected by any notice to the contrary.
ARTICLE IV
OTHER PROVISIONS RELATING TO
RIGHTS OF WARRANTHOLDER
Section 4.01 No Rights as Stockholders; Notice to Warrantholders.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or its transferees the right to vote or to receive dividends or to
consent or to receive notice as a stockholder in respect of any meeting of
stockholders for the election of directors of the Company or of any other
matter, or any rights whatsoever as stockholders of the Company. The Company
shall give notice to the Warrantholder by certified mail if at any time prior to
the expiration or exercise in full of the Warrants, any of the following events
shall occur:
(a) the Company shall authorize the payment of any dividend
payable in any securities upon shares of Common Stock or authorize the making of
any non-cash distribution to the holders of shares of Common Stock;
(b) the Company shall authorize the issuance to all holders of
Common Stock of any additional shares of Common Stock or of rights, options or
warrants to subscribe for or purchase Common Stock or of any other subscription
rights, options or warrants;
- 7 -
<PAGE>
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale or conveyance of
the property of the Company as an entirety or substantially as an entirety); or
(d) a capital reorganization or reclassification of the Common
Stock (other than a subdivision or combination of the outstanding Common Stock
and other than a change in the par value of the Common Stock) or any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and that does not result in any reclassification or change of Common
Stock outstanding) or in the case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially an
entirety.
Such giving of notice shall be initiated (i) at least ten Business Days prior to
the date fixed as a record date or effective date or the date of closing of the
Company's stock transfer books for the determination of the stockholders
entitled to such dividend, distribution, or subscription rights, or for the
determination of the stockholders entitled to vote on such proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of the closing of the stock
transfer books, as the case may be. Failure to provide such notice shall not
affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or proposed merger, consolidation, sale,
conveyance, dissolution, liquidation or winding up.
Section 4.02 Lost, Stolen, Mutilated or Destroyed Warrants. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may in its discretion impose (which shall, in
the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as, and in substitution for, this
Warrant.
Section 4.03 Payment of Taxes. The Company shall pay all stamp taxes
attributable to the initial issuance of Warrant Shares issuable upon any
exercise of the Warrant or issuable pursuant to Section 3, excluding any tax or
taxes which may be payable because of the transfer involved in the issuance or
delivery of any certificates for Warrant Shares in a name other than that of the
exercising Warrantholder in respect of which such Warrant Shares are issued.
ARTICLE V
RESTRICTIONS ON TRANSFER OF WARRANTS
Section 5.01 Restrictions on Transfer.
(a) The Warrantholder understands and agrees that neither this
Warrant nor the Warrant Shares have been registered under the Securities Act,
and that accordingly they will not be transferable except as permitted under
various exemptions contained in the Securities Act, or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act.
- 8 -
<PAGE>
(b) Neither this Warrant nor the Warrant Shares may be
disposed of or encumbered (any such action, a "Transfer"), except (i) to any
underwriter in connection with a Public Offering of the Common Stock, provided
that this Warrant is exercised immediately upon such Transfer and the shares of
Common Stock issued upon such exercise are sold by such underwriter as part of
such Public Offering and only in accordance with and subject to the provisions
of the Securities Act and the rules and regulations promulgated thereunder, or
(ii) to the extent that, in connection with any such transfer, the Warrantholder
first provides the Company with an opinion of counsel (which may be counsel for
the Company) to the effect that such Transfer will be exempt from the
registration and the prospectus delivery requirements of the Securities Act and
the registration or qualification requirements of any applicable state
securities laws, except that no such opinion will be required with respect to a
sale effected in accordance with Rule 144(k) or Rule 144A under the Securities
Act or pursuant to an effective registration statement under the Act.
(c) The Warrantholder understands that the Company shall not
be required to register any transfer of this Warrant or the Warrant Shares not
made in accordance with the restrictions contained herein and that the Company
may make a notation on its records or give instructions to any transfer agent of
this Warrant or the Warrant Shares in order to implement the restrictions on
transfer of this Warrant and the Warrant Shares as provided in paragraph
5.01(b).
ARTICLE VI
OTHER MATTERS
Section 6.01 Amendments and Waivers. The provisions of this Warrant,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waiver or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Holders of at least a majority-in-interest of the outstanding Warrants (based
upon the respective number of shares purchasable upon the exercise of the
Warrants). Whenever such consent is required hereunder, such consent may be
effected by any available legal means, including without limitation at a special
or regular meeting, by written consent or otherwise. Holders shall be bound by
any consent agreed to by a majority-in-interest of the Holders, whether or not
certificates representing such Warrants have been marked to indicate such
consent.
Section 6.02 Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware, notwithstanding
principles of conflicts of laws.
Section 6.03 Notice. Any notices or certificates by the Company to the
Holder and by the Holder to the Company shall be deemed delivered if in writing
and delivered in person or by certified mail (return receipt requested) to the
Holder addressed to it at the address which Holder has designated in writing to
the Company, and if to the Company, addressed to it at:
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<PAGE>
eResearchTechnology, Inc.
30 South 17th Street
Philadelphia, PA 19103
Attention: President and Chief Executive Officer
The Company may change its address by written notice to the Holder, and
the Holder may change its address by written notice to the Company.
Section 6.04 Reports under the Securities Exchange Act of 1934. With a
view to making available to the Holder the benefits of Rule 144 promulgated
under the Securities Act and any other rule or regulation of the Securities and
Exchange Commission (the "SEC") that may at any time permit a Holder to sel
securities of the Company to the public without registration, the Company agrees
to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after 90 days after the
effective date of the first registration statement filed by the Company for the
offering of its Common Stock to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Securities
Exchange Act of 1934; and
(c) furnish to any Holder, so long as the Holder owns any
Warrant Shares, forthwith upon request (i) a written statement by the Company
that it has complied with the reporting requirements of SEC Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for the offering of its Common Stock to the general
public), the Securities Act and the Securities Exchange Act of 1934 (at any time
after it has become subject to such reporting requirements), (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company and (iii) such other information as may be
reasonably requested in availing any Holder of any rule or regulation of the SEC
which permits the selling of any such Warrant Shares without registration.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
as of the 27th day of March, 2000.
eResearchTechnology, Inc.
By: /s/ Bruce Johnson
-----------------------
Bruce Johnson,
Vice President and
Chief Financial Officer
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<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, _____________________________________________
hereby sells, assigns and transfers unto __________________________ the within
Warrant, together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint ________________________________ attorney, to
transfer said Warrant on the books of the within-named Company with respect to
the number of Warrant Shares set forth below, with full power of substitution in
the premises:
Name(s) of Number of
Assignee(s) Address Warrant Shares
----------- ------- --------------
And if said number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, a new Warrant is to be issued in the
name of said undersigned for the balance remaining of the Warrant Shares
represented by said Warrant.
Date:__________________
-----------------------------
The above signature should
correspond exactly with the
name on the first page of this
Warrant or with the name of
the assignee appearing in the
assignment form.
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
eResearchTechnology, Inc.:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
_________________ shares of Common Stock, as provided for therein, and tenders
herewith payment of the purchase price in full in the form of (i) cash or a
certified or official bank check in the amount of $____________________ and/or
(ii) shares of Common Stock with a current fair market value, calculated in
accordance with Section 2.01(a)(iii) of the within Warrant, of $ ..
Please issue a certificate or certificates for such Common Stock in the
name of, and pay cash for any fractional share to:
(Please print Name, Address and Taxpayer I.D. No.)
Name
---------------------------------------
Address
-----------------------------------
Taxpayer I.D. No.
--------------------------
And if said number of shares shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.
Signature
-----------------------------
The above signature should
correspond exactly with the
name on the first page of this
Warrant or with the name of
the assignee appearing in the
assignment form.
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 8th day of March, 2000,
by and between Medical Advisory Systems, Inc. (the "Seller"), a Delaware
corporation; and Premier Research Worldwide, Ltd. (the "Buyer"), a Delaware
corporation. The Seller and the Buyer are referred to herein collectively as the
"Parties."
Recitals:
The Seller wishes to sell to the Buyer, and the Buyer wishes to
purchase from the Seller, 550,000 shares of the Seller's Common Stock, par value
$.005 (the "Common Stock"), in accordance with the terms and provisions of this
Agreement.
The Seller's Common Stock is registered under the Securities Exchange
Act of 1934 (the "Exchange Act") and listed on the NASDAQ/AMEX.
NOW, THEREFORE, the Parties hereto, intending to be legally bound
hereby, agree as follows:
1. Definitions.
"Accredited Investor" has the meaning set forth in Regulation
D promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
"Audit" means any audit, assessment or other examination
relating to Taxes by any Tax Authority or any judicial or administrative
proceedings relating to Taxes.
"COBRA" means the requirements of Part 6 of Subtitle I of
ERISA and Code Section 4980B.
"Code" means the Internal Revenue Code of 1986, as amended.
"Environmental Laws" shall mean all federal, state, local and
foreign statutes, regulations, ordinances and other provisions having the force
and effect of laws, all judicial and administrative orders and determinations,
all contractual obligations and all common law concerning pollution or
<PAGE>
protection of the environment, or the impact of the environment on human health,
including without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenals, noise or radiation, each as amended and as now or hereafter in
effect.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"eRT" means eResearch Technology, Inc., a wholly owned
subsidiary of the Buyer.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Health and Safety Requirements" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force and effect of laws, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, and worker health and safety, including without limitation
all those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenals, noise or radiation, each as
amended and as now or hereafter in effect.
"Knowledge" means actual knowledge.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether future or become
due), including any liability for Taxes.
"License Agreement" means the Master Software License
Agreement between eRT and the Seller.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended.
2
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge or other security interest, other than (a) liens for Taxes
not yet due and payable, (b) purchase money liens and liens securing rental
payments under capital lease arrangements, and (c) other liens arising in the
Ordinary Course of Business and not incurred in connection with the borrowing of
money.
"Service Agreement" means Service, Sales and Co-Marketing
Agreement dated as of April 1, 2000 between Buyer's wholly owned subsidiary, eRT
and the Seller.
"Tax" means any federal, state, local or foreign, income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), custom duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Authority" means the Internal Revenue Service and any
other domestic or foreign governmental authority responsible for the
administration of any Taxes.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof required to
be filed with any Tax Authority.
2. Purchase and Sale; Use of Proceeds.
(a) Number of Shares. The Seller is selling to the Buyer, and
the Buyer is purchasing from the Seller, 550,000 shares of the Seller's Common
Stock, representing, upon completion of the transaction, approximately 11.1% of
the Seller's issued and outstanding Common Stock. The shares being purchased and
sold pursuant to this Agreement are hereinafter sometimes referred to
individually as a "Share" and collectively as the "Shares."
(b) Purchase Price. The aggregate purchase price for the
Shares (the "Purchase Price") shall be $5,775,000. The Buyer agrees to pay the
Seller the Purchase Price in cash payable by wire transfer or delivery of other
immediately available funds.
(c) Use of Proceeds. Seller shall use the proceeds from the
sale of the Shares as follows: (i) $2,700,000 under the License Agreement; (ii)
for infrastructure agreed upon in the Service Agreement ; and (iii) the balance
for working capital and other corporate purposes.
3. Right of First Refusal.
(a) Grant. Commencing on the Closing Date, the Buyer,
including its assignees, and any of its majority owned subsidiaries and its
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assignees, is hereby granted the right of first refusal (the "First Refusal
Right") as set forth in this Section 3. In the event that a third party or group
seeks to acquire the Seller or substantially all of Seller's business or assets
by tender offer, merger, asset sale, stock sale or purchase, or other business
combination (collectively, referred to as a "Sale Event"), which MAS has deemed
an acceptable offer (the "Sale Offer") as determined by Board of Directors of
MAS, the Buyer shall have the right to acquire the Seller, or such portion, as
the case may be, in accordance with the terms of the Sale Offer, as more fully
described in 3(c) hereof This First Refusal Right shall terminate and expire at
the close of business on September 15, 2000.
(b) Notice of a Sale Offer. In the event of a Sale Offer, the
Seller shall promptly notify the Buyer, in writing, of the terms of the Sale
Offer, including the purchase price, the other material terms of the transaction
and the identity of the third party offeror (the "Notice of Offer"). The date
that the Buyer receives the Notice of Offer is hereafter defined as the "Notice
Date."
(c) Exercise of First Refusal Right. Buyer shall have the
First Refusal Right with respect to a Sale Offer. Buyer shall have thirty (30)
calendar days commencing on the calendar day following receipt of Buyer of the
Notice of Offer within which to inform Seller in writing that it exercises its
First Refusal Right and will enter into the Sale Event on substantially similar
structural terms and economic conditions as set forth in the Notice of Offer. In
the event Buyer notifies Seller of its exercise of its First Refusal Right for a
Sale Event, Buyer and Seller shall cooperate in good faith in negotiating and
executing customary definitive documentation and in taking such other action as
is reasonably necessary and customary to consummate the Sale Event on the same
terms and conditions as set forth in the Notice of Offer.
(d) Non-Exercise of the First Refusal Right. In the event (i)
the Seller does not deliver the Exercise Notice to the Seller prior to the
expiration of the 30-day exercise period Buyer's First Refusal Right shall
terminate and be of no further force and effect with respect to the Sale Event
which is the subject of the Notice of Offer, but will remain in effect with
respect to any other Sale Event, including any material modification of a Sale
Event which is the subject of a Notice of Offer with respect to which Buyer
previously elected not to exercise its First Refusal Right.
4. Closing.
(a) The Closing. The closing of the purchase of the Shares
contemplated by this Agreement (the "Closing") shall take place at the office of
the Buyer, on March 21, 2000, or at such other place, time and date as the Buyer
and the Seller may mutually determine (the "Closing Date").
(b) Deliveries at the Closing. At Closing:
(i) Seller shall deliver to the Buyer a certificate
of most recent practicable date as to the corporate good standing of Seller
issued by the Secretary of State of Delaware;
(ii) Seller shall deliver to Buyer a certified copy
of its Articles of Incorporation and Bylaws and resolutions of its Board of
Directors authorizing and approving all matters in connection with the Agreement
and the transactions contemplated thereby;
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(iii) Seller's counsel shall deliver to Buyer an
opinion in the form and substance acceptable to the Buyer and its counsel, dated
as of the Closing Date;
(iv) Seller and eRT shall execute and deliver the
Licensing Agreement;
(v) Seller and eRT shall execute and deliver the
Services Agreement;
(vi) Seller shall deliver to Buyer one certificate
representing the Shares; and
(vii) Buyer shall deliver the consideration specified
in Section 2(b) above.
5. Representations and Warranties of the Seller. Subject to the
disclosures set forth on Seller's disclosure schedule, dated as of the date
hereof and delivered herewith ("Seller Disclosure Schedule"), Seller represents
and warrants to the Buyer as set forth in this Section 5. The inclusion of
information on Seller's Disclosure Schedule shall be deemed adequate to disclose
an exception to a representation or warranty made therein if the information
contained thereon would provide notice to a reasonable person of the existence
of a fact or circumstance which would be contrary to the substance of the
applicable representation and/or warranty. Subject to the foregoing, Seller
represents and warrants to the Buyer as follows:
(a) Validity of Issuance. The Shares being sold by the Seller
hereunder have been duly authorized, and, upon the issuance of such Shares to
the Buyer in accordance with the terms and provisions of this Agreement, such
Shares will be validly issued, fully paid and nonassessable.
(b) Organization, Qualification and Corporate Power. The
Seller (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
corporate power and authority to own its property and assets and to transact the
business in which it is engaged and (iii) is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required except where any failure to be so qualified would not
have a material adverse effect either individually or in the aggregate on
Seller. The Seller has full corporate power and authority and all licenses,
permits and authorizations necessary to carry on the business in which it is
engaged and to own and use the properties owned and used by it. The Seller has
delivered to the Buyer correct and complete copies of its certificate of
incorporation and bylaws. The minute books (containing the records of meetings
of the stockholders, the board of directors and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Seller are complete, correct and accurate.
(c) Authorization, Validity and Effect. The Seller has the
requisite corporate power to execute, deliver and perform the terms and
provisions of this Agreement and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement by the
Seller. This Agreement constitutes, and all agreements and documents described
herein (when executed and delivered pursuant hereto for value received) will
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constitute, the valid and binding obligations of Seller enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditor's rights and
general principles of equity.
(d) No Consent Required. No authorization, consent or approval
of, or exemption by, any governmental or public body or authority is required to
authorize, or is required in connection with, the execution, delivery and
performance of any of this Agreement, or the taking of any action contemplated
hereby, by the Seller, except such authorizations, consents or approvals which
the failure of Seller to obtain will not either individually or in the aggregate
have a material adverse affect on the financial condition or results of
operations of Seller.
(e) No Defaults. No material default exists under any
agreement to which the Seller is a party or by which it is bound, which default,
if not cured, would have a material adverse effect upon the financial condition
or the results of operations of the Seller.
(f) No Violation. Neither the execution and delivery of this
Agreement, nor compliance with any of the terms and provisions hereof, nor the
consummation of any of the transactions herein contemplated will: (i) violate
any law, statute, regulation, rule, order, writ, injunction, judgment, ruling,
charge, decree or other restriction of any court or governmental department,
commission, board, bureau, agency or instrumentality applicable to the Seller,
or (ii) conflict or be inconsistent with, or result in any breach of, any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any lien, charge or encumbrance upon any of the property or assets of the Seller
pursuant to the terms of any indenture, mortgage, deed of trust, agreement or
other instrument, or result in the acceleration of, create any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Seller is a party or by which it may be bound or to which it may be subject,
or (iii) violate any provision of any of the organizational documents of the
Seller, including but not limited to its certificate of incorporation and
bylaws.
(g) Capitalization. The total number of shares of capital
stock the Seller is authorized to issue is 11,000,000 shares, consisting of
10,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock having
a par value of $1.75 per share (the "Preferred Stock"). As of Closing Date
4,506,240 shares of Common Stock were issued; outstanding and 50,000 shares of
Common Stock were held in Treasury; and options to purchase an aggregate of
550,000 were outstanding. As of the Closing Date, none of the shares of
Preferred Stock are issued or outstanding.
All of the issued and outstanding shares of Common Stock of the Seller
have been duly authorized, are validly issued, fully paid, and nonassessable,
and are held of record by 174 Seller's Disclosure Schedule, there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Seller to issue, sell or otherwise cause to become
outstanding any of its capital. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar rights with respect
to the Seller. There are no voting trusts, proxies or other arrangements or
understandings with respect to the voting capital stock of the Seller.
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(h) Subsidiaries. The Seller does not own, directly or
indirectly, any equity or other ownership interest in any subsidiary,
corporation, partnership, joint venture or other entity.
(i) Brokers' Fees. The Seller has no liability or obligation
to pay any commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
obligated.
(j) SEC Filings; SEC Financial Statements.
(i) The Seller has filed all forms, reports and
documents required to be filed with the SEC since December 31, 1994, and has
heretofore made available to Buyer, in the form filed with the SEC, its (A)
annual reports on Form 10-KSB for the fiscal years ended October 31, 1999 and
1998 (including all amendments prior to the date hereof), (B) all proxy
statements relating to the Seller's meetings of its stockholders (whether annual
or special) held since October 31, 1998 and (C) all other forms, reports,
registrations, schedules, statements and other documents required to be filed by
the Seller since October 31, 1998 with the SEC pursuant to the Exchange Act or
the Securities Act (as such documents referred to herein have been amended since
the time of their filing, collectively, the "SEC Reports"). As of their
respective dates, or, if amended, as of the date of the last such amendment, the
SEC Reports, including without limitation, any financial statements or schedules
included therein (the "SEC Financial Statements") (A) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations of the SEC
promulgated thereunder, and (B) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(ii) The SEC Financial Statements have been prepared
from, and are in accordance with the books and records of the Seller, comply in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto) and fairly
presented the financial position of the Seller and its results of operation,
cash flows and changes in financial position as of and for the periods
indicated, except that the unaudited interim financial statements contained in
the SEC Reports were or are subject to normal and recurring year-end
adjustments.
(k) Events Subsequent to the Most Recent Fiscal Year End.
Except as disclosed in paragraph 5(k) of the Seller's Disclosure Schedule, since
October 31, 1999, the Seller has conducted its business only in the Ordinary
Course of Business and there has not been any material adverse change in the
business, financial condition, results of operations, or future prospects of the
Seller. Without limiting the generality of the foregoing, since October 31,
1999:
(i) there have not occurred any events or changes
(including the incurrence of any liabilities of any nature, whether or not
accrued, contingent or otherwise) having, individually or in the aggregate, a
material adverse effect upon the present or future financial condition or the
future results of operations of the Seller;
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(ii) the Seller has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(iii) the Seller has not entered into any agreement,
contract, lease or license (or series of related agreements, contracts, leases,
or licenses) either involving more than $50,000 or outside the Ordinary Course
of Business;
(iv) the Seller has not delayed or postponed the
payment of accounts payable and other Liabilities outside the Ordinary Course of
Business;
(v) there has been no change made or authorized in
the certificate of incorporation or bylaws of the Seller;
(vi) except as set forth in Seller's Disclosure
Schedule, the Seller has not issued, sold, or otherwise disposed of any of its
capital stock, or granted any options, warrants or other rights to purchase or
obtain (including conversion, exchange or exercise) any of its capital stock ;
(vii) the Seller has not made any loan to, or entered
into any other transaction with, any of its directors, officers and employees
outside the Ordinary Course of Business;
(viii) the Seller has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(ix) there has not been any other material adverse
occurrence, event, incident, action, failure to act or transaction outside the
Ordinary Course of Business involving the Seller; and
(x) the Seller has not committed to any of the
foregoing.
(l) Undisclosed Liabilities. The Seller has no Liability (and
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the Seller), except
for (i) material Liabilities set forth in the SEC Financial Statements
(including in any notes thereto) and (ii) material Liabilities which have arisen
after the most recent interim financial statements included in the SEC Financial
Statements in the Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement or violation of law) .
(m) Legal Compliance. The Seller has materially complied with
all applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings and charges thereunder) of federal, state ,
local and foreign governments (and all agencies thereof) and Seller has no
Knowledge of any action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice having been filed or commenced against it
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alleging any failures to so comply, except where any such noncompliance, or
alleged noncompliance if proven, would not either individually or in the
aggregate have a material adverse affect upon the financial condition or results
of operations of Seller.
(n) Taxes.
(i) (A) Subject to any extension which have been
obtained, Seller has timely filed with the appropriate Tax Authority all Tax
Returns required to be filed by or with respect to the Seller, and such Tax
Returns are true, correct and complete in all material respects; (B) all Taxes
due and payable by the Seller, with respect to the taxable years or other
taxable periods ending on or prior to the Closing Date have been or on or prior
to the Closing Date will be, paid or adequately disclosed and fully provided
for; (C) no Audits are pending or, to the Knowledge of the Seller, threatened
with regard to any Taxes or Tax Returns of the Seller and there are no
outstanding deficiencies or assessments asserted or, to the Knowledge of the
Seller, proposed; (D) no issue has been raised by any Taxing Authority in any
Audit of the Seller that if raised with respect to any other period not so
audited could reasonably be expected to result in a proposed deficiency of any
period not so audited that would have a material adverse effect upon the
financial condition or results of operations of the Seller; (E) there are no
outstanding agreements, consents or waivers extending the statutory period of
limitations applicable to the assessment of any Taxes or deficiencies against
the Seller, and the Seller is not a party to any agreement providing for the
allocation or sharing of Taxes; and (F) no powers of attorney with respect to
Taxes of the Seller have been executed that will be outstanding as of the
Closing Date.
(ii) The Seller has not filed a consent to the
application of Section 341(f) of the Code.
(iii) The Seller has not been a United States real
property holding company (as defined in Section 897(c)(2) of the Code) during
the applicable period specified in Section 897(c)(1)(ii) of the Code.
(iv) No indebtedness of the Seller is "corporate
acquisition indebtedness" within the meaning of Section 279(b) of the Code.
(v) The Seller has not entered into any agreements
that would result in the disallowance of any tax deductions pursuant to Section
280G of the Code.
(vi) There are no liens for Taxes upon any of the
assets of the Seller, except for Liens for Taxes not yet due and payable for
which adequate reserves have been established on the Seller's balance sheet at
October 31, 1999 included in the Seller's Annual Report on Form 10-KSB filed
with the SEC prior to the date hereof in accordance with GAAP.
(vii) The Seller has disclosed all material Tax
elections to Buyer.
(o) Real Property. Paragraph 5(o) of Seller's Disclosure
Schedule sets forth a complete list and description of all real property owned
by the Seller (the "Real Property"). The Seller has good and marketable title to
the Real Property. There are no existing or, to Seller's Knowledge, threatened
proceedings, claims, condemnation proceedings, lawsuits, administrative actions,
disputes or conditions affecting any Real Property that might curtail or
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interfere in any material respect with the use of such property, nor is an
action of eminent domain pending or to the Knowledge of the Seller, threatened
for all or any portion of the Real Property. Except as disclosed in paragraph
5(o) of the Seller's Disclosure Schedule, the Seller is not a party to any
lease, assignment or similar arrangement under which the Seller is a lessor,
assignor or otherwise makes available for use by any third party any portion of
the Real Property. The Seller has obtained all appropriate material licenses,
permits, easements and rights of way, including proofs of dedication, required
to use and operate the Real Property in all material respects in the manner in
which the Real Property is currently being used and operated.
(p) Title and Condition of Properties. The Seller has good and
marketable title, free and clear of all liens, to its personal property and
assets shown on the most recent balance sheet of the SEC Financial Statements or
acquired thereafter, except for (i) assets which have been disposed of to
nonaffiliated third parties since the date of the most recent balance sheet of
the SEC Financial Statements in the Ordinary Course of Business, liens or
imperfections of title which are not, individually or in the aggregate, material
in character, amount or extent and which do not materially detract from the
value or materially interfere with the present or presently contemplated use of
the assets subject thereto or affected thereby, and (iii) liens for current
Taxes not yet due and payable.
(q) Intellectual Property.
(i) Paragraph 5(q) of the Seller's Disclosure
Schedule contains a true and complete list of all material (A) patents and
patent applications, (B) trademark registrations and applications, (C) service
mark registrations and applications, (D) Computer Software (as hereinafter
defined)(excluding Computer Software generally available for purchase by the
public), (E) copyright registrations and applications, (F) unregistered
trademarks, service marks, and copyrights, and (G) Internet domain names used or
held for use in connection with the business of the Seller, together with all
licenses related to the foregoing.
(ii) The term "Computer Software" shall mean (A) any
and all computer programs and applications consisting of sets of statements and
instructions to be used directly or indirectly in computer software or firmware
whether in source code or object code form, (B) databases and compilations,
including without limitation any and all data and collections of data, whether
machine readable or otherwise, (C) all versions of the foregoing including,
without limitation, all screen displays and designs thereof, and all component
modules of source code or object code or natural language code therefor, and
whether recorded on papers, magnetic media or other electronic or non-electronic
device, (D) all descriptions, flowcharts and other work product used to design,
plan, organize and develop any of the foregoing, (E) all documentation,
including without limitation all technical and user manuals and training
materials, relating to the foregoing, and all Internet domain names and content
contained on all world wide web sites of the Seller.
(iii) The Seller owns or has the valid right to use
all of the Intellectual Property used by it or held for use by it in connection
with its business. The Seller is the sole and exclusive owner of all patents,
patent applications, patent rights, copyrights, trademarks, trademark rights,
trade names, trade name rights, and service marks, and all goodwill of the
business associated therewith, trade secrets, registrations for and applications
for registration of trademarks, service marks and copyrights, technology and
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know-how, Computer Software other than off-the-shelf applications and other
confidential or proprietary rights and information made or used in connection
with any of the foregoing, used or held for use anywhere in the world in
connection with its business as currently conducted (collectively, the
"Intellectual Property"), free and clear of all material Liens.
(iv) All grants, registrations and applications for
Intellectual Property that are used in and are material to the conduct of the
business of the Seller as currently conducted (A) are valid, subsisting, in
proper form and enforceable, and have been duly maintained, including the
submission of all necessary filings and fees in accordance with the legal and
administrative requirements of the appropriate jurisdictions and (B) have not
lapsed, expired or been abandoned, and no application or registration therefor
is the subject of any legal or governmental proceeding before any governmental,
registration or other authority in any jurisdiction, except to the extent where
the absence of such Intellectual Property would not have a material adverse
effect upon the financial condition or results of operations of the Seller.
(v) To the Knowledge of the Seller, there are no
conflicts with or infringements of any Intellectual Property by any third party.
The conduct of the respective businesses of the Seller as currently conducted
does not conflict with or infringe in any way on any proprietary right of any
third party. There is no claim, suit, action or proceeding pending or, to the
Knowledge of the Seller, threatened against the Seller (A) alleging any such
conflict or infringement with any third party's proprietary rights, or (B)
challenging the ownership, use, validity or enforceability of the Intellectual
Property.
(vi) The Seller is not, nor will it be as a result of
the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any material license, sublicense
or other agreement relating to the Intellectual Property, except where any such
breach(es) will not individually or in the aggregate have a material adverse
affect upon the financial condition or results of operations of Seller.
(vii) No former or present employees, officers or
directors of the Seller hold any right, title or interest directly or
indirectly, in whole or in part, in or to any Intellectual Property.
(r) Contracts.
(i) The SEC Reports contain a list of all material
contracts to which the Seller is a party or by which the Seller is bound.
(ii) The Seller has filed with the SEC a correct and
complete copy of each of the written agreements referenced in Section 5(r)(i)
above.
(iii) With respect to each agreement referenced in
Section 5(r)(i) above, each agreement is: (A) legal, valid, binding, enforceable
and in full force and effect; (B) will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (C) Seller has no
Knowledge that any other party to any such agreement is in material breach or
default, and Seller has no Knowledge that any event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement, and (D) Seller
has no Knowledge that any other party has repudiated any provision of the
agreement.
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(s) Litigation. There are no claims, judgments, orders,
decrees, rulings, charges, actions, suits, proceedings, (including, without
limitation, arbitration proceedings), injunctions or alternative dispute
resolution proceedings, or investigations pending or, to the Knowledge of the
Seller, threatened against the Seller or any properties or rights of the Seller,
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction or before any arbitrator that, either
individually or in the aggregate would be reasonably likely to have a material
adverse effect upon the financial condition or the results of operations of the
Seller. As of the date hereof, the Seller is not subject to any material
outstanding order, judgment, injunction or decree.
(t) Employees. To the best Knowledge of the Seller, no
executive, key employee or group of employees has any plans to terminate
employment with the Seller. The Seller is not a party to any collective
bargaining agreement. The Seller has not experienced any strike, grievance,
claim of unfair labor practice or other collective bargaining disputes. The
Seller has not committed any unfair labor practice. To the best Knowledge of the
Seller, no organizational effort presently is being made or threatened by or on
behalf of any labor union with respect to employees of the Seller. The Seller
has complied in all material respects with all applicable laws relating to
employment, employment discrimination and employment practices.
(u) Employee Benefit Plans (see MAS Employee Stock Option
Plan).
(i) Paragraph 5(u) of the Seller's Disclosure
Schedule sets forth a list of all "Employee Welfare Benefit Plans" (as defined
in Section 3(l) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), "Employee Pension Benefit Plans" (as defined in Section 3(2)
of ERISA), employment agreements and all other bonus, stock option, stock
purchase, benefit, profit sharing, savings, retirement, disability, insurance,
incentive, deferred compensation and other similar fringe or employee benefit
plans, programs or arrangements for the benefit of, or relating to, any employee
of, or independent contractor or consultant to, the Seller (together, the
"Employee Plans"). With respect to each Employee Plan, the Seller has made
available to Buyer true and complete copies of (A) all plan documents, as in
effect on the date hereof, and will make available all other employee plans,
together with all amendments thereto which will become effective at a later
date, (B) the latest Internal Revenue Service determination letter, (C) the last
filed Form 5500, (D) summary plan description, if any, and all modifications
thereto communicated to employees, and (E) the most recent annual and periodic
accounting of related plan assets, if any. Neither the Seller, its directors,
officers, employees or agents has, with respect to any Employee Plan, engaged in
or been a party to any "prohibited transaction," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, which could result in the
imposition of either a material penalty assessed pursuant to Section 502(i) of
ERISA or a material tax imposed by Section 4975 of the Code, in each case
applicable to the Seller or any Employee Plan. All Employee Plans are in
compliance in all material respects with the currently applicable requirements
prescribed by all statutes, orders, or governmental rules or regulations
currently in effect with respect to such Employee Plans, including, but not
limited to, ERISA and the Code and, to the Knowledge of the Seller, there are no
pending or threatened claims, lawsuits or arbitrations (other than routine
claims for benefits), relating to any of the Employee Plans, which have been
asserted or instituted against the Seller, any Employee Plan or the assets of
any trust for any Employee Plan. Each Employee Plan intended to qualify under
Section 401(a) of the Code, and the trusts created thereunder intended to be
exempt from tax under the provisions of Section 501(a) of the Code has received
a favorable determination letter from the Internal Revenue Service to such
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effect or is still within the "remedial amendment period." No Employee Plan is a
"Multiemployer Plan" (as defined in Section 3(37) of ERISA) or is subject to
Title IV of ERISA. The Seller has fully complied with the provisions of Section
4980B of the Code and Part 6 of Title I of ERISA. The requirements of COBRA have
been met with respect to each such Employee Plan which is an Employee Welfare
Benefit Plan. All contributions (including employer contributions and employee
salary reduction contributions) which are due have been paid to each such
Employee Plan which is an employee benefit pension plan and all contributions
for any period ending on or before the Closing Date which are not yet due have
been paid to each such employee benefit pension plan or accrued in accordance
with the past custom and practice of the Seller. All premiums or other payments
for all periods ending on or before the Closing Date have been paid with respect
to each such Employee Plan which is an Employee Welfare Benefit Plan.
(ii) All required reports and descriptions (including
Form 5500 Annual Reports, summary annual reports, PBGC-1s, and summary plan
descriptions) have been timely filed and distributed appropriately with respect
to each such Employee Plan.
(iii) The market value of assets under each such
Employee Plan which is an Employee Pension Benefit Plan equals or exceeds the
present value of all vested and nonvested Liabilities thereunder determined in
accordance with PBGC methods, factors and assumptions applicable to an Employee
Pension Benefit Plan terminating on the date for determination.
(v) Guaranties. The Seller is not a guarantor or otherwise
liable for any Liability or obligation (including indebtedness) of any other
Person.
(w) Environmental Matters. Except for matters disclosed in
paragraph 5(w) of the Seller's Disclosure Schedule:
(i) The Seller is in compliance with all
Environmental Laws, and the Seller has not received written notice of any
outstanding allegations by any person or entity that the Seller is not or has
not been in compliance (unless such non-compliance has been cured) with any
Environmental Laws.
(ii) The Seller currently holds all material permits,
licenses, registrations and other governmental authorizations and financial
assurances required under any Environmental Laws for the Seller to operate its
business except for such permits, licenses, registrations and other governmental
authorization and financial assurances, the failure of the Seller to hold is not
reasonably expected to result in a material adverse effect upon the financial
condition or the results of operations of the Seller.
(iii) To the best of the Seller's Knowledge, there is
no asbestos or asbestos-containing materials in or on any real property,
buildings, structures or components thereof currently owned, leased or operated
by the Seller. To the best of the Seller's Knowledge, there are and have been no
underground or aboveground storage tanks (whether or not required to be
registered under any applicable law), dumps, landfills, lagoons, surface
13
<PAGE>
impoundments, sumps, injection wells or other disposal or storage sites or
locations in or on any property currently owned, leased or operated by the
Seller for any matter that is reasonably expected to result in a material
adverse effect upon the financial condition or the results of operations of the
Seller.
(iv) The Seller has not received (A) any
communication from any person stating or alleging that it is or may be a
potentially responsible party under any Environmental Law (including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, and any state analog thereto) with respect to any
actual or alleged environmental contamination or (B) any request for information
under any Environmental Law from any governmental agency or authority or any
other person or entity with respect to any active or alleged environmental
contamination or violation.
(v) The Seller is not a party to any pending judicial
or administrative proceedings alleging that it is a potentially responsible
party under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, and any state analog thereto) or otherwise
liable or responsible with respect to any actual or alleged environmental
contamination.
(vi) No governmental agency or authority, or any
other person or entity is conducting and has not conducted (nor is proposing or
threatening to conduct) any environmental remediation or investigation of the
Seller.
(x) Health and Safety. The Seller has not received any written
or oral notice, report or other information regarding any actual or alleged
violation of Health and Safety Requirements, or any Liabilities, including any
investigatory, remedial or corrective obligations, relating to Seller or its
facilities arising under Health and Safety Requirements.
(y) Insurance Policies. All material policies of fire,
liability, workmen's compensation and other similar forms of insurance owned or
held by the Seller are in full force and effect, and no notice of cancellation
or termination has been received with respect to any such policy. Such policies
are valid, outstanding and enforceable policies, and will not in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement. Such policies, provide, to the Knowledge of the Seller,
insurance coverage that is adequate for the assets and operations of the Seller.
Since October 31, 1997, the Seller has been covered by insurance in scope and
amount customary and reasonable for the business in which it has engaged during
such period.
6. Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller that the statements contained in this Section 6 are
correct and complete as of the date of the Closing Date. The Buyer represents
and warrants to the Seller as follows:
(a) No Registration of the Shares. The Buyer understands that:
(i) the Shares are being sold to the Buyer under one or more exemptions from the
registration provisions of the Securities Act; (ii) the Buyer is purchasing such
Shares without being furnished any offering literature or prospectus other than
the information set forth herein and publicly disseminated information regarding
the Seller and its Common Stock; and (iii) the sale of the Shares has not been
14
<PAGE>
examined by the SEC or by any agency charged with the administration of the
securities laws of any state or other jurisdiction. The Buyer represents and
warrants that it is an accredited investor as defined in Rule 501 under
Regulation D of the Rules of the United States Securities and Exchange
Commission under the Securities Act and that it has such Knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Shares and of making an informed
investment decision with respect thereto. The Buyer understands that the Seller
is relying on the truth and accuracy of the representations, declarations and
warranties made herein by the Buyer in selling the Shares hereunder without
having first registered such Shares under the Securities Act or under the
securities laws of any state or other jurisdiction.
(b) Investment Intent. The Buyer confirms that: (i) it
understands that there are substantial restrictions on the transferability of
the Shares and, accordingly, it may not be possible for it to liquidate its
investment in the Shares in case of emergency; and (ii) it is able to bear the
economic risk of this investment in the Shares, to hold the Shares for an
indefinite period of time, and currently to afford a complete loss of this
investment. The Shares being acquired by the Buyer hereunder are being acquired
in good faith solely for its own account, for investment purposes only, and are
not being purchased with a view to or for the resale, distribution, subdivision
or fractionalization thereof. The Buyer does not have any contract, undertaking,
understanding, agreement or arrangement, formal or informal, with any person to
sell, transfer or pledge to any person the Shares being acquired hereunder, or
any part thereof, and has no current plan to enter into any such contract,
undertaking, agreement or arrangement. The Buyer understands that the legal
consequences of the foregoing representations and warranties are that it must
bear the economic risk of this investment in the Shares for an indefinite period
of time because the Shares have not been registered under the Securities Act.
(c) Decision to Invest. The Buyer confirms that, in making its
decision to invest in the Shares, it has relied solely upon independent
investigations made by it or its representatives and advisors, and that it and
such representatives and advisors have been given the opportunity to ask
questions of, and to receive answers from, management of the Seller with respect
to the Seller and the Seller's Common Stock.
(d) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(e) Authority. The Buyer has the corporate power to execute,
deliver and carry out the terms and provisions of this Agreement and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Agreement by the Buyer. This Agreement constitutes the valid
and legally binding obligation of the Buyer, enforceable in accordance with its
terms and conditions.
(f) No Consent Required. No authorization, consent or approval
of, or exemption by, any governmental or public body or authority is required to
authorize, or is required in connection with, the execution, delivery and
performance of any of this Agreement, or the taking of any action contemplated
hereby, by the Buyer, except those that have been obtained or are available.
(g) No Violation. Neither the execution and delivery of this
Agreement, nor compliance with any of the terms and provisions hereof, nor the
15
<PAGE>
consummation of any of the transactions herein contemplated will not violate any
provision of any of the organizational documents of the Buyer, including but not
limited to its charter and bylaws.
(h) Brokers' Fees. The Buyer has no liability or obligation to
pay any commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
obligated.
7. Securities Law Matters and Restrictions on the Shares.
(a) Permitted Transfers.
(i) The Buyer understands and agrees that the Shares
being purchased hereunder may be transferred by it only pursuant to (A) a public
offering thereof registered under the Securities Act, (B) Rule 144 of the SEC
(or any similar rule in force at the time of such transfer) if such rule is
available, and (C) any other legally available means of transfer.
(ii) In connection with the transfer of any Shares,
the Buyer shall deliver written notice to the Seller describing in reasonable
detail the transfer or proposed transfer, together with an opinion of counsel
that is knowledgeable in securities law matters and reasonably acceptable to the
Seller, to the effect that such transfer may be effected without registration
under the Securities Act and under applicable state securities laws.
(b) Restrictive Legend. Each certificate for the Shares, and
any shares of capital stock received in respect thereof, whether by reason of a
stock split or share reclassification thereof, a stock dividend thereon or
otherwise, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS.
(c) Current Public Information. The Seller shall use its best
efforts to file all reports required to be filed by it under the Exchange Act
and the rules and regulations thereunder and shall take such further action as
any holder of any Shares may reasonably request, all to the extent required to
enable any such holder to sell Shares pursuant to Rule 144 under the Securities
Act (as such rule may be amended from time to time) or any similar rule or
regulation then in force. Upon written request, the Seller shall deliver to any
holder of any Shares a written statement as to whether it has complied with such
requirements.
(d) Compliance with Securities Laws. The Buyer acknowledges
that it is required to comply with the provisions of the Exchange Act and other
applicable rules and regulations relating to its ownership of the Seller's
Common Stock. The Buyer agrees to comply in all respects with the provisions of
the Exchange Act and other applicable rules and regulations, to file all reports
16
<PAGE>
required to be filed by it thereunder and to supply the Seller with all
information requested by it from time to time in order to permit the Seller to
comply with the provisions of the Exchange Act and other applicable laws, rules
and regulations.
8. Closing Covenants. Each of the Parties agree as follows.
(a) General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement.
(b) Use of Proceeds. Seller agrees to use the proceeds from
the sale of the Shares in accordance with Section 2(c) above.
(c) License Agreement. The Seller and the Buyer's wholly-owned
subsidiary, eRT, shall enter into the Licensing Agreement.
(d) Services Agreement. The Seller and the Buyer's wholly-
owned subsidiary, eRT, shall enter into the Services Agreement.
(e) Notices and Consents. The Seller will give any notice to
third parties, and will use its reasonable best efforts to obtain any third
party consents, if any, that the Buyer may reasonably request in connection with
the matters in Section 5(f). Each of the Parties will give any notices to, make
any filings with, and use its reasonable best efforts to obtain any required
authorizations, consents and approvals of governments and governmental agencies
in connection with the transactions contemplated herein.
(f) Right of First Refusal . The Seller will not engage in any
practice, or take any action or enter into any transaction in violation of
Section 3 of this Agreement.
(g) Preservation of Business. The Seller will keep its
business and properties substantially in tact, including its present operations,
physical facilities, working conditions and relationships with lessors,
licensors, suppliers, customers and employees.
(h) Full Access. The Seller will permit the Buyer, or its
representatives, to have the full access accorded to shareholders of the Buyer
and as authorized with respect to eRT under the License Agreement and the
Services Agreement at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Seller to all premises,
properties, books, and records (including Tax records), contracts and documents
of or pertaining to the Seller. No disclosure by the Seller hereunder shall be
deemed to amend or supplement the Seller's Disclosure Schedule or to prevent or
cure any misrepresentation, breach of warranty or breach of agreement.
(i) Notice of Developments. The Seller will give prompt
written notice to the Buyer of any material adverse development causing a breach
of any of the representations and warranties in Section 5 above. The Buyer will
give prompt written notice to the Seller of any material adverse development
causing a breach of any of the representations and warranties in Section 6
above.
9. Remedies for Breaches of this Agreement.
17
<PAGE>
(a) Survival of Representations and Warranties. All of the
representations, warranties, covenants, and obligations in this Agreement, the
Seller's Disclosure Schedule, any certificates and documents delivered pursuant
to this Agreement will survive for a period of one (1) year Closing.
(b) Indemnification Provisions for the Benefit of the Buyer.
In the event the Seller breaches (or in the event that any third party alleges
facts that, if true, would mean the Seller has breached) any of its
representations and warranties, and covenants contained herein, provided that
the Buyer makes a written claim for indemnification against the Seller pursuant
to the notification requirements of Section 10(g) below, then the Seller agrees
to indemnify the Buyer from and against the entirety of any Adverse Consequences
the Buyer may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Buyer may suffer after the end of any
applicable survival period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach or alleged breach.
(c) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against the other Party (the
"Indemnifying Party") under this Section 10, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim with counsel of the
Indemnifying Party's choice reasonably satisfactory to the Indemnified Party so
long as (A) the Indemnifying Party notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim, (B) the Indemnifying Party provides the Indemnified
Party with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (C)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (D) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with Section 9(c)(ii) above,
(A) the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party, not to be withheld unreasonably, and (C) the
Indemnifying Party will not consent to the entry of any judgment or enter into
18
<PAGE>
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified party, not to be withheld unreasonably.
(iv) In the event any of the conditions in Section
9(c)(ii) are or become unsatisfied, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from the Indemnifying Party in connection therewith), (B) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (C) the Indemnifying Party will
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 9.
(d) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy (including without limitation any such remedy
arising under Environmental Laws and Health and Safety Requirements) any Party
may have with respect to the transactions contemplated by this Agreement.
10. Miscellaneous.
(a) Press Releases. No party shall issue any press release or
make any public announcement relating to the subject matter of this Agreement
prior to Closing without the prior written approval of the other Party,
provided, however, that any Party may make a public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case, the disclosing Party
will use its reasonable best efforts to advise the other Party prior to making
the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Choice of Law. This Agreement shall be construed and
enforced in accordance with and pursuant to the laws of the State of Delaware
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware.
(d) Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective heirs,
successors, personal representatives and assigns.
(e) Entire Agreement. This Agreement, including the documents
referred to herein, constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements or representations by or between
the Parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
19
<PAGE>
(f) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original Agreement, and all of
which shall constitute one Agreement to be effective as of the date of this
Agreement.
(g) Notices. All notices, requests or other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person or by courier; sent by overnight courier, charges prepaid;
or telegraphed, telexed or mailed by certified or registered mail, postage
prepaid, to the address of the respective Party set forth below:
If to the Buyer:
Premier Research Worldwide, Ltd.
30 South 17th Street
Philadelphia, PA 19103-4001
Attention: Joel Morganrath, MD, Chairman and
Chief Executive Officer
with a copy to:
Duane, Morris & Heckscher LLP
4200 One Liberty Place
Philadelphia, PA 19103-7396
Attention: Sheldon M. Bonovitz, Esquire
If to the Seller:
Medical Advisory Systems Inc.
8050 Southern Maryland Blvd.
Owings, MD 20736
Attention:
(h) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(i) Amendments. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
effect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
20
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto executed this
Agreement the day and year first above written.
MEDICAL ADVISORY SYSTEMS, INC.
By: /s/ Ronald W. Pickett
-----------------------------------
Title: /s/ President
---------------------------
PREMIER RESEARCH WORLDWIDE, LTD.
By: /s/ Joel Morganroth, M.D.
-----------------------------------
Title: /s/ Chairman and CEO
---------------------------
21
<PAGE>
Amendment to the Management Agreement dated 9-7-1999 between PRWW, Ltd. and Joel
Morganroth, M.D., its Chairman and CEO
This contract is hereby amended, as of May 1, 2000, in that section 10
clause "b" which currently reads that severance shall equal one year's
annual salary and applicable prorated bonus shall in fact be equal to 1.765
times the annual salary and applicable prorate bonus as long as all
relationships such as providing medical services with any affiliated
company are also terminated and if not then the severance will remain at
1.0 times PRWW salary.
Signed:
John Ryan
Chairman, Compensation Committee
Accepted:
Joel Morganroth, MD
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